ACAMS Virtual Assets and Cryptocurrency AML 1 — Questions and Answers
Question 1: Under FATF Recommendation 16 (the Travel Rule), what information must Virtual Asset Service Providers (VASPs) transmit alongside virtual asset transfers?
- Only the transaction hash and wallet addresses
- Originator and beneficiary name, account/wallet address, and physical address or national ID (Correct answer)
- The USD equivalent value and the date of the transaction
- The VASP's license number and jurisdiction of registration
Correct answer: Originator and beneficiary name, account/wallet address, and physical address or national ID
FATF's Travel Rule requires VASPs to collect and transmit originator and beneficiary identifying information (name, wallet address, and physical address or national ID/date of birth) for qualifying transfers, mirroring wire transfer rules for banks.
Question 2: Which technique involves routing cryptocurrency through multiple wallets or intermediary addresses to obscure the transaction trail?
- Layering via blockchain fragmentation
- Cryptocurrency mixing or tumbling (Correct answer)
- Smurfing across exchanges
- Chain hopping between networks
Correct answer: Cryptocurrency mixing or tumbling
Mixing or tumbling services pool multiple users' cryptocurrency together and redistribute equivalent amounts, breaking the transaction trail and making it difficult to trace the original source of funds.
Question 3: Which FATF Recommendation was specifically updated in 2019 to extend AML/CFT obligations to Virtual Asset Service Providers (VASPs)?
- Recommendation 10 (Customer Due Diligence)
- Recommendation 14 (Money or Value Transfer Services)
- Recommendation 15 (New Technologies) (Correct answer)
- Recommendation 26 (Regulation of Financial Institutions)
Correct answer: Recommendation 15 (New Technologies)
FATF Recommendation 15 was updated in 2019 to explicitly include virtual assets and VASPs, requiring countries to regulate, supervise, and apply AML/CFT obligations to these entities.
Question 4: What is 'chain hopping' in the context of cryptocurrency money laundering?
- Repeatedly buying and selling the same cryptocurrency on one exchange
- Converting funds from one blockchain network to another to obscure the audit trail (Correct answer)
- Using multiple custodial wallets at the same VASP
- Splitting a large cryptocurrency transaction into smaller ones on the same chain
Correct answer: Converting funds from one blockchain network to another to obscure the audit trail
Chain hopping involves converting cryptocurrency from one blockchain (e.g., Bitcoin) to another (e.g., Monero) to exploit gaps in cross-chain transaction monitoring and disrupt the investigative trail.
Question 5: A blockchain explorer is most useful in an AML investigation for which purpose?
- Automatically freezing suspicious wallets
- Filing Suspicious Activity Reports with FinCEN
- Tracing the flow of funds across publicly visible transaction records (Correct answer)
- Determining the legal identity of a wallet owner
Correct answer: Tracing the flow of funds across publicly visible transaction records
Blockchain explorers display the publicly recorded transaction history on a given blockchain, allowing investigators to trace fund flows between wallet addresses, though they do not by themselves reveal real-world identities.
Question 6: Which category of virtual asset is specifically designed to raise proliferation financing risk due to its direct association with sanctioned jurisdictions' attempts to evade restrictions?
- Stablecoins pegged to major fiat currencies
- State-sponsored or government-issued virtual currencies from sanctioned nations (Correct answer)
- Utility tokens used for software platform access
- Non-fungible tokens (NFTs) on public blockchains
Correct answer: State-sponsored or government-issued virtual currencies from sanctioned nations
State-sponsored cryptocurrencies issued by sanctioned nations (e.g., Venezuela's Petro, or North Korea's crypto activities) are specifically flagged as proliferation financing risks as they are designed to circumvent international sanctions.
Question 7: Under FinCEN guidance, a business that exchanges virtual currency for fiat currency on behalf of customers is generally classified as which type of regulated entity?
- A broker-dealer subject to SEC oversight
- A money services business (MSB) subject to Bank Secrecy Act requirements (Correct answer)
- A non-bank financial institution exempt from AML requirements
- A commodity pool operator regulated by the CFTC
Correct answer: A money services business (MSB) subject to Bank Secrecy Act requirements
FinCEN guidance (2013 and subsequent) classifies virtual currency exchangers and administrators as money services businesses (MSBs) under the Bank Secrecy Act, requiring them to register, maintain AML programs, and file SARs and CTRs.
ACAMS Virtual Assets and Cryptocurrency AML 1
Under FATF Recommendation 16 (the Travel Rule), what information must Virtual Asset Service Providers (VASPs) transmit alongside virtual asset transfers?