CFA AML & KYC Compliance 3 — Questions and Answers
Question 1: A customer opens multiple accounts at the same bank under different business names but with the same ultimate owner. This is BEST described as:
- Normal business diversification
- Beneficial ownership concealment (Correct answer)
- Legitimate asset protection
- Standard corporate structuring
Correct answer: Beneficial ownership concealment
Using multiple entities with the same beneficial owner to obscure the true controller is a common money laundering red flag related to ownership concealment.
Question 2: Under FinCEN's Customer Due Diligence rule, covered financial institutions must identify beneficial owners who own what minimum percentage of a legal entity?
- 10%
- 15%
- 20%
- 25% (Correct answer)
Correct answer: 25%
FinCEN's CDD rule requires identifying natural persons who own 25% or more of a legal entity customer.
Question 3: What is a 'Politically Exposed Person' (PEP) in the context of KYC compliance?
- Any government employee regardless of rank
- An individual who holds or has held a prominent public position (Correct answer)
- A customer who has made political donations
- A foreign national applying for a bank account
Correct answer: An individual who holds or has held a prominent public position
A PEP is an individual who holds or has held a prominent public function, making them higher risk for bribery and corruption.
Question 4: Which of the following is NOT typically a red flag for potential money laundering?
- Reluctance to provide identification
- Large cash transactions inconsistent with the customer's business
- Regular payroll deposits from a known employer (Correct answer)
- Frequent wire transfers to high-risk jurisdictions
Correct answer: Regular payroll deposits from a known employer
Regular payroll deposits from a known employer represent normal, expected banking activity rather than a suspicious pattern.
Question 5: The 'travel rule' in AML compliance requires financial institutions to pass along specific information when processing wire transfers above what threshold?
- $1,000
- $3,000 (Correct answer)
- $5,000
- $10,000
Correct answer: $3,000
The BSA travel rule requires banks to pass along originator and beneficiary information for wire transfers of $3,000 or more.
Question 6: A customer deposits $9,800 in cash on Monday and $9,500 in cash on Tuesday. What AML concern does this raise?
- None, as neither transaction triggers a CTR individually
- Structuring, since the deposits appear designed to avoid the $10,000 reporting threshold (Correct answer)
- Money laundering integration stage activity
- Potential sanctions violation
Correct answer: Structuring, since the deposits appear designed to avoid the $10,000 reporting threshold
Deliberately splitting deposits to stay below the $10,000 CTR threshold is illegal structuring, regardless of whether the funds are legitimate.
Question 7: Which international body maintains the list of jurisdictions subject to increased AML monitoring?
- INTERPOL
- FATF (Correct answer)
- IMF
- World Bank
Correct answer: FATF
FATF (Financial Action Task Force) publishes the 'grey list' and 'black list' of jurisdictions with strategic AML/CFT deficiencies.
CFA AML & KYC Compliance 3
A customer opens multiple accounts at the same bank under different business names but with the same ultimate owner.
This is BEST described as: