ACAMS Customer Due Diligence (CDD) 2

Question 1

Under FinCEN's Customer Due Diligence Rule (31 CFR 1010.230), what are the four core elements of CDD?

Accepted Answer

Customer identification, beneficial ownership identification, understanding the customer's business, and ongoing monitoring

Answer

FinCEN's 2016 CDD Rule established four core elements: (1) identifying and verifying the customer's identity; (2) identifying and verifying beneficial owners of legal entity customers; (3) understanding the nature and purpose of the relationship; and (4) conducting ongoing monitoring and updating customer information.

Question 2

Under the FinCEN CDD Rule, who qualifies as a 'beneficial owner' of a legal entity customer?

Accepted Answer

Each individual who owns, directly or indirectly, 25% or more of the equity interests of a legal entity, plus one individual who controls or manages the entity

Answer

The FinCEN CDD Rule defines beneficial owners using a two-prong test: the ownership prong (anyone owning 25% or more) and the control prong (one individual who controls or manages the entity, typically the CEO, COO, or equivalent).

Question 3

What is 'simplified due diligence' (SDD) and when may it be applied?

Accepted Answer

A reduced level of CDD measures that may be applied to lower-risk customers where the risk of money laundering is demonstrably low

Answer

Simplified due diligence allows institutions to apply reduced CDD measures to clearly lower-risk customers — such as government entities, publicly listed companies, or low-value retail accounts — where the inherent ML/TF risk does not justify standard CDD requirements.

Question 4

What is a 'trigger event' in the context of CDD ongoing monitoring, and can you provide three examples?

Accepted Answer

An event requiring a financial institution to review and potentially update a customer's CDD information; examples: significant changes in transaction patterns, adverse media, or customer-initiated changes to account information

Answer

Trigger events are circumstances that prompt a review and potential update of a customer's CDD file. Examples include significant changes in transaction activity, adverse media hits, changes to beneficial ownership, or requests for new high-risk products.

Question 5

What is 'reliance on third parties' for CDD, and what conditions must be met for this reliance to be permissible?

Accepted Answer

Allowing another regulated financial institution to conduct CDD on a customer and relying on those results, subject to specific conditions including written agreement, immediate access to records, and satisfaction that the third party is regulated and supervised

Answer

Financial institutions may rely on third parties (other regulated institutions) to conduct elements of CDD, provided specific conditions are met: a written agreement, the ability to obtain CDD records upon request, and satisfaction that the third party is subject to AML regulation and supervision.

(ACAMS) Association of Certified Anti-Money Laundering Specialists Practice Test

(ACAMS) Association of Certified Anti-Money Laundering Specialists Practice Test

ACAMS Customer Due Diligence (CDD) 2