Finastra Assessment Test Finastra Assessment Financial Crime and Compliance 4 — Questions and Answers
Question 1: Which international body sets the global standards for anti-money laundering and counter-terrorist financing (AML/CTF)?
- The World Bank
- The Financial Action Task Force (FATF) (Correct answer)
- The Bank for International Settlements (BIS)
- The International Monetary Fund (IMF)
Correct answer: The Financial Action Task Force (FATF)
FATF is the intergovernmental body that sets international standards and promotes effective implementation of legal, regulatory, and operational measures to combat money laundering and terrorist financing.
Question 2: Under US law, what is the primary purpose of a Currency Transaction Report (CTR)?
- To report all wire transfers above $500
- To document cash transactions exceeding $10,000 to help detect money laundering (Correct answer)
- To flag suspicious electronic fund transfers
- To report foreign account holdings to the IRS
Correct answer: To document cash transactions exceeding $10,000 to help detect money laundering
A CTR is required under the Bank Secrecy Act for cash transactions exceeding $10,000 in a single business day, creating a paper trail to detect money laundering.
Question 3: What is the key distinction between a Suspicious Activity Report (SAR) and a Currency Transaction Report (CTR)?
- CTRs are voluntary; SARs are mandatory
- SARs are filed based on suspicion of illegal activity; CTRs are filed based on transaction amount thresholds (Correct answer)
- SARs require law enforcement approval; CTRs do not
- CTRs are filed only for wire transfers; SARs cover cash only
Correct answer: SARs are filed based on suspicion of illegal activity; CTRs are filed based on transaction amount thresholds
SARs are filed when a transaction is suspected to involve criminal activity, regardless of amount, while CTRs are mandatory for any cash transaction exceeding $10,000.
Question 4: Which of the following is an example of a 'gatekeeping' profession that can be exploited for money laundering?
- Bank tellers processing routine deposits
- Lawyers and accountants who facilitate real estate or corporate transactions (Correct answer)
- IT staff maintaining core banking software
- Compliance officers reviewing transaction alerts
Correct answer: Lawyers and accountants who facilitate real estate or corporate transactions
Lawyers, accountants, and other professional service providers are considered 'gatekeepers' because they control access to financial systems and can be misused to facilitate money laundering.
Question 5: In AML risk assessment, which factor would most likely elevate a customer's risk rating?
- Operating a business in a low-risk domestic market
- Being a politically exposed person (PEP) from a high-risk jurisdiction (Correct answer)
- Having a long-established banking relationship with no prior alerts
- Maintaining a single-currency savings account
Correct answer: Being a politically exposed person (PEP) from a high-risk jurisdiction
Politically exposed persons from high-risk jurisdictions combine two major risk factors — PEP status and geographic risk — significantly elevating their AML risk rating.
Question 6: What is the concept of 'tipping off' in AML compliance, and why is it prohibited?
- Informing competitors about regulatory changes
- Alerting a customer that a SAR has been filed on them, which could compromise investigations (Correct answer)
- Sharing SAR data with correspondent banks for due diligence
- Reporting suspicious activity to law enforcement without internal approval
Correct answer: Alerting a customer that a SAR has been filed on them, which could compromise investigations
Tipping off is the illegal act of informing a subject that they are under investigation or that a SAR has been filed, as this can allow them to evade detection and destroy evidence.
Question 7: A compliance officer discovers that a customer's beneficial owner is on the OFAC SDN list. What is the correct immediate action?
- File a SAR and continue the business relationship under enhanced monitoring
- Block the transaction and freeze assets, then notify OFAC and legal counsel (Correct answer)
- Close the account and return all funds to the customer
- Escalate to senior management for a business decision within 30 days
Correct answer: Block the transaction and freeze assets, then notify OFAC and legal counsel
When an SDN match is confirmed, the institution must immediately block transactions and freeze assets, then report to OFAC as required under US sanctions regulations.
Finastra Assessment Test Finastra Assessment Financial Crime and Compliance 4
Which international body sets the global standards for anti-money laundering and counter-terrorist financing (AML/CTF)?