Transaction Monitoring Flashcards

Which of the following is the MOST significant risk associated with over-reliance on automated transaction monitoring without human review?

Answer: Context-dependent suspicious activity may be missed because systems cannot interpret nuanced customer behavior

Automated systems lack the contextual judgment to distinguish between genuinely suspicious patterns and unusual but legitimate activity, making human analyst review essential.

A customer's account shows a pattern of receiving large wire transfers followed immediately by conversion to cryptocurrency on an exchange. This pattern is MOST consistent with:

Answer: Layering, as funds are being moved into a less transparent asset class

Converting wire transfer proceeds to cryptocurrency is a layering technique designed to obscure the trail of funds and complicate tracing.

What does the term 'negative news screening' refer to in the context of transaction monitoring investigations?

Answer: Searching media and public sources for adverse information about a customer or their counterparties

Negative news screening involves searching public databases, news sources, and adverse media to identify derogatory information about customers during alert investigation.

Which of the following BEST describes the purpose of establishing 'expected activity' profiles in transaction monitoring?

Answer: To create a baseline against which deviations can be identified as potentially suspicious

Expected activity profiles define normal behavior for each customer so that deviations from that baseline can trigger alerts for further investigation.

A financial institution receives a grand jury subpoena for records on a customer who is the subject of an active SAR. What should the institution do?

Answer: Comply with the subpoena and do not notify the customer (tipping-off prohibition applies)

The tipping-off prohibition under the BSA forbids notifying the subject of a SAR, and the institution must comply with lawful legal process without alerting the customer.

Which of the following is an example of a 'transaction monitoring scenario' specifically designed to detect terrorist financing?

Answer: Small, frequent international wire transfers to high-risk jurisdictions inconsistent with the customer's profile

Terrorist financing often involves small amounts sent to high-risk regions, unlike money laundering which typically involves large sums, making this pattern a key TF indicator.

Under FinCEN guidance, which of the following institutions is required to have a transaction monitoring program?

Answer: Money services businesses (MSBs)

FinCEN's BSA regulations require MSBs to implement AML programs including transaction monitoring as a core component of their compliance obligations.