Banking Exam Anti-Money Laundering Compliance 4 — Questions and Answers
Question 1: A real estate company receives cash payments for property purchases without reporting to a financial institution. Which AML stage does this most represent?
- Integration
- Placement (Correct answer)
- Layering
- Structuring
Correct answer: Placement
Placement is the first stage of money laundering, where illegal cash is introduced into the financial system or used to purchase assets.
Question 2: What is the primary purpose of a financial institution's AML risk assessment?
- To determine the profitability of high-risk customers
- To identify, measure, and mitigate the institution's money laundering exposure (Correct answer)
- To set transaction limits for all customers
- To comply with SEC reporting requirements
Correct answer: To identify, measure, and mitigate the institution's money laundering exposure
An AML risk assessment identifies an institution's specific money laundering and terrorist financing risks to allocate compliance resources appropriately.
Question 3: Which of the following best describes 'integration' in the money laundering process?
- Splitting cash into smaller deposits
- Moving funds through multiple accounts to obscure origin
- Re-introducing laundered funds into the legitimate economy (Correct answer)
- Using shell companies to hide beneficial ownership
Correct answer: Re-introducing laundered funds into the legitimate economy
Integration is the final stage where laundered funds re-enter the legitimate economy appearing as normal business income or assets.
Question 4: An MSB (Money Services Business) customer wants to open a business account. Compared to a typical retail customer, the bank should apply:
- Standard due diligence only
- Reduced due diligence since MSBs are regulated
- Enhanced due diligence due to elevated risk (Correct answer)
- No due diligence as MSBs are exempt from BSA
Correct answer: Enhanced due diligence due to elevated risk
MSBs are considered higher-risk customers by regulators because they handle large volumes of cash and are frequently targeted by money launderers.
Question 5: Which of the following transactions would most likely require a SAR filing?
- A business customer deposits $15,000 in cash from its retail sales
- A customer wires $500,000 to an account with no apparent business purpose (Correct answer)
- A customer withdraws $10,001 in cash to purchase a used car
- A customer makes multiple ATM deposits totaling $8,000
Correct answer: A customer wires $500,000 to an account with no apparent business purpose
A large wire transfer with no apparent business purpose is a classic SAR trigger due to its unusual nature and potential for hiding illicit fund movement.
Question 6: Under BSA, how long must financial institutions retain records of CTRs and SARs?
- 3 years
- 5 years (Correct answer)
- 7 years
- 10 years
Correct answer: 5 years
BSA requires financial institutions to retain CTRs, SARs, and related records for five years from the date of filing.
Question 7: What is the key difference between a SAR and a CTR?
- CTRs are confidential; SARs are public record
- CTRs are filed for suspicious activity; SARs are filed for large cash transactions
- CTRs are mandatory for large cash transactions; SARs are filed when activity is deemed suspicious (Correct answer)
- SAR filing is optional; CTR filing is mandatory only for businesses
Correct answer: CTRs are mandatory for large cash transactions; SARs are filed when activity is deemed suspicious
CTRs are mandatory filings for cash transactions over $10,000, while SARs are filed when a financial institution identifies activity it suspects involves money laundering or other financial crimes.
Banking Exam Anti-Money Laundering Compliance 4
A real estate company receives cash payments for property purchases without reporting to a financial institution.
Which AML stage does this most represent?