ACFE Money Laundering Investigation 4 — Questions and Answers
Question 1: A CFE discovers that a client's company has been making round-trip transactions where funds leave the company and return disguised as foreign investment. This is known as:
- Loan-back scheme
- Round-tripping (Correct answer)
- Double invoicing
- Asset cycling
Correct answer: Round-tripping
Round-tripping involves sending money offshore and reintroducing it as foreign investment, making domestic funds appear to come from a foreign source.
Question 2: Under FinCEN's Customer Due Diligence (CDD) Rule, what ownership threshold triggers beneficial ownership identification for legal entities?
- 5% or more ownership
- 10% or more ownership
- 25% or more ownership (Correct answer)
- 51% or more ownership
Correct answer: 25% or more ownership
FinCEN's CDD Rule requires financial institutions to identify individuals who own 25% or more of a legal entity customer.
Question 3: Which professional is most at risk of being used as a 'gatekeeper' in a money laundering scheme?
- A bank teller processing routine deposits
- An attorney forming shell companies on behalf of anonymous clients (Correct answer)
- A payroll administrator processing employee wages
- A retail cashier accepting credit card payments
Correct answer: An attorney forming shell companies on behalf of anonymous clients
Attorneys, accountants, and other professionals who form companies or manage funds for clients can be exploited as gatekeepers to obscure beneficial ownership.
Question 4: What is the primary difference between 'concealment' money laundering and 'promotion' money laundering under 18 U.S.C. § 1956?
- Concealment involves drug proceeds only; promotion applies to all crimes
- Concealment hides proceeds of past crimes; promotion uses funds to facilitate future crimes (Correct answer)
- Concealment requires a foreign transaction; promotion is domestic only
- Concealment is a civil violation; promotion is a criminal offense
Correct answer: Concealment hides proceeds of past crimes; promotion uses funds to facilitate future crimes
Concealment money laundering involves disguising the nature or source of criminal proceeds, while promotion money laundering uses those proceeds to further criminal activity.
Question 5: A money launderer uses a legitimate restaurant business to commingle illegal cash with daily sales receipts, inflating reported revenues. This primarily exploits which characteristic?
- High employee turnover in food service
- The cash-intensive nature of restaurant operations (Correct answer)
- Restaurants' exemption from BSA reporting requirements
- The perishable nature of restaurant inventory making audits difficult
Correct answer: The cash-intensive nature of restaurant operations
Cash-intensive businesses like restaurants are attractive for commingling because large cash revenues are normal and harder to distinguish from illicit funds.
Question 6: When investigating a suspected money laundering case, which type of analysis maps the flow of funds through multiple accounts and entities?
- Vertical analysis
- Link analysis (Correct answer)
- Regression analysis
- Ratio analysis
Correct answer: Link analysis
Link analysis visually maps relationships and fund flows between accounts, individuals, and entities, helping investigators trace the movement of laundered money.
Question 7: A financial institution that fails to implement an adequate AML program can be prosecuted under which theory even if it did not knowingly process illegal funds?
- Vicarious liability
- Deliberate ignorance / willful blindness (Correct answer)
- Strict product liability
- Respondeat superior negligence
Correct answer: Deliberate ignorance / willful blindness
The willful blindness doctrine holds that deliberately avoiding knowledge of suspicious activity is equivalent to actual knowledge for criminal liability purposes.
ACFE Money Laundering Investigation 4
A CFE discovers that a client's company has been making round-trip transactions where funds leave the company and return disguised as foreign investment.
This is known as: