Instructions:

• Answer 50 questions in 15 minutes.
• If you are not ready to take this test, you can study here.
• Match each statement with the correct term.
• Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. Pink Sheets
They are businesses such as ariplane - automobile and boat dealers - lawyers - jewelers - real estate brokers and others that are subjec to BSA regulations (US).
An electronic quotation system that displays quotes of many securities traded over the counter.
It conducts investigations in support of a government's confiscation or seizure efforts.
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.


2. Automated Sale
High-speed matching of known or suspected patterns in very large DB's using recognition algorithms.
Countries should designate law enforcement authorities with AML/CFT responsibilities and allow them special investigative techniques.
2% - 5% ($590B - $1.5T)
Use of electronic clearing houses to facilitate electronic transfers of money that complete transactions between two parties where the buyer receives securities - goods - services etc. in exchange for the money.


3. FATF Recommendation 31
Countries should ensure policy makers - the FIU - law enforcement and supervisors have effective mechanisms to enable cooperation.
Procedures used to determine the identities of the account holders of a respondent bank in a correspondent banking relationship.
Banking services between merchant banks and other financial institutions.
Market participants intentionally restrict a security's liquidity. May lead to increased profits when the security's price rises due to the lack of 'supply'.


4. FATF Recommendation 36
Provide mutual legal assistance.
Futures contracts - forwards - swaps or options.
Preferred stocks that includes an option for the holder to convert it into common stock at a specified covnersion rate.
A fund setup by an investment trust in which the number of shares can fluctuate as investors' move in and out the fund. Share prices moves in direct proportion of the net asset value of the underlying investments (no premium or discount).


5. FATF Recommendation 15
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.
Financial institutions should have AML/CFT programs that include approved policies - employee screenings & ongoing training and an audit function to test it all.
Combines funds from various members and users them to trade in futures or options contracts.
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.


6. OTC markets Over-The-Counter
Competent authorities should have powers of subpoena - search and seizure.
General recommendations for client acceptance - updating client files - practices when identifying unusual or suspicious activity - monitoring - control responsibilities - reporting - education and records retention.
A market is which securities are bought and sold outside of establisehd securities markets.
Charles Ponzi - an Italian immigrant to the US who spent 10 years in jail for a scheme that defrauded 40 -000 people out of $15 million.


7. FATF Recommendation 5
To provide a forum for FIU's (Financial Intelligence Unit) to improve support to their respective national AML progrmans and development protocols for the sharing of information.
Render mutual legal assistance notwithstanding the absence of dual criminality. Where dual criminality is required - classification should not be an issue.
Financial institutions should NOT keep any anonymous or fictionally named accounts - plus they should undertake customer due diligence measures.
Normally seen as non-violent or involving 'business-related' schemes rather than violent or threat or violence crimes.


8. In general terms - EDD requires what of a financial institution?

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9. How does 'Product Diversion' work?
Futures contracts - forwards - swaps or options.
Product is purchsed with terms that it is going to foreign country A. While in transit - the product is diverted back to originating country or to another foreign market where the greatly discounted price provides for extreme profits.
Money Laundering and Tax Evasion
Procedures used to determine the identities of the account holders of a respondent bank in a correspondent banking relationship.


10. What do 'Hedge Funds' attempt to do?
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)
To profit all kinds of markets by pursuing leveraging and other speculative investment practises thay may increase the risk of investment loss.
a chain-referral scheme.
Open and Closed system


11. The 'Art Loss Register'

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12. OCC Office of the Comptroller of the Currency
www.artloss.com
Refers to express trusts or other similar legal arrangements - such as fiducie - treuhand and fideicomiso [FATF Risk-Based approach - Guidance for the Life Insurance Sector - Oct 09]
A federal regulator in the US - responsible for auditing risk and compliance measuers of federally chartered banks.
To promulgate good practices in countering money laundering and to give practical assistance in interpreting the UK Money Laundering Regulations and laws


13. Variable Annuity
Penny Stocks
A professional responsible for the securities portfolio of an individual or institutional investor. In return for a fee - the manager has the responsibility of choosing and managing assets.
May involve movement or large sums of money going cross-border and often through multiple casinos - all by a third party (the operator). Sometime operator does not identify funds owners.
Contract issued by an insurance company under which an investor provides the insurer with funds (a lump-sum or series of payments). The insurer then agrees to make periodic payments to the investor starting the immediately or in the future.


14. FATF Sepcial Recommendation on Terrorist Financing -- SR One
Report suspicious transactions linked to terrorism.
Competent authorities should be provided with adequate financial - human and technological resources. Personnel should be of high integrity.
Take immediate steps to ratify and implement the UN instruments.
The opposing part of a transaction or trade.


15. Cash Letter
Ad interbank transmittal form - resembling a deposit slip - used to accompany cash and cash equivalent items sent from one bank to another.
Casinos - real estate agents - precious metal/stone dealers - lawyers - notaries - accountants and trust & company service providers.
Render mutual legal assistance notwithstanding the absence of dual criminality. Where dual criminality is required - classification should not be an issue.
As a key tool in detecting suspicious or money laundering activity - it is important because correspondent accounts are often used as conduits to launder criminal proceeds in international settings.


16. Apostille

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17. Why does a launderer try to run transactions through a concentration account of a financial institution?
The exempt accounts must be documented and the financial institution that secures the exemptions must still monitor their financial transactions.
Because they are accounts through which funds are transferred and commingled without personally identifying the originator.
Transportation/transfer of funds (even clean) to/from the US - if done to promote unlawful activity - or with knowledge that the funds are illicit - or to conceal/disguise the nature - location - source - ownership - etc. of funds - or to avoid feder
EurAsian Group


18. 'Open-end Mutual Fund' (or Company)

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19. What does FIU do?
To provide a forum for FIU's (Financial Intelligence Unit) to improve support to their respective national AML progrmans and development protocols for the sharing of information.
Goods such as food - grains and metals that are usually traded in large amounts on a commodities exchange - usually through future contracts.
It analyzes and processes information and disseminates it to appropriate government authorities in support of AML efforts and financial crime investigations.
A trust clearly created by the settlor - usually in the form of a document - such as a written deed or trust.


20. MENAFATF
A Correspondent Banking Client who receives Corresponding Banking services from an institution and itself provides Correspondent Banking services to other financial institutions in the same currency as the account it maintains with the institution.
Transportation/transfer of funds (even clean) to/from the US - if done to promote unlawful activity - or with knowledge that the funds are illicit - or to conceal/disguise the nature - location - source - ownership - etc. of funds - or to avoid feder
Middle East and North Africa Financial Action Task Force
USD/EUR 3 -000 (Interpretive Note to Reommendations 5 - 12 and 16)


21. FATF Recommendation 33
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.
A person who tranfers stolen money (or merchandise) from one country to another - often as a result of online scams. Transfers - can be done electronically - via mail or courier service or in person.
Helps to identify financial system strengths and vulnerabilities and to reduce the potential for crisis.
Freeze and confiscate terrorist assets.


22. Convertible Preferred
Preferred stocks that includes an option for the holder to convert it into common stock at a specified covnersion rate.
Applied by an authority - it is a special seal which certifies that a document is a true copy of an original. However - it does not and cannot speak to the validity of the document's content.
Countries should have a central authority to collect suspicious activity and international currency reports. Should have secure - computerized data base.
EurAsian Group


23. What is the aim of Joint Money Laundering Steering Group? (UK)
Countries should ensure that secrecy laws do NOT inhibit implementation of these Recommendations.
An association of global financial institutions that issues guidelines is such areas as correspondent banking - private banking - terrorist financing etc.
To promulgate good practices in countering money laundering and to give practical assistance in interpreting the UK Money Laundering Regulations and laws
Countering the Financing of Terrorism (Counter Terrorist Financing).


24. FATF Recommendations examples of non-financial businesses and professions
A co-operative property seller agrees to sell home at a well-below market reported price - then accepts the difference 'under the table'. When launderer later sells house - he recognizes 'gain' and all funds appear legitimate as it sold at market.
Applied by an authority - it is a special seal which certifies that a document is a true copy of an original. However - it does not and cannot speak to the validity of the document's content.
A written statement given under oath before an officer of the court - notary public - or other authorized person. Commonly used as the factual basis for an application for a search - arrest or seizure warrant.
Casinos - real estate agents - precious metal/stone dealers - lawyers - notaries - accountants and trust & company service providers.


25. Why is it imperative to have a strong Know Your Employee program?
Solicits potential customers and issues the credit cards.
An introducing broker-dealer with an exclusive written agreement with a Futures Commission Merchant (FCM) that obligates the FCM to assume responsibility for the introducing broker's performance.
Competent authorities should provide guidelines in applying national AML/CFT measures - especially for detecting and reporting suspicious activity.
In many major money laundering operations - it is not unusual to find a complicit employee in financial institution.


26. FATF Recommendation 21
Should give special attention to relationships or transactions of people - companies or financial institutions from countries showing little regard for these Recommendations.
Pouch activity.
www.artloss.com
They pool investors' money and invest those funds in financial instruments in an effort to turn a profit. They typically issue securities in 'private offerings' that are usually not required to be registered with sa securities or financial regulator.


27. Why is a 'money order' attractive to a money launderer?
Supervisors should have powers to monitor and ensure compliance - including the ability to compel production of information and to impose sanctions.
Because it represents funds drawn on the account of a financial institution and not on a particular individual.
that appear to be linked
A market is which securities are bought and sold outside of establisehd securities markets.


28. Should one ever file a Suspicious Transaction Report (STR/SAR) based on a person's profile?

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29. Bust-out
Customer makes payments on account with bad checks - then takes cash advances before they clear - thereby expanding his credit.
Money Laundering - bribery - health care - tax - bankruptcy - securities or environmental frauds etc.
Financial institutions may rely upon intermediaries to perform certain CDD elements provided the intermediary is supervised and regulated. However - ultimate responsibility remains with the financial institution.
The UN Convention against Illicit Trafficking in Narcotic drugs and Pyshotropic substances [Adopted 12/88].


30. Who conducts the Financial Sector Assessment Program (FSAP)?
The International Monetary Fund (IMF) and the world bank conduct the joint program.
Intentional misrepresentation - concealment or omission of the truth for the purpose of deception or manipulation to ther detriment of a person or organization.
Dealers in precious metals/stones - trust and company services providers - lawyers - notaries and accountants should all be required to report suspicious activity - but legal privilege cannot be violated.
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)


31. FATF Sepcial Recommendation on Terrorist Financing -- SR Four
Direct money of Criminal A is sent to foreign bank account of company B. Investment company C is formed as A's country. A is appointed as director of C. C borrows money from B and buys building which is rented to 3rd parties. with rent - C pays off B
Report suspicious transactions linked to terrorism.
A corporation - often established in an offshore jurisdiction with tight secrecy laws to protect the financial privacy of its owners.
A fund setup by an investment trust that issues a fixed number of shares to its investors. As such - the market price of the shares fluctuates - often selling at a premium or discount to the fund's net asset value (NAV).


32. What are included in the Wolfsberg AML Principles on Private Banking?
Firm or person that solicits and accepts commodity futures orders from customers but does not accept funds. Two types of IB_C's: Guaranteed and Independent.
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)
General recommendations for client acceptance - updating client files - practices when identifying unusual or suspicious activity - monitoring - control responsibilities - reporting - education and records retention.
Competent authorities should provide guidelines in applying national AML/CFT measures - especially for detecting and reporting suspicious activity.


33. What is the goal of the Egmont group?

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34. Portfolio Manager
Competent authorities should provide guidelines in applying national AML/CFT measures - especially for detecting and reporting suspicious activity.
A federal regulator in the US - responsible for auditing risk and compliance measuers of federally chartered banks.
Countries should establish national centers to receive and disseminate AML/CFT information and have access to law enforcement and others.
A professional responsible for the securities portfolio of an individual or institutional investor. In return for a fee - the manager has the responsibility of choosing and managing assets.


35. What criterion does the US need to enforce its 'Extraterritorial Reach'?

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36. What can result from on institution's disregard for the Basel Due Diligence Principle?
The financial institution can become subject to lawsuits from the failure to observe mandatory KYC standards or from the failure to practise due diligence.
A market is which securities are bought and sold outside of establisehd securities markets.
Direct money of Criminal A is sent to foreign bank account of company B. Investment company C is formed as A's country. A is appointed as director of C. C borrows money from B and buys building which is rented to 3rd parties. with rent - C pays off B
Passed in 1977 - the US law is primarily known for its anti-bribery provisions (it also applies to foreign companies with stocks covered by the Securities and Exchange Act of 1934).


37. Structuring is a common technique in jurisdictions that...
have in place compulsory currency reporting requirements.
Large companies often export their branded products at wholesale prices far below those at which those products are offered in that country.
It was the first law in any country to make money laundering a crime.
bear the mark 'APOSTILLE'


38. Commodity
Applied by an authority - it is a special seal which certifies that a document is a true copy of an original. However - it does not and cannot speak to the validity of the document's content.
Goods such as food - grains and metals that are usually traded in large amounts on a commodities exchange - usually through future contracts.
Passed in 1977 - the US law is primarily known for its anti-bribery provisions (it also applies to foreign companies with stocks covered by the Securities and Exchange Act of 1934).
To profit all kinds of markets by pursuing leveraging and other speculative investment practises thay may increase the risk of investment loss.


39. EAG
EurAsian Group
Council of European committee of Experts on the Evaluation of AML measures and the Financing of Terrorism
have in place compulsory currency reporting requirements.
Attorneys - accountants - broker-dealers - communication and transportation providers - bankers and other financial service providers - concealment trap (hiding places) builders etc.


40. Legal Arrangements (Insurance Industry)
Transportation/transfer of funds (even clean) to/from the US - if done to promote unlawful activity - or with knowledge that the funds are illicit - or to conceal/disguise the nature - location - source - ownership - etc. of funds - or to avoid feder
To promulgate good practices in countering money laundering and to give practical assistance in interpreting the UK Money Laundering Regulations and laws
Middle East and North Africa Financial Action Task Force
Refers to express trusts or other similar legal arrangements - such as fiducie - treuhand and fideicomiso [FATF Risk-Based approach - Guidance for the Life Insurance Sector - Oct 09]


41. Operational risks in KYC context relate to...
Terrorism and Terrorist Financing
Financial institutions may rely upon intermediaries to perform certain CDD elements provided the intermediary is supervised and regulated. However - ultimate responsibility remains with the financial institution.
Countries should ensure policy makers - the FIU - law enforcement and supervisors have effective mechanisms to enable cooperation.
weakness in the implementation of bank programs - ineffective control procedures and failure to practice due diligence.


42. Mutual Fund
A fund - offered by an investment company - that offers shares while investing the capital in diversified securities of other companies.
Countering the Financing of Terrorism (Counter Terrorist Financing).
A degree of satisfaction not necessarily amounting to belief but extending beyond specualtionas to whether an event has occured or not. Though suspicion requires a lesser factual basis than a belief - it must be built upon some foundation.
Confiscation


43. FATF Recommendation 39
Countries should recognize money laundering as an extraditable offense.
a chain-referral scheme.
Person who - for compensation - provides advice on securities and investments and manages client assets.
Middle East and North Africa Financial Action Task Force


44. What is a 'NCCT'?
Non-Coperative countries and Territories. Country or territory that has been designated by the FATF as non-cooperative with international AML principles and procedures.
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.
Countries should have effective criminal - civil and administrative sanctions for money laundering or terrorist financing violations.
Electronic transmissions of funds between financial institutions on behalf of themselves or their customers.


45. Market Manipulation
Customer makes payments on account with bad checks - then takes cash advances before they clear - thereby expanding his credit.
Goods such as food - grains and metals that are usually traded in large amounts on a commodities exchange - usually through future contracts.
A deliberate attempt to interfere with the free and fair operation of the market and create artificial - false or misleading appearances with respect to the price of - or market for a security - commodity or currency.
The sale of a stock that the investor does not own. To do so - a securities intermediary 'loans' the stock to the investor - which comes from the intermediary's own inventory - another client's margin account or another intermediary.


46. Why is 'Know Your Customer's Customer' important?
High-speed matching of known or suspected patterns in very large DB's using recognition algorithms.
Applied by an authority - it is a special seal which certifies that a document is a true copy of an original. However - it does not and cannot speak to the validity of the document's content.
An intelligence gathering law enforcement or regulatory body that receives financial information form covered financial institutions - businesses and persons in tis respective country.
Respondent banks may be used by other banks and customers to conduct transactions through a correspondent account.


47. Abusive Squeezes

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48. Transparency International
Berlin- based - non-governmental organization with goal of improving government accountability and curbing national and international corruption.
General recommendations for client acceptance - updating client files - practices when identifying unusual or suspicious activity - monitoring - control responsibilities - reporting - education and records retention.
Assess any international correspondent's bank nature - ownership - management - reputation - supervision and AML & Terrorist Financing controls. Also. document relationship responsibilities.
2% - 5% ($590B - $1.5T)


49. Guaranteed Introducing Broker

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50. Basel's 'CDD for Banks' states that the decision to open an account for a PEP should be taken at...
Passed in 1977 - the US law is primarily known for its anti-bribery provisions (it also applies to foreign companies with stocks covered by the Securities and Exchange Act of 1934).
A security that offers the owner the right to subscribe for ordinary shares of a company at a fixed date - usually at a fixed price. Equivalent to stock options.
a Sr Management level
Criminalize the financing of terrorism - terrorist acts and terrorist organisations.