Anti-Money Laundering (AML) Principles Flashcards
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Read the first 7 Anti-Money Laundering (AML) Principles flashcards as text
What does the term 'Know Your Customer' (KYC) require a bank to do at account opening?
Answer: Verify customer identity, understand the nature of the account, and assess money laundering risk
KYC encompasses customer identification, understanding the customer's expected account activity, and performing an ongoing risk assessment to detect anomalies.
Under FinCEN's Customer Due Diligence (CDD) rule, banks must identify beneficial owners of legal entity customers who own what minimum ownership threshold?
Answer: 25% or more
The CDD rule requires banks to identify all individuals who own 25% or more of a legal entity customer, plus one person with significant managerial control.
A Politically Exposed Person (PEP) requires enhanced due diligence primarily because:
Answer: Their prominent public position creates heightened risk of bribery and corruption-related money laundering
PEPs hold positions that make them susceptible to bribery, corruption, or abuse of power, so their financial activity poses an elevated money laundering risk that warrants EDD.
Which stage of money laundering involves introducing illicit cash into the legitimate financial system for the first time?
Answer: Placement
Placement is the first and most vulnerable stage, where criminals physically deposit or otherwise introduce cash proceeds into the banking system.
Trade-Based Money Laundering (TBML) most commonly involves which of the following techniques?
Answer: Over- or under-invoicing goods and services in international trade
TBML typically exploits international trade by manipulating invoice values, quantities, or quality of goods to transfer value across borders while appearing legitimate.
Which of the following is NOT typically considered a red flag for potential money laundering activity?
Answer: A business account with cash deposits consistent with its stated industry
Cash deposits that are consistent with a business's stated industry and expected activity are a normal pattern, not a red flag.
What is the role of the Bank Secrecy Act (BSA) Officer within a financial institution?
Answer: To oversee the institution's AML compliance program and ensure BSA obligations are met
The BSA/AML Compliance Officer is responsible for implementing and managing the institution's AML program, training staff, and ensuring all BSA filing obligations are fulfilled.