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Anti-Money Laundering (AML) Principles Flashcards

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Read the first 7 Anti-Money Laundering (AML) Principles flashcards as text

  1. What is 'smurfing' in the context of AML?

    Answer: Breaking large cash sums into multiple smaller deposits across different branches or individuals to avoid reporting thresholds

    Smurfing is a form of structuring where multiple individuals ('smurfs') deposit smaller amounts across different locations to avoid triggering CTR requirements.

  2. Which of the following describes the 'integration' stage of money laundering?

    Answer: Reintroducing laundered funds into the legitimate economy so they appear as lawful income

    Integration is the final stage, where laundered money re-enters the legitimate financial system — often through luxury purchases, investments, or business revenue — appearing as clean funds.

  3. A Money Services Business (MSB) such as a check casher or money transmitter must register with:

    Answer: FinCEN, and comply with BSA requirements

    MSBs are required to register with FinCEN, implement AML programs, and comply with BSA obligations including filing SARs and CTRs.

  4. A bank discovers it failed to file a required SAR six months ago. What should it do?

    Answer: File the SAR immediately and document the reason for the delay

    Banks should file late SARs promptly upon discovery and document the circumstances; regulators take a more favorable view of good-faith late filings than of willful non-filing.

  5. What is the primary purpose of a bank's transaction monitoring system in an AML program?

    Answer: To automatically detect unusual or suspicious patterns in account activity that may warrant further investigation

    Transaction monitoring systems analyze account activity against expected behavior and peer groups to flag anomalies that compliance staff can then investigate for potential SAR filing.

  6. Which of the following customer behaviors would most strongly indicate potential money laundering through a business account?

    Answer: Consistent cash deposits significantly exceeding the revenue reported on the business's tax filings

    A discrepancy between reported business revenue and actual cash deposits is a strong red flag, suggesting the business may be used as a front to launder cash.

  7. Under U.S. law, which statute makes it a federal crime to conduct a financial transaction knowing the funds are derived from illegal activity?

    Answer: The Money Laundering Control Act (18 U.S.C. § 1956)

    18 U.S.C. § 1956, enacted as part of the Money Laundering Control Act of 1986, is the primary federal statute criminalizing money laundering transactions.