CFS Money Laundering & AML Compliance 3 — Questions and Answers
Question 1: Under the USA PATRIOT Act, financial institutions are required to share information with each other about suspected money launderers under which provision?
- Section 311
- Section 312
- Section 314(b) (Correct answer)
- Section 326
Correct answer: Section 314(b)
Section 314(b) allows financial institutions that opt in to voluntarily share information with each other about suspected money laundering or terrorist financing.
Question 2: Which international body issues the global anti-money laundering standards known as the '40 Recommendations'?
- IMF
- World Bank
- FATF (Financial Action Task Force) (Correct answer)
- Basel Committee on Banking Supervision
Correct answer: FATF (Financial Action Task Force)
The Financial Action Task Force (FATF) is the intergovernmental body that develops and promotes the 40 Recommendations as the global AML/CFT standard.
Question 3: A drug trafficking organization uses a chain of legitimate restaurants to mix drug proceeds with lawful restaurant revenues before reporting it as business income. This technique primarily exploits which money laundering stage?
- Placement through commingling (Correct answer)
- Layering through correspondent banking
- Integration through trade finance
- Extraction through wire transfers
Correct answer: Placement through commingling
Commingling illegal proceeds with legitimate business revenues is a placement technique that makes the illicit funds appear to be lawful income.
Question 4: A Politically Exposed Person (PEP) is best defined as:
- Any foreign national opening a US bank account
- An individual entrusted with a prominent public function and their close associates (Correct answer)
- A customer with transactions exceeding $1 million annually
- Any customer flagged by law enforcement
Correct answer: An individual entrusted with a prominent public function and their close associates
PEPs are individuals who hold or have held prominent public positions — such as heads of state, senior politicians, or military officers — and pose higher corruption and bribery risks.
Question 5: Which AML control involves monitoring transactions against a list of sanctioned individuals, entities, and countries in real time?
- KYC onboarding
- OFAC screening (Correct answer)
- SAR filing
- CTR aggregation
Correct answer: OFAC screening
OFAC (Office of Foreign Assets Control) screening checks transactions and customers against the SDN list and other sanctions lists to prevent prohibited dealings.
Question 6: Trade-based money laundering (TBML) most commonly involves:
- Using shell companies to layer funds through multiple bank accounts
- Over- or under-invoicing goods and services in international trade (Correct answer)
- Converting cash into cryptocurrency on unregulated exchanges
- Purchasing real estate through nominee buyers
Correct answer: Over- or under-invoicing goods and services in international trade
TBML typically exploits international trade through invoice manipulation — over-invoicing, under-invoicing, or falsely describing goods — to transfer value across borders.
Question 7: Under FinCEN guidance, what is the minimum dollar threshold for filing a SAR related to a known or suspected violation by an insider at a depository institution?
- No threshold — all insider violations must be reported (Correct answer)
- $5,000
- $10,000
- $25,000
Correct answer: No threshold — all insider violations must be reported
When a depository institution suspects an insider (employee, director, officer, or agent) has committed a violation, a SAR must be filed regardless of the dollar amount.
CFS Money Laundering & AML Compliance 3
Under the USA PATRIOT Act, financial institutions are required to share information with each other about suspected money launderers under which provision?