CFA AML & KYC Compliance 2 — Questions and Answers
Question 1: Under the Bank Secrecy Act, what is the threshold for filing a Currency Transaction Report (CTR)?
- $5,000
- $10,000 (Correct answer)
- $25,000
- $50,000
Correct answer: $10,000
The BSA requires financial institutions to file a CTR for cash transactions exceeding $10,000 in a single business day.
Question 2: Which practice involves breaking up large cash deposits into smaller amounts to avoid CTR reporting thresholds?
- Layering
- Smurfing (Correct answer)
- Integration
- Placement
Correct answer: Smurfing
Smurfing (also called structuring) is the illegal act of splitting large cash transactions into smaller ones to evade reporting requirements.
Question 3: What does 'Enhanced Due Diligence' (EDD) primarily apply to?
- All retail banking customers
- High-risk customers and Politically Exposed Persons (Correct answer)
- Only non-US citizens
- Customers with accounts over $1 million
Correct answer: High-risk customers and Politically Exposed Persons
EDD is a deeper level of scrutiny applied to higher-risk customers, including PEPs and those from high-risk jurisdictions.
Question 4: A Suspicious Activity Report (SAR) must generally be filed within how many days of detecting suspicious activity?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
SARs must be filed within 30 calendar days of the date the suspicious activity is initially detected.
Question 5: Which FATF recommendation specifically addresses the risk-based approach to AML/CFT?
- Recommendation 1 (Correct answer)
- Recommendation 10
- Recommendation 16
- Recommendation 40
Correct answer: Recommendation 1
FATF Recommendation 1 requires countries and financial institutions to apply a risk-based approach to AML/CFT measures.
Question 6: In KYC processes, what does 'beneficial ownership' refer to?
- The registered name on a bank account
- The natural person(s) who ultimately owns or controls a legal entity (Correct answer)
- The bank's ownership interest in collateral
- The primary signatory on a corporate account
Correct answer: The natural person(s) who ultimately owns or controls a legal entity
Beneficial ownership identifies the natural persons who ultimately own or control a legal entity, even if ownership is indirect or through nominees.
Question 7: Which AML stage involves moving illicit funds through complex transactions to obscure their origin?
- Placement
- Layering (Correct answer)
- Integration
- Structuring
Correct answer: Layering
Layering is the second stage of money laundering where criminals conduct complex financial transactions to distance funds from their illegal source.
CFA AML & KYC Compliance 2
Under the Bank Secrecy Act, what is the threshold for filing a Currency Transaction Report (CTR)?