ACAMS General Practice 3 — Questions and Answers
Question 1: Under the FinCEN Customer Due Diligence rule, which of the following must be identified for legal entity customers opening accounts at covered financial institutions?
- The company's credit score and debt-to-equity ratio
- Beneficial owners who own 25% or more and a single person with significant control (Correct answer)
- All employees who have signature authority over the account
- The company's three most recent audited financial statements
Correct answer: Beneficial owners who own 25% or more and a single person with significant control
FinCEN's CDD rule requires identifying beneficial owners at a 25% ownership threshold plus one control person with significant managerial authority.
Question 2: Which red flag is most associated with trade-based money laundering (TBML)?
- A customer requesting a wire transfer to a FATF-compliant jurisdiction
- Over- or under-invoicing of goods and services in international trade transactions (Correct answer)
- A business customer depositing revenue consistent with its industry
- Requesting online banking access for a new business account
Correct answer: Over- or under-invoicing of goods and services in international trade transactions
TBML often involves manipulating trade invoice values to transfer value across borders, making over- or under-invoicing a key red flag.
Question 3: An AML officer discovers that a compliance program has not been updated since 2019 and lacks risk-based controls. What is the most immediate priority?
- File a SAR with FinCEN to disclose the program deficiency
- Conduct a gap analysis and present findings to senior management for remediation (Correct answer)
- Notify all customers of the compliance program weakness
- Suspend all new account openings until the program is updated
Correct answer: Conduct a gap analysis and present findings to senior management for remediation
Conducting a gap analysis and escalating to senior management is the appropriate first step to begin systematic remediation of compliance program deficiencies.
Question 4: Under OFAC regulations, what does 'blocking' a transaction mean?
- Delaying a transaction pending additional customer documentation
- Freezing assets or funds associated with sanctioned parties so they cannot be moved (Correct answer)
- Returning funds to the originating party without processing
- Reporting the transaction to the IRS for tax investigation
Correct 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.
Question 5: Which of the following is the most effective method for identifying money laundering in correspondent banking relationships?
- Reviewing the respondent bank's website for compliance information
- Conducting due diligence on the respondent bank's AML program and monitoring nested accounts (Correct answer)
- Limiting the relationship to domestic wire transfers only
- Requiring the respondent bank to file SARs in the home country
Correct answer: Conducting due diligence on the respondent bank's AML program and monitoring nested accounts
Correspondent banks must assess the respondent bank's AML controls and monitor for nested accounts where third parties gain indirect access to the correspondent's services.
Question 6: What is the key difference between a SAR and a CTR?
- CTRs are filed voluntarily while SARs are mandatory
- CTRs are triggered by transaction amounts while SARs are triggered by suspicious activity (Correct answer)
- SARs are submitted to the IRS while CTRs go to FinCEN
- CTRs require law enforcement approval before filing
Correct answer: CTRs are triggered by transaction amounts while SARs are triggered by suspicious activity
CTRs are threshold-based reports ($10,000+ in cash) while SARs are activity-based reports filed when transactions appear suspicious regardless of amount.
Question 7: Which FATF recommendation addresses the risk-based approach to AML/CFT?
- Recommendation 1 (Correct answer)
- Recommendation 5
- Recommendation 16
- Recommendation 40
Correct answer: Recommendation 1
FATF Recommendation 1 establishes the risk-based approach, requiring countries and financial institutions to identify, assess, and understand their ML/TF risks.
ACAMS General Practice 3
Under the FinCEN Customer Due Diligence rule, which of the following must be identified for legal entity customers opening accounts at covered financial institutions?