ACAMS Beneficial Ownership and Politically Exposed Persons (PEPs) 1 — Questions and Answers
Question 1: Under FinCEN's Customer Due Diligence (CDD) Rule, what ownership threshold triggers beneficial ownership identification for legal entity customers?
- 10% or more
- 15% or more
- 25% or more (Correct answer)
- 51% or more
Correct answer: 25% or more
FinCEN's CDD Rule requires covered financial institutions to identify natural persons owning 25% or more of a legal entity customer and one person with significant managerial control.
Question 2: In addition to identifying equity owners, FinCEN's beneficial ownership rule also requires identification of which individual?
- The entity's largest creditor
- A single person with significant responsibility to control, manage, or direct the entity (Correct answer)
- All directors of the company
- The entity's registered agent
Correct answer: A single person with significant responsibility to control, manage, or direct the entity
The CDD Rule's two-prong approach requires identifying equity owners at 25%+ and one control person with significant responsibility for managing or directing the entity.
Question 3: Which of the following is NOT considered a Politically Exposed Person (PEP) under FATF guidance?
- A head of state
- A senior military official
- A mid-level tax administrator with no policy-making authority (Correct answer)
- A senior executive of a state-owned enterprise
Correct answer: A mid-level tax administrator with no policy-making authority
FATF defines PEPs as individuals entrusted with prominent public functions; a mid-level tax administrator without policy-making authority does not meet this elevated risk threshold.
Question 4: Under FATF Recommendation 12, for how long after an individual leaves a prominent public position should enhanced due diligence measures continue?
- Six months
- One year
- A risk-based period, often cited as 12–18 months or longer (Correct answer)
- PEP status ends immediately upon leaving office
Correct answer: A risk-based period, often cited as 12–18 months or longer
FATF recommends applying a risk-based approach for former PEPs, and many jurisdictions and industry guidance suggest monitoring for at least 12–18 months or longer depending on risk.
Question 5: Which category of PEP is defined as 'domestic PEP' under US AML rules?
- Senior officials of foreign governments only
- Senior officials of US federal, state, or local government entrusted with prominent public functions (Correct answer)
- Any US citizen who works for a foreign government
- Relatives of foreign PEPs residing in the US
Correct answer: Senior officials of US federal, state, or local government entrusted with prominent public functions
Domestic PEPs are individuals entrusted with prominent public functions within the US, such as senior elected or appointed government officials.
Question 6: Which of the following best describes the 'layering' risk associated with complex beneficial ownership structures?
- Difficulty in processing wire transfers efficiently
- Multiple layers of legal entities obscuring the true natural person ultimately owning or controlling assets (Correct answer)
- Increased regulatory capital requirements for banks
- The use of nominees to reduce corporate tax liability
Correct answer: Multiple layers of legal entities obscuring the true natural person ultimately owning or controlling assets
Layered corporate structures—chains of holding companies, trusts, and nominee arrangements—are used to obscure beneficial ownership, making it difficult to identify the ultimate natural person behind accounts.
ACAMS Beneficial Ownership and Politically Exposed Persons (PEPs) 1
Under FinCEN's Customer Due Diligence (CDD) Rule, what ownership threshold triggers beneficial ownership identification for legal entity customers?