Mixed Deck — All ACAMS Topics Flashcards

What are 'money service businesses' (MSBs) and why do they require enhanced due diligence?

Answer: Non-bank financial institutions (check cashers, money transmitters, currency exchangers, prepaid card issuers) that process large volumes of cash or value transfers and are frequently targeted by money launderers

MSBs are non-bank financial businesses that handle currency, money orders, wire transfers, and similar instruments. They require EDD because their cash-intensive, high-volume operations and often anonymous customers create significant ML/TF exposure.

What is the role of the 'board of directors' in overseeing the BSA/AML compliance program?

Answer: The board approves the AML program and policies, receives regular reports on AML program performance, and is ultimately accountable for ensuring the institution maintains effective AML controls

The board of directors bears ultimate accountability for BSA/AML compliance. The board approves the AML program and policies, receives regular compliance reports, ensures adequate resources are allocated, and is held responsible by regulators for the effectiveness of the program.

An anti-money laundering professional recently created and implemented an anti-money laundering program. What is the best resource for evaluating the program's effectiveness?

Answer: A qualified independent party/auditor

The best resource for evaluating the effectiveness of an AML program is a qualified independent party/auditor. An independent auditor provides an objective and unbiased assessment of the program's design and operational effectiveness, identifying weaknesses and areas for improvement without internal conflicts of interest. This external review ensures the program meets regulatory requirements and effectively mitigates risks.

What is 'transaction monitoring' in the context of a VASP's AML program, and what makes it uniquely challenging compared to traditional banking?

Answer: It involves watching blockchain public ledgers; the challenge is that pseudonymous addresses obscure beneficial ownership

Transaction monitoring for VASPs uses blockchain analytics to detect suspicious patterns on public ledgers, but the pseudonymous nature of wallet addresses — where owners are not inherently identifiable — makes it significantly harder to link activity to real-world individuals than in traditional banking.

How should an institution handle a FinCEN 314(a) inquiry for a customer who has a current SAR investigation open?

Answer: Respond to the 314(a) inquiry as required (confirm or deny the match), continue the internal investigation, and ensure confidentiality is maintained for both the SAR and the 314(a) response

Institutions must respond to 314(a) inquiries confirming or denying whether the named individual has current accounts or conducted transactions, while simultaneously maintaining confidentiality of both the SAR investigation and the 314(a) response — they are separate, confidential processes.

Under OFAC regulations, what does 'blocking' a transaction mean?

Answer: Freezing assets or funds associated with sanctioned parties so they cannot be moved

Blocking under OFAC means freezing assets or transactions involving sanctioned persons or entities so they cannot be transferred, withdrawn, or used.

Which of the following best describes how an informal value transfer system (IVTS) like Hawala can be exploited for terrorist financing?

Answer: By moving value across jurisdictions with minimal documentation and without the physical cross-border movement of currency.

Informal value transfer systems such as Hawala operate on trust-based networks, allowing for the transfer of value from one location to another without the money physically crossing borders through formal financial institutions. This lack of a formal audit trail and reliance on anonymity makes them attractive for illicit financing.

Under FinCEN's Customer Due Diligence Rule (31 CFR 1010.230), what are the four core elements of CDD?

Answer: Customer identification, beneficial ownership identification, understanding the customer's business, and ongoing monitoring

FinCEN's 2016 CDD Rule established four core elements: (1) identifying and verifying the customer's identity; (2) identifying and verifying beneficial owners of legal entity customers; (3) understanding the nature and purpose of the relationship; and (4) conducting ongoing monitoring and updating customer information.

What is the standard for determining whether a SAR should be filed after completing an AML investigation?

Answer: The institution knows, suspects, or has reason to suspect that a transaction involves funds from illegal activity or is designed to evade BSA requirements, and involves at least $5,000

The SAR filing threshold is met when the institution 'knows, suspects, or has reason to suspect' that a transaction involves criminal funds or evasion of BSA requirements — proof is not required, and the threshold is $5,000 for most institutions ($2,000 for MSBs).

Trade-based money laundering (TBML) most commonly involves which of the following techniques?

Answer: Over- or under-invoicing goods and services in international trade transactions

TBML exploits international trade by manipulating invoice values, quantities, or quality of goods to transfer value across borders.

What is the 'correspondent banking concentration risk' and how should institutions manage it?

Answer: Excessive reliance on a small number of correspondent banks or respondent banks for a significant portion of transaction volume, managed through relationship diversification and enhanced monitoring

Concentration risk in correspondent banking refers to over-reliance on a small number of banking relationships, which can create both operational risk (if a relationship is terminated) and elevated AML risk (if a single relationship channels a disproportionate volume of potentially suspicious activity).

What is an 'OFAC general license' and how does it differ from a 'specific license'?

Answer: A general license authorizes a broad category of transactions without individual application; a specific license is OFAC authorization granted to a named applicant for a specific transaction or category

OFAC general licenses are published authorizations that apply broadly to categories of transactions without requiring individual application. Specific licenses are case-by-case authorizations granted by OFAC to a named applicant for particular transactions that would otherwise be prohibited.

What is 'dusting' in the context of cryptocurrency, and how can it relate to AML concerns?

Answer: Sending microscopic amounts of crypto to multiple wallets to de-anonymize their owners by tracking subsequent transactions

Dusting attacks involve sending tiny ('dust') amounts of cryptocurrency to many wallets; when recipients move these funds, their wallet clusters can be linked, potentially de-anonymizing them — a tactic sometimes used by investigators or malicious actors.

What is 'simplified due diligence' (SDD) and when may it be applied?

Answer: A reduced level of CDD measures that may be applied to lower-risk customers where the risk of money laundering is demonstrably low

Simplified due diligence allows institutions to apply reduced CDD measures to clearly lower-risk customers — such as government entities, publicly listed companies, or low-value retail accounts — where the inherent ML/TF risk does not justify standard CDD requirements.

When a legal entity customer is a publicly traded company on a US exchange, how does FinCEN's CDD Rule treat beneficial ownership requirements?

Answer: Covered financial institutions may exclude these entities from beneficial ownership identification requirements

FinCEN's CDD Rule provides exclusions for certain regulated entities, including companies listed on US stock exchanges, because their ownership is already subject to SEC disclosure requirements.

Which of the following best describes a comprehensive sanctions program, such as those the U.S. has imposed on North Korea and Cuba?

Answer: Broad prohibitions on trade, financial transactions, and other dealings with an entire country or geographic region.

Comprehensive sanctions are broad, country-based embargoes that prohibit most commercial and financial transactions with an entire country or region. This is distinct from targeted or list-based sanctions, which apply only to specific individuals, entities, or sectors.

What is the 'Wolfsberg Group' and what is its role in international AML standards?

Answer: A group of 13 global financial institutions that develop voluntary AML/CFT guidance, principles, and best practice papers for the private sector, particularly in correspondent banking, private banking, and trade finance

The Wolfsberg Group is a private-sector association of 13 major global banks that develops voluntary AML guidance and principles, particularly influential in areas such as correspondent banking due diligence, private banking, and anti-bribery standards.

When a financial institution identifies a discrepancy in beneficial ownership information provided by a customer, what is the appropriate response?

Answer: Conduct additional due diligence to resolve the discrepancy; escalate and file a SAR if suspicion remains

FinCEN guidance requires institutions to conduct additional due diligence when discrepancies arise, and to file a SAR if the discrepancy cannot be satisfactorily resolved and suspicion of illicit activity remains.

Under-invoicing in a TBML scheme primarily benefits which party?

Answer: The importer

Under-invoicing benefits the importer, who pays less than market value, receiving excess value in the form of goods while transferring the value difference to the exporting country.

What is 'trade-based terrorist financing' and how does it differ from trade-based money laundering?

Answer: Both exploit trade transactions, but trade-based TF focuses on moving value to support terrorist operations (procuring materials, funding operatives) rather than integrating criminal proceeds — the purpose of the value movement distinguishes TF from ML

Both exploit trade transaction manipulation, but the purpose differs: TBML integrates criminal proceeds into the legitimate economy, while trade-based TF moves value to fund terrorist operations — acquiring materials, paying operatives, or supporting logistics — often from legitimate fund sources.