KYC and Customer Due Diligence Flashcards
6 cards from real CAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 KYC and Customer Due Diligence flashcards as text
What are the three levels of customer due diligence recognized in AML frameworks?
Answer: Simplified, standard, enhanced
Customer due diligence is typically stratified into simplified (low-risk), standard (normal), and enhanced (high-risk) levels, with the depth of scrutiny increasing with the customer's risk rating.
Under FinCEN's Customer Due Diligence (CDD) Rule, which category of beneficial owner must be identified for legal entities?
Answer: Each individual owning 25% or more of the entity and one control person
FinCEN's CDD Rule requires identifying each individual who owns 25% or more of a legal entity (ownership prong) plus one individual who controls the entity (control prong).
What is the primary purpose of Enhanced Due Diligence (EDD)?
Answer: To gather additional information on high-risk customers to better understand and mitigate risk
EDD involves collecting additional information about high-risk customers — such as source of funds, source of wealth, and business purpose — to better assess and manage elevated money laundering risk.
Which of the following is a valid document for verifying individual customer identity under a U.S. Customer Identification Program (CIP)?
Answer: Unexpired government-issued photo ID such as a passport or driver's license
CIP requirements specify that for individuals, institutions must collect and verify name, date of birth, address, and identification number using documentary or non-documentary methods; an unexpired government-issued photo ID satisfies documentary verification.
What does 'ongoing customer due diligence' require financial institutions to do?
Answer: Continuously monitor customer transactions and update customer information to ensure profiles remain current and accurate
Ongoing CDD requires continuously monitoring customer transactions for activity inconsistent with the customer's profile and periodically refreshing customer information to ensure risk ratings remain accurate.
A Politically Exposed Person (PEP) is best defined as:
Answer: An individual who holds or has held a prominent public function, posing higher corruption and bribery risks
A PEP is someone entrusted with a prominent public function (e.g., heads of state, senior government officials, military officers, judicial officials) who pose an elevated risk of corruption and bribery.