CISI UAE FRR Financial Crime & AML/CFT UAE 3 — Questions and Answers
Question 1: The 'Travel Rule' under FATF Recommendation 16 requires:
- Originator and beneficiary information to accompany wire transfers (Correct answer)
- Financial institutions to track customer travel
- Funds to be held for 3 days before international transfer
- Mandatory approval for cross-border transfers above USD 10,000
Correct answer: Originator and beneficiary information to accompany wire transfers
The Travel Rule requires financial institutions to collect, retain, and transmit originator and beneficiary information with wire transfers, enabling law enforcement to trace the flow of funds.
Question 2: Under UAE AML regulations, 'ongoing monitoring' of customers requires:
- Continuous scrutiny of transactions and periodic review of CDD information (Correct answer)
- Annual review of all customer files only
- Monitoring only during the onboarding phase
- Automated transaction alerts without human review
Correct answer: Continuous scrutiny of transactions and periodic review of CDD information
Ongoing monitoring requires scrutinising transactions to ensure consistency with the customer's profile and risk level, and periodically updating CDD information, particularly for higher-risk customers.
Question 3: What is a 'shell company' in the context of AML typologies?
- A company with no real operations used to obscure beneficial ownership (Correct answer)
- A newly incorporated company with no trading history
- A subsidiary of a foreign multinational
- A company registered in a free zone
Correct answer: A company with no real operations used to obscure beneficial ownership
Shell companies have no significant assets or operations but are used to create layers of ownership that obscure the identity of the true beneficial owner, facilitating money laundering and tax evasion.
Question 4: The UAE's Executive Office for Control and Non-Proliferation (EOCN) oversees:
- Targeted financial sanctions and proliferation financing risks (Correct answer)
- General AML compliance for banks
- Cybercrime and digital fraud
- Export licences for defence equipment
Correct answer: Targeted financial sanctions and proliferation financing risks
The EOCN coordinates the implementation of targeted financial sanctions and oversees the UAE's strategy to combat proliferation financing, working with financial institutions to freeze designated assets.
Question 5: Under UAE AML law, which party bears responsibility for ensuring AML/CFT compliance within a financial institution?
- Senior management and the Board of Directors (Correct answer)
- The compliance department exclusively
- External auditors
- The Central Bank's examiners
Correct answer: Senior management and the Board of Directors
Ultimately, senior management and the Board are responsible for the institution's AML/CFT framework, culture, and compliance programme, while the compliance function assists in implementation.
Question 6: What is 'layering' in the money laundering process?
- Using complex transactions to distance funds from their criminal origin (Correct answer)
- Placing cash into the banking system
- Investing laundered funds in legitimate businesses
- Filing false suspicious transaction reports
Correct answer: Using complex transactions to distance funds from their criminal origin
Layering involves creating complex transaction chains — wire transfers, currency conversions, offshore accounts, investments — to obscure the audit trail and make it difficult to link funds to their criminal source.
CISI UAE FRR Financial Crime & AML/CFT UAE 3
The 'Travel Rule' under FATF Recommendation 16 requires: