Anti-Money Laundering Flashcards
7 cards from real Banking practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Anti-Money Laundering flashcards as text
Which of the following best describes a 'shell company' in the context of money laundering?
Answer: A business entity with no active operations used to obscure the true owner of assets
Shell companies are legal entities with no genuine business activities and are commonly used in layering schemes to hide the beneficial owner of illicit funds.
What is the primary purpose of a Customer Risk Rating in an AML program?
Answer: To assess the likelihood that a customer's activity poses a money laundering risk
Customer risk ratings help banks apply a risk-based approach, directing enhanced due diligence resources toward higher-risk customers.
A Politically Exposed Person (PEP) is considered high-risk for AML purposes primarily because:
Answer: Their political position may provide opportunities for bribery or corruption
PEPs are considered high-risk because their public positions of power create opportunities for bribery, corruption, and embezzlement of public funds.
Which of the following is an example of the 'integration' stage of money laundering?
Answer: Purchasing real estate with laundered funds and then selling it
Integration is the final stage where laundered funds re-enter the legitimate economy through purchases of assets like real estate, which can be sold to generate clean proceeds.
Under the BSA, how long must banks retain records of wire transfers of $3,000 or more?
Answer: 5 years
The BSA's Recordkeeping Rule requires banks to retain records of wire transfers of $3,000 or more for five years from the date of the transaction.
What is 'correspondent banking' and why does it pose elevated AML risk?
Answer: Providing banking services to foreign banks, which may allow illicit funds to pass through without full due diligence
Correspondent banking relationships can be exploited by money launderers because the respondent bank's customers receive indirect access to the correspondent bank's systems without undergoing its due diligence.
Which red flag most strongly suggests real estate money laundering?
Answer: An all-cash purchase of high-value property by a newly formed LLC with no apparent business history
All-cash purchases by opaque entities like newly formed LLCs with no business history are a classic integration-stage red flag in real estate money laundering schemes.