Banking Exam Anti-Money Laundering Compliance 5 — Questions and Answers
Question 1: A customer presents a valid government ID but the address does not match records in a credit bureau database. Under CIP requirements, the bank should:
- Reject the application immediately without exception
- Accept the ID and open the account without further action
- Use additional identity verification methods to resolve the discrepancy (Correct answer)
- File a SAR automatically for all new account rejections
Correct answer: Use additional identity verification methods to resolve the discrepancy
CIP requires institutions to use additional methods, such as documentary or non-documentary verification, to resolve discrepancies in customer identity information.
Question 2: Which of the following is a core pillar of an effective BSA/AML compliance program?
- Annual employee bonuses tied to SAR filing volume
- Designation of a BSA compliance officer (Correct answer)
- Restricting cash transactions to existing customers only
- Outsourcing all compliance functions to a third party
Correct answer: Designation of a BSA compliance officer
Federal regulations require financial institutions to designate a BSA/AML compliance officer responsible for day-to-day oversight of the AML program.
Question 3: Trade-based money laundering (TBML) most commonly involves:
- Using offshore shell companies to hold assets
- Over- or under-invoicing goods in international trade transactions (Correct answer)
- Converting cash into cryptocurrency on dark web exchanges
- Purchasing real estate in all-cash transactions
Correct answer: Over- or under-invoicing goods in international trade transactions
TBML exploits the complexity of international trade by manipulating invoice prices, quantities, or quality of goods to transfer value across borders.
Question 4: When a financial institution files a SAR, who should generally NOT be informed of the filing?
- Senior management of the institution
- The BSA/AML compliance officer
- The subject of the SAR (Correct answer)
- Federal law enforcement upon official request
Correct answer: The subject of the SAR
Informing the SAR subject that a report has been or may be filed is the prohibited act of 'tipping off,' which is a federal violation under the BSA.
Question 5: A shell company with no employees, no physical office, and no clear business operations requests a wire transfer to a high-risk country. This is primarily a red flag for:
- Tax evasion only, not money laundering
- Legitimate foreign direct investment
- Potential layering activity using a shell entity (Correct answer)
- Standard correspondent banking activity
Correct answer: Potential layering activity using a shell entity
Shell companies with opaque ownership structures are commonly used in the layering stage to obscure the origin of illicit funds through complex ownership chains.
Question 6: What does 'de-risking' mean in the context of AML compliance?
- Applying enhanced due diligence to high-risk customers
- Financial institutions exiting entire customer segments to avoid AML risk (Correct answer)
- Reducing transaction monitoring alert thresholds
- Transferring AML risk to correspondent banks
Correct answer: Financial institutions exiting entire customer segments to avoid AML risk
De-risking occurs when financial institutions terminate or restrict relationships with entire customer categories (e.g., MSBs, foreign banks) rather than managing risk on a case-by-case basis.
Question 7: Under FinCEN's geographic targeting orders (GTOs), all-cash real estate purchases above a set threshold in covered jurisdictions require disclosure of:
- The property's assessed tax value
- The beneficial owner of the purchasing entity (Correct answer)
- The buyer's employment and income history
- The real estate agent's commission structure
Correct answer: The beneficial owner of the purchasing entity
GTOs require title insurance companies to identify the natural person(s) who are the beneficial owners behind shell companies making all-cash real estate purchases.
Banking Exam Anti-Money Laundering Compliance 5
A customer presents a valid government ID but the address does not match records in a credit bureau database.
Under CIP requirements, the bank should: