Anti-Money Laundering and Financial Crimes Flashcards
6 cards from real CCO practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Anti-Money Laundering and Financial Crimes flashcards as text
What is Customer Due Diligence (CDD) in AML compliance?
Answer: The process of identifying and verifying customer identity and assessing the nature of their business relationship to detect suspicious activity
CDD requires firms to collect and verify customer identity information and understand the expected nature of their transactions to detect anomalies.
What is Enhanced Due Diligence (EDD) and when is it required?
Answer: Additional scrutiny applied to high-risk customers, such as politically exposed persons or customers from high-risk jurisdictions
EDD requires more rigorous verification and ongoing monitoring for customers who pose elevated AML risks, including PEPs and those from high-risk countries.
What is a Politically Exposed Person (PEP)?
Answer: An individual who holds or has held a prominent public function, making them higher risk for bribery and corruption
PEPs are individuals such as heads of state, senior officials, or their close associates who carry elevated corruption risk due to their public positions.
What does OFAC stand for and what is its role?
Answer: Office of Foreign Assets Control; administers US economic and trade sanctions
OFAC is the US Treasury bureau that administers and enforces economic and trade sanctions against targeted foreign countries, entities, and individuals.
What is the purpose of a transaction monitoring system in AML compliance?
Answer: To automatically detect unusual patterns of activity that may indicate money laundering or other financial crimes
Transaction monitoring systems use rules and analytics to flag unusual activity patterns for investigation by compliance analysts.
What is 'de-risking' and what concern does it raise for regulators?
Answer: Financial institutions exiting entire customer segments to avoid AML compliance burden, raising financial inclusion concerns
De-risking occurs when banks terminate services for entire categories of customers, which raises financial inclusion concerns and can push activity to less-regulated channels.