CII R01 Financial Crime Prevention 2 — Questions and Answers
Question 1: What is the role of a Money Laundering Reporting Officer (MLRO)?
- To manage the firm's marketing activities
- To receive internal disclosures of suspicious activity and decide whether to submit SARs to the NCA (Correct answer)
- To report the firm's profits to HMRC
- To train new staff on customer service
Correct answer: To receive internal disclosures of suspicious activity and decide whether to submit SARs to the NCA
The MLRO is responsible for receiving internal reports of suspicious activity from employees, evaluating them, and if appropriate, submitting SARs to the NCA. The MLRO must be a senior person within the firm.
Question 2: What is a Politically Exposed Person (PEP)?
- Any person who votes in elections
- A person entrusted with a prominent public function, or their family members and close associates (Correct answer)
- A person who has been convicted of a financial crime
- A person who works for a political party
Correct answer: A person entrusted with a prominent public function, or their family members and close associates
A PEP is an individual entrusted with a prominent public function (such as heads of state, ministers, judges, or senior military officers), plus their family members and known close associates. PEPs present a higher risk of corruption.
Question 3: What are the main money laundering offences under the Proceeds of Crime Act 2002?
- Tax evasion and fraud only
- Concealing, arranging, and acquiring/using/possessing criminal property (Correct answer)
- Insider trading and market manipulation
- Breach of contract and negligence
Correct answer: Concealing, arranging, and acquiring/using/possessing criminal property
POCA creates three principal money laundering offences: concealing criminal property (s.327), arranging the acquisition, retention, use, or control of criminal property (s.328), and acquiring, using, or possessing criminal property (s.329).
Question 4: What is 'reliance' in the context of CDD?
- Relying on the customer's word without verification
- Relying on another regulated person to apply CDD measures, while remaining liable for any failure (Correct answer)
- Relying on the FCA to conduct CDD on all customers
- Relying on automated systems without human oversight
Correct answer: Relying on another regulated person to apply CDD measures, while remaining liable for any failure
Under the MLR 2017, a firm can rely on another regulated person to apply CDD measures. However, the firm relying on the other person remains liable for any failure to apply adequate CDD.
Question 5: What is the purpose of ongoing monitoring in AML compliance?
- To ensure customers are satisfied with the service
- To scrutinise transactions and keep CDD information up to date to detect suspicious activity (Correct answer)
- To monitor the firm's share price
- To track employee performance
Correct answer: To scrutinise transactions and keep CDD information up to date to detect suspicious activity
Ongoing monitoring involves scrutinising transactions to ensure they are consistent with the firm's knowledge of the customer and their risk profile, and keeping CDD information up to date throughout the business relationship.
Question 6: What is 'smurfing' in money laundering?
- Using fictional identities to open accounts
- Breaking large amounts of cash into smaller deposits below reporting thresholds (Correct answer)
- Transferring money through online gaming platforms
- Using cryptocurrency for anonymous transactions
Correct answer: Breaking large amounts of cash into smaller deposits below reporting thresholds
Smurfing (also called structuring) involves breaking a large sum of money into smaller amounts and making multiple deposits or transactions to avoid triggering reporting thresholds and detection.
CII R01 Financial Crime Prevention 2
What is the role of a Money Laundering Reporting Officer (MLRO)?