Anti-Money Laundering (AML) Principles Flashcards

Under the USA PATRIOT Act, which program must banks establish to verify the identity of new customers?

Answer: Customer Identification Program (CIP)

Section 326 of the USA PATRIOT Act requires covered financial institutions to implement a CIP to collect and verify identifying information for new account holders.

OFAC (Office of Foreign Assets Control) sanctions programs require banks to:

Answer: Block or reject transactions involving sanctioned individuals, entities, or countries

OFAC administers economic sanctions that prohibit U.S. financial institutions from engaging in transactions with designated individuals, entities, and jurisdictions.

Which of the following best describes a 'shell company' in the context of money laundering?

Answer: A company with no significant assets or operations used to conceal the true beneficial owner

Shell companies are corporate entities with no real business activity, used to obscure the identity of the true owner and facilitate layering of illicit funds.

A bank's AML program must include four core elements. Which of the following is NOT one of the four required pillars?

Answer: Customer credit monitoring and scoring

The four BSA/AML pillars are: internal controls, a designated BSA officer, ongoing employee training, and independent audit/testing — credit monitoring is not among them.

Real estate transactions are a common vehicle for money laundering integration because:

Answer: Property values are easy to manipulate and real estate can be sold to produce seemingly legitimate proceeds

Real estate allows criminals to integrate dirty money by purchasing property with illicit funds and reselling it, generating what appears to be clean, legitimate sales proceeds.

Which international body sets global AML standards that influence U.S. regulatory requirements?

Answer: The Financial Action Task Force (FATF)

FATF is an intergovernmental organization that develops and promotes policies to combat money laundering and terrorist financing, setting the global AML standards that member countries implement.

When a bank's transaction monitoring system generates an alert, what is the compliance team's first responsibility?

Answer: Conduct a review to determine whether the alert represents genuinely suspicious activity

An alert is a starting point for investigation, not automatic grounds for a SAR — the compliance team must analyze the transaction in context before determining whether filing is warranted.