CCO Anti-Money Laundering and Financial Crimes 2

Question 1

What is Customer Due Diligence (CDD) in AML compliance?

Accepted Answer

The process of identifying and verifying customer identity and assessing the nature of their business relationship to detect suspicious activity

Answer

CDD requires firms to collect and verify customer identity information and understand the expected nature of their transactions to detect anomalies.

Question 2

What is Enhanced Due Diligence (EDD) and when is it required?

Accepted Answer

Additional scrutiny applied to high-risk customers, such as politically exposed persons or customers from high-risk jurisdictions

Answer

EDD requires more rigorous verification and ongoing monitoring for customers who pose elevated AML risks, including PEPs and those from high-risk countries.

Question 3

What is a Politically Exposed Person (PEP)?

Accepted Answer

An individual who holds or has held a prominent public function, making them higher risk for bribery and corruption

Answer

PEPs are individuals such as heads of state, senior officials, or their close associates who carry elevated corruption risk due to their public positions.

Question 4

What does OFAC stand for and what is its role?

Accepted Answer

Office of Foreign Assets Control; administers US economic and trade sanctions

Answer

OFAC is the US Treasury bureau that administers and enforces economic and trade sanctions against targeted foreign countries, entities, and individuals.

Question 5

What is the purpose of a transaction monitoring system in AML compliance?

Accepted Answer

To automatically detect unusual patterns of activity that may indicate money laundering or other financial crimes

Answer

Transaction monitoring systems use rules and analytics to flag unusual activity patterns for investigation by compliance analysts.

CCO - Chief Compliance Officer Practice Test

CCO - Chief Compliance Officer Practice Test

CCO Anti-Money Laundering and Financial Crimes 2