ACFE - Association of Certified Fraud Examiners Money Laundering Investigation Questions and Answers — Questions and Answers
Question 1: An investigator is tracing illicitly obtained funds. The suspect made numerous wire transfers between various shell corporations in different jurisdictions, purchased and quickly sold securities, and exchanged currencies multiple times. These actions BEST represent which stage of the money laundering process?
- Placement
- Integration
- Layering (Correct answer)
- Structuring
Correct answer: Layering
Layering is the stage where the launderer creates complex layers of financial transactions to obscure the audit trail and sever the link to the original crime. [4, 8] The described actions—using shell companies, rapid securities trading, and currency exchanges—are classic layering techniques designed to make the funds difficult to trace. [9, 22] Placement is the initial introduction of the funds, and integration is the final re-entry into the legitimate economy. [5, 15] Structuring is a method used in the placement stage, not a stage itself. [1, 5]
Question 2: Which of the following activities is the clearest indicator of "structuring," a money laundering technique designed to evade reporting requirements?
- Exchanging a large volume of small-denomination bills for large-denomination bills.
- Making multiple cash deposits, each just under $10,000, at different branches or on different days. (Correct answer)
- Using a single, large wire transfer to move funds to an offshore jurisdiction known for bank secrecy.
- Commingling illicit cash with the daily receipts of a legitimate cash-intensive business.
Correct answer: Making multiple cash deposits, each just under $10,000, at different branches or on different days.
Structuring, also known as smurfing, specifically refers to the act of breaking up large cash transactions into smaller, individual transactions to fall below the currency transaction reporting (CTR) threshold, which is over $10,000 in the U.S. [2, 3, 7] This is done to avoid the automatic reporting that such a large transaction would trigger. [1, 6]
Question 3: A CFE is investigating a public official suspected of accepting bribes. The official's known legitimate income is approximately $150,000 per year, yet they have recently purchased a luxury yacht, two vacation homes, and several high-end vehicles. To prove that the official's expenditures exceed their legitimate sources of funds, which investigative method would be MOST effective?
- Net worth analysis (Correct answer)
- Bank deposit analysis
- Asset misappropriation review
- Forensic audit of public records
Correct answer: Net worth analysis
Net worth analysis is an indirect method of proving illicit income by calculating the difference between a person's assets and liabilities over time. [27, 28] It compares the subject's change in net worth plus their known living expenses to their known legitimate income. [20] A significant excess of expenditures and wealth accumulation over known income serves as powerful circumstantial evidence of illicit enrichment, which is central to this bribery case. [29]
Question 4: What is the primary function of the Financial Action Task Force (FATF) in the global fight against money laundering and terrorist financing?
- To prosecute individuals and entities involved in international money laundering schemes.
- To act as a global central bank for processing cross-border suspicious activity reports.
- To set international standards and promote the effective implementation of legal, regulatory, and operational measures. (Correct answer)
- To directly seize the assets of sanctioned countries and terrorist organizations.
Correct answer: To set international standards and promote the effective implementation of legal, regulatory, and operational measures.
The FATF is an inter-governmental, policy-making body whose primary purpose is to set international standards (known as the FATF Recommendations) to combat money laundering and terrorist financing. [10, 19] It promotes the effective implementation of these standards through peer reviews but does not have any direct investigative, prosecutorial, or asset seizure powers. [12, 13]
Question 5: An import/export company is under investigation for money laundering. The company's invoices show it purchased electronic components from a foreign supplier for $50 per unit, but investigators determine the fair market value of the components is only $5 per unit. This practice allows the company to transfer significant value offshore. This scheme is a classic example of which form of money laundering?
- Bulk cash smuggling
- Shell corporation layering
- Structuring
- Trade-Based Money Laundering (TBML) through over-invoicing (Correct answer)
Correct answer: Trade-Based Money Laundering (TBML) through over-invoicing
Trade-Based Money Laundering (TBML) involves exploiting international trade to move value across borders. [16] Over-invoicing, as described in the scenario, is a common TBML technique where the importer pays a fraudulently inflated price for goods, effectively sending the excess, illicit funds to the exporter under the guise of a legitimate commercial transaction. [11, 14, 21]
Question 6: Under the U.S. Bank Secrecy Act (BSA), a financial institution is generally required to file a Suspicious Activity Report (SAR) for a transaction that it knows, suspects, or has reason to suspect involves funds derived from illegal activities and aggregates to at least what threshold when a suspect can be identified?
- $10,000
- $3,000
- $25,000
- $5,000 (Correct answer)
Correct answer: $5,000
The Bank Secrecy Act, as enforced by FinCEN, requires financial institutions like banks and broker-dealers to file a SAR for suspicious transactions that aggregate to at least $5,000 where a suspect can be identified. [31, 34] The $10,000 threshold applies to Currency Transaction Reports (CTRs), not necessarily SARs, although structuring to avoid the CTR threshold is a reason to file a SAR. [32, 33, 35]
ACFE - Association of Certified Fraud Examiners Money Laundering Investigation Questions and Answers
An investigator is tracing illicitly obtained funds.
The suspect made numerous wire transfers between various shell corporations in different jurisdictions, purchased and quickly sold securities, and exchanged currencies multiple times.
These actions BEST represent which stage of the money laundering process?