Emerging Trends Flashcards

What is 'chain-hopping' in the context of cryptocurrency-based money laundering?

Answer: Converting funds between different blockchain networks to obscure their trail

Chain-hopping involves converting assets from one cryptocurrency to another across different blockchains, complicating tracing efforts.

Synthetic identity fraud most directly impacts AML programs because it:

Answer: Creates accounts that pass initial KYC checks using fabricated but plausible identities

Synthetic identities combine real and fictitious information to create credible personas that evade standard ID verification, allowing illicit accounts to pass KYC.

Which technology is being explored to improve AML information sharing between financial institutions while protecting customer privacy?

Answer: Privacy-preserving computation techniques like federated learning

Federated learning and similar privacy-preserving techniques allow institutions to train shared AML models without exposing individual customer data.

Environmental crime proceeds, such as those from illegal logging or wildlife trafficking, are increasingly laundered through:

Answer: Cash-intensive legitimate businesses in source countries

Proceeds from environmental crimes are often integrated through local cash-intensive businesses like restaurants or retail shops in the country where the crime occurred.

How are darknet markets relevant to AML compliance programs?

Answer: They facilitate the sale of illicit goods for cryptocurrency, generating proceeds requiring laundering

Darknet markets generate cryptocurrency proceeds from drug sales, fraud tools, and other illegal items that must subsequently be laundered into the financial system.

What is the significance of 'unhosted wallets' (self-custodied wallets) in the FATF virtual asset framework?

Answer: Transactions involving unhosted wallets may require enhanced due diligence by VASPs

FATF guidance recommends that VASPs apply enhanced due diligence when their customers transact with unhosted wallets, as these lack an obligated intermediary.

Which typology involves using professional third parties such as lawyers or accountants to launder money by exploiting attorney-client privilege?

Answer: Gatekeeping abuse

Gatekeeping abuse occurs when legal and accounting professionals are used—knowingly or unknowingly—to provide a veneer of legitimacy to illicit transactions.