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Money Laundering Flashcards

7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. Which international body sets global AML/CFT standards and issues the Forty Recommendations on money laundering?

    Answer: The Financial Action Task Force (FATF)

    The Financial Action Task Force (FATF) is the intergovernmental body that establishes international standards for combating money laundering and terrorist financing.

  2. Which of the following is considered a 'red flag' indicator of potential money laundering?

    Answer: A customer who is reluctant to provide information about the source of funds

    Reluctance to provide information about the source of funds is a classic red flag indicating possible money laundering activity.

  3. The primary anti-money laundering legislation in the United States that requires financial institutions to assist government agencies in detecting and preventing money laundering is the:

    Answer: Bank Secrecy Act (BSA)

    The Bank Secrecy Act of 1970 is the primary U.S. AML law requiring financial institutions to maintain records and file reports to help detect money laundering.

  4. Know Your Customer (KYC) programs at financial institutions are primarily designed to:

    Answer: Verify customer identity and assess the risk of illicit financial activity

    KYC programs require institutions to verify client identities and understand the nature of their financial activity to detect and prevent money laundering and fraud.

  5. Which term describes the use of cash-intensive businesses (such as car washes or restaurants) to mix criminal proceeds with legitimate revenue?

    Answer: Commingling

    Commingling involves mixing illegal proceeds with legitimate business revenues to disguise their illicit origin.

  6. Under the USA PATRIOT Act, financial institutions are required to implement Customer Identification Programs (CIPs). At minimum, CIPs must collect which of the following for individual customers?

    Answer: Name, date of birth, address, and identification number

    CIPs must collect at minimum the customer's name, date of birth, address, and identification number (such as Social Security Number or passport number).

  7. A 'shell company' is most commonly used in money laundering schemes to:

    Answer: Conceal the true ownership and origin of funds through complex corporate layers

    Shell companies, which have no real operations, are used to conceal the beneficial ownership of assets and obscure the paper trail of illicit funds.