CCO Anti-Money Laundering and Financial Crimes 1 — Questions and Answers
Question 1: What are the three stages of the money laundering process?
- Reporting, monitoring, and sanctioning
- Placement, layering, and integration (Correct answer)
- Detection, investigation, and prosecution
- Sourcing, transferring, and concealing
Correct answer: Placement, layering, and integration
Money laundering moves through placement (introducing dirty money), layering (obscuring its trail), and integration (reintroducing it as legitimate funds).
Question 2: What does a Suspicious Activity Report (SAR) require from a financial institution?
- Immediate freezing of the customer's account
- Confidential filing with FinCEN when suspicious transactions are detected (Correct answer)
- Public disclosure to law enforcement
- Notification to the customer that they are under review
Correct answer: Confidential filing with FinCEN when suspicious transactions are detected
SARs must be filed confidentially with FinCEN when transactions suggest money laundering, fraud, or other financial crimes without alerting the subject.
Question 3: What is the Bank Secrecy Act (BSA)?
- A law requiring banks to keep customer information secret
- The primary US anti-money laundering law requiring financial institutions to assist government agencies in detecting and preventing money laundering (Correct answer)
- A regulation governing international wire transfers only
- A law preventing banks from sharing data with third parties
Correct answer: The primary US anti-money laundering law requiring financial institutions to assist government agencies in detecting and preventing money laundering
The BSA is the foundational US AML law that requires financial institutions to maintain records and file reports to help identify and prevent money laundering.
Question 4: What is 'Know Your Customer' (KYC)?
- A customer service initiative
- The process of verifying customer identity and assessing financial crime risk before and during a business relationship (Correct answer)
- A marketing segmentation strategy
- A credit scoring method
Correct answer: The process of verifying customer identity and assessing financial crime risk before and during a business relationship
KYC requires financial institutions to verify the identity of clients and assess potential risks of illegal intentions to prevent financial crimes.
Question 5: What is a Currency Transaction Report (CTR)?
- A report for foreign exchange transactions only
- A mandatory report filed with FinCEN for cash transactions exceeding $10,000 (Correct answer)
- A voluntary fraud notification
- A report filed by customers for large purchases
Correct answer: A mandatory report filed with FinCEN for cash transactions exceeding $10,000
CTRs must be filed with FinCEN for all cash transactions exceeding $10,000 in a single day by the same customer.
Question 6: What is 'structuring' in the context of AML?
- Organizing a compliance department
- Deliberately breaking up transactions to avoid CTR reporting thresholds (Correct answer)
- Building a financial model
- Layering investments across asset classes
Correct answer: Deliberately breaking up transactions to avoid CTR reporting thresholds
Structuring, also called 'smurfing,' is the illegal act of breaking large cash transactions into smaller ones specifically to evade the $10,000 CTR filing requirement.
CCO Anti-Money Laundering and Financial Crimes 1
What are the three stages of the money laundering process?