ACAMS Basic 3 — Questions and Answers
Question 1: Under FinCEN's Customer Due Diligence (CDD) Rule, what is the beneficial ownership threshold that triggers identification requirements for legal entity customers?
- 10% or more ownership
- 20% or more ownership
- 25% or more ownership (Correct answer)
- 51% or more ownership
Correct answer: 25% or more ownership
The CDD Rule requires identification of any natural person owning 25% or more of a legal entity, plus one control person.
Question 2: Which category of customer typically requires Enhanced Due Diligence (EDD) measures?
- Salaried employees with direct deposit
- Politically Exposed Persons (PEPs) (Correct answer)
- Students opening basic savings accounts
- Non-profit organizations in low-risk jurisdictions
Correct answer: Politically Exposed Persons (PEPs)
PEPs present elevated corruption and money laundering risk due to their access to public funds and political influence, necessitating EDD.
Question 3: What is the purpose of a Customer Risk Rating (CRR) in an AML program?
- To determine the interest rate a customer receives on deposits
- To assign a credit score based on payment history
- To categorize customers by their likelihood of posing money laundering risk (Correct answer)
- To measure customer profitability for the institution
Correct answer: To categorize customers by their likelihood of posing money laundering risk
A CRR aggregates factors like geography, products used, and business type to classify customers as low, medium, or high risk for AML purposes.
Question 4: A 'shell company' is most accurately described as which of the following?
- A company that manufactures and sells petroleum products
- A legal entity with no significant assets or operations used to obscure ownership (Correct answer)
- A holding company that owns multiple operating subsidiaries
- A company registered in a foreign country for legitimate tax efficiency
Correct answer: A legal entity with no significant assets or operations used to obscure ownership
Shell companies often have no real business activity and are used to layer ownership and obscure the true beneficial owner of assets.
Question 5: What does 'source of funds' verification in CDD refer to?
- Confirming where the bank wire originated technically
- Identifying the income or asset origin that funds a customer's transactions (Correct answer)
- Verifying the customer's credit card issuer
- Checking that funds are denominated in the local currency
Correct answer: Identifying the income or asset origin that funds a customer's transactions
Source of funds verification establishes the legitimate origin of the money a customer is using, helping detect illicit proceeds.
Question 6: Which of the following is a key component of an effective Know Your Customer (KYC) program?
- Collecting marketing preferences from customers at onboarding
- Establishing a Customer Identification Program (CIP) to verify identity (Correct answer)
- Offering loyalty rewards to long-standing customers
- Reviewing customer credit history before approving transactions
Correct answer: Establishing a Customer Identification Program (CIP) to verify identity
CIP is a foundational KYC element requiring institutions to collect and verify identity information for each customer.
Question 7: When should a financial institution conduct a periodic review of an existing customer's due diligence information?
- Only when the customer requests a product upgrade
- Whenever the customer's risk profile changes or on a scheduled basis based on risk tier (Correct answer)
- Exclusively at account closure
- Only if a SAR has already been filed on the customer
Correct answer: Whenever the customer's risk profile changes or on a scheduled basis based on risk tier
Ongoing due diligence requires refreshing customer information when risk factors change or on a risk-tiered schedule to ensure accuracy.
ACAMS Basic 3
Under FinCEN's Customer Due Diligence (CDD) Rule, what is the beneficial ownership threshold that triggers identification requirements for legal entity customers?