CII R01 Financial Crime Prevention

Question 1

What is the primary UK legislation for preventing money laundering?

Accepted Answer

Proceeds of Crime Act 2002 and Money Laundering Regulations 2017

Answer

The Proceeds of Crime Act 2002 (POCA) creates the principal money laundering offences, while the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) set out the regulatory framework for prevention.

Question 2

What are the three stages of money laundering?

Accepted Answer

Placement, layering, integration

Answer

The three stages of money laundering are: placement (introducing criminal proceeds into the financial system), layering (moving money through complex transactions to disguise its origin), and integration (making the money appear legitimate).

Question 3

What is Customer Due Diligence (CDD)?

Accepted Answer

The process of identifying and verifying customers' identities and understanding the nature of their business

Answer

CDD involves identifying the customer, verifying their identity using reliable and independent sources, and understanding the nature and purpose of the business relationship. It is a fundamental AML requirement.

Question 4

When is Enhanced Due Diligence (EDD) required?

Accepted Answer

When there is a higher risk of money laundering, such as with politically exposed persons or complex transactions

Answer

EDD is required in situations presenting a higher risk of money laundering or terrorist financing, including dealing with PEPs, correspondent banking relationships, complex or unusual transactions, and customers from high-risk jurisdictions.

Question 5

What is a Suspicious Activity Report (SAR)?

Accepted Answer

A report made to the National Crime Agency when there is knowledge or suspicion of money laundering

Answer

A SAR must be submitted to the UK Financial Intelligence Unit at the National Crime Agency (NCA) when a person knows or suspects, or has reasonable grounds to suspect, that money laundering or terrorist financing is taking place.

CII R01 Practice Test

CII R01 Practice Test

CII R01 Financial Crime Prevention