CCB Financial Crime Prevention 5 — Questions and Answers
Question 1: Which emerging typology uses digital assets to layer illicit funds by rapidly exchanging between multiple cryptocurrencies across decentralized exchanges?
- Pig butchering
- Chain-hopping (Correct answer)
- Smurfing
- Round-tripping
Correct answer: Chain-hopping
Chain-hopping involves converting cryptocurrency from one blockchain to another in rapid succession to obscure the transaction trail.
Question 2: A compliance program that relies solely on automated transaction monitoring without human review is MOST deficient in which area?
- Recordkeeping
- Independent testing
- Contextual analysis and judgment (Correct answer)
- Customer identification
Correct answer: Contextual analysis and judgment
Automated systems lack the contextual judgment needed to evaluate complex customer relationships and emerging typologies, requiring human analyst review.
Question 3: Under the Corporate Transparency Act (CTA), which entity type is generally EXEMPT from beneficial ownership reporting requirements to FinCEN?
- LLCs with fewer than 5 employees
- Partnerships formed in a US state
- SEC-reporting public companies (Correct answer)
- Foreign companies operating in the US
Correct answer: SEC-reporting public companies
SEC-reporting public companies are among the 23 exempted categories under the CTA because they already disclose ownership information to regulators.
Question 4: Which real estate-related AML requirement requires title insurance companies in certain high-risk areas to identify the natural persons behind shell companies purchasing high-value properties?
- Customer Due Diligence Rule
- Geographic Targeting Orders (GTOs) (Correct answer)
- Suspicious Activity Report mandate
- Currency Transaction Report rule
Correct answer: Geographic Targeting Orders (GTOs)
FinCEN's Geographic Targeting Orders require title insurance companies in specific US markets to identify beneficial owners of LLCs purchasing residential real estate above certain thresholds.
Question 5: The 'risk-based approach' to AML compliance means that a financial institution should:
- Apply identical due diligence to all customers regardless of risk level
- Allocate more compliance resources to higher-risk customers and activities (Correct answer)
- Focus exclusively on the highest-risk customers while ignoring low-risk ones
- Use only automated systems to assess customer risk
Correct answer: Allocate more compliance resources to higher-risk customers and activities
A risk-based approach requires institutions to direct enhanced scrutiny and resources proportionally toward customers, products, and geographies that pose the greatest financial crime risk.
Question 6: Which internal control practice is MOST effective at detecting collusion between employees to facilitate money laundering?
- Mandatory employee training programs
- Job rotation and mandatory vacation policies (Correct answer)
- Increasing salary to reduce financial pressures
- Requiring dual-factor authentication for system access
Correct answer: Job rotation and mandatory vacation policies
Mandatory vacations and job rotation force another employee to cover responsibilities, increasing the likelihood of detecting concealed schemes or unusual activity.
Question 7: A SAR filed with FinCEN is subject to strict confidentiality rules. Which of the following actions would VIOLATE these rules?
- Sharing the SAR with FinCEN upon its request
- Disclosing the SAR to the subject of the report (Correct answer)
- Sharing the SAR information with law enforcement pursuant to a subpoena
- Discussing the SAR within the institution's AML team on a need-to-know basis
Correct answer: Disclosing the SAR to the subject of the report
Disclosing the existence or content of a SAR to the subject ('tipping off') is explicitly prohibited under 31 USC 5318(g) and may result in criminal penalties.
CCB Financial Crime Prevention 5
Which emerging typology uses digital assets to layer illicit funds by rapidly exchanging between multiple cryptocurrencies across decentralized exchanges?