Banking Exam Anti-Money Laundering (AML) Principles 3

Question 1

What does the term 'Know Your Customer' (KYC) require a bank to do at account opening?

Accepted Answer

Verify customer identity, understand the nature of the account, and assess money laundering risk

Answer

KYC encompasses customer identification, understanding the customer's expected account activity, and performing an ongoing risk assessment to detect anomalies.

Question 2

Under FinCEN's Customer Due Diligence (CDD) rule, banks must identify beneficial owners of legal entity customers who own what minimum ownership threshold?

Accepted Answer

25% or more

Answer

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.

Question 3

A Politically Exposed Person (PEP) requires enhanced due diligence primarily because:

Accepted Answer

Their prominent public position creates heightened risk of bribery and corruption-related money laundering

Answer

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.

Question 4

Which stage of money laundering involves introducing illicit cash into the legitimate financial system for the first time?

Accepted Answer

Placement

Answer

Placement is the first and most vulnerable stage, where criminals physically deposit or otherwise introduce cash proceeds into the banking system.

Question 5

Trade-Based Money Laundering (TBML) most commonly involves which of the following techniques?

Accepted Answer

Over- or under-invoicing goods and services in international trade

Answer

TBML typically exploits international trade by manipulating invoice values, quantities, or quality of goods to transfer value across borders while appearing legitimate.

Banking Exam Practice Test

Banking Exam Practice Test

Banking Exam Anti-Money Laundering (AML) Principles 3