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AML & KYC Compliance Flashcards

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

Read the first 7 AML & KYC Compliance flashcards as text

  1. A cryptocurrency exchange that operates without registering as a Money Services Business (MSB) and without AML controls is violating which US law?

    Answer: Bank Secrecy Act

    Virtual currency exchangers are MSBs under the BSA and must register with FinCEN and maintain AML programs.

  2. In KYC, 'ongoing monitoring' refers to:

    Answer: Continuously reviewing customer transactions and updating risk profiles throughout the relationship

    Ongoing monitoring involves continuously reviewing customer transactions against their expected profile and updating risk assessments throughout the business relationship.

  3. Which of the following scenarios MOST likely represents the 'placement' stage of money laundering?

    Answer: Depositing cash drug proceeds into restaurant bank accounts

    Placement is the initial stage where illegal cash enters the financial system, such as mingling drug proceeds with legitimate restaurant cash receipts.

  4. What is the primary purpose of a 'derisking' strategy when adopted by large global banks?

    Answer: Terminating banking relationships with high-risk customer segments to reduce AML compliance exposure

    Derisking refers to banks exiting relationships with entire customer categories deemed too costly or risky to comply with AML requirements.

  5. A foreign bank that maintains a correspondent account in a US bank is subject to which specific BSA requirement?

    Answer: Enhanced due diligence and potential restrictions under the USA PATRIOT Act Section 312

    Section 312 of the USA PATRIOT Act requires US banks to conduct enhanced due diligence on correspondent accounts held for foreign financial institutions.

  6. Which of the following is considered a 'high-risk' indicator in a customer's geographic profile for AML purposes?

    Answer: Customer conducts business in a FATF black-listed jurisdiction

    Transactions involving FATF-blacklisted jurisdictions are a major AML red flag requiring enhanced scrutiny and potentially restricting business dealings.

  7. When a financial institution identifies a customer on the OFAC Specially Designated Nationals (SDN) list, the FIRST required action is to:

    Answer: Block or reject the transaction and report to OFAC

    Upon an SDN match, the institution must immediately block or reject the transaction and file a report with OFAC — funds cannot be returned to the sanctioned party.