CCB Financial Crime Prevention 3 — Questions and Answers
Question 1: Which of the following best describes the 'loan-back' money laundering technique?
- Placing cash in a bank and immediately withdrawing it
- Depositing illicit funds offshore then borrowing them back as a legitimate loan (Correct answer)
- Using multiple couriers to deposit small amounts
- Converting cash to cryptocurrency then back to cash
Correct answer: Depositing illicit funds offshore then borrowing them back as a legitimate loan
The loan-back scheme places illicit funds in an offshore account, then borrows the money back to create a seemingly legitimate paper trail.
Question 2: Under the USA PATRIOT Act, financial institutions are required to establish Customer Identification Programs (CIP). What is the minimum information required for individual customers?
- Name and address only
- Name, date of birth, address, and identification number (Correct answer)
- Name, Social Security number, and employer
- Name, address, and credit score
Correct answer: Name, date of birth, address, and identification number
CIP regulations require collection of name, date of birth, address, and identification number (e.g., SSN or passport number) for individual customers.
Question 3: Which type of Politically Exposed Person (PEP) poses the HIGHEST risk and typically requires enhanced due diligence by default?
- Domestic PEPs
- Foreign PEPs (Correct answer)
- International organization PEPs
- Family members of PEPs
Correct answer: Foreign PEPs
Foreign PEPs are classified as highest risk under FATF and US regulations because they may use US financial systems to hide corruption proceeds.
Question 4: A financial institution's AML program must include which four core elements under the BSA/AML framework?
- Policies, training, audits, and customer complaints
- Internal controls, independent testing, a designated AML officer, and training (Correct answer)
- KYC, CDD, EDD, and transaction monitoring
- Recordkeeping, reporting, screening, and sanctions compliance
Correct answer: Internal controls, independent testing, a designated AML officer, and training
The BSA requires the 'four pillars': written internal controls, independent testing (audit), a designated compliance officer, and an ongoing employee training program.
Question 5: Which federal agency is the primary financial intelligence unit (FIU) in the United States that receives and analyzes SARs and CTRs?
- FBI
- OFAC
- FinCEN (Correct answer)
- OCC
Correct answer: FinCEN
The Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury, is the US FIU responsible for collecting and analyzing BSA filings.
Question 6: The term 'de-risking' in the financial crime context refers to:
- Reducing credit exposure to high-risk borrowers
- Financial institutions exiting entire customer categories to avoid AML risk (Correct answer)
- Lowering transaction monitoring alert thresholds
- Implementing enhanced due diligence for all customers
Correct answer: Financial institutions exiting entire customer categories to avoid AML risk
De-risking occurs when financial institutions terminate or restrict relationships with entire categories of customers rather than managing individual risks.
Question 7: When conducting Enhanced Due Diligence (EDD) for a high-risk customer, which additional step is most appropriate?
- Waiving the standard CIP requirements
- Obtaining senior management approval for the relationship (Correct answer)
- Filing a pre-emptive SAR
- Restricting the customer to cash-only transactions
Correct answer: Obtaining senior management approval for the relationship
EDD for high-risk customers typically requires senior management approval before onboarding or continuing the relationship, in addition to enhanced monitoring.
CCB Financial Crime Prevention 3
Which of the following best describes the 'loan-back' money laundering technique?