Swift Swift Financial Crime Prevention & AML 1 — Questions and Answers
Question 1: What is the primary AML concern with correspondent banking via SWIFT?
- Nested correspondent relationships can obscure the ultimate originator of funds (Correct answer)
- MT messages contain insufficient encryption
- SWIFT BIC codes reveal account holder identity
- Correspondent banks cannot screen transactions in real time
Correct answer: Nested correspondent relationships can obscure the ultimate originator of funds
Nested correspondent banking creates chains of banks where the originating customer is hidden, increasing money laundering risk.
Question 2: What does the FATF Recommendation 16 (the 'Travel Rule') require in SWIFT payments?
- Originator and beneficiary information must accompany wire transfers (Correct answer)
- Banks must report all international transfers over $10,000
- SWIFT messages must include a unique transaction hash
- All payments must be processed within 24 hours
Correct answer: Originator and beneficiary information must accompany wire transfers
FATF Recommendation 16 requires that accurate originator and beneficiary information travel with wire transfers throughout the payment chain.
Question 3: In SWIFT MT103 messages, which fields carry the originator information required under the Travel Rule?
- Field 50 (Ordering Customer) and Field 52 (Ordering Institution) (Correct answer)
- Field 59 (Beneficiary Customer)
- Field 56A (Intermediary Institution)
- Field 71A (Details of Charges)
Correct answer: Field 50 (Ordering Customer) and Field 52 (Ordering Institution)
Fields 50 and 52 carry the ordering customer and institution details required to satisfy Travel Rule originator information requirements.
Question 4: What is 'KYC' in the context of SWIFT correspondent banking?
- Know Your Customer — due diligence on the identity and risk profile of banking clients and counterparties (Correct answer)
- Keep Your Credentials — a SWIFT security protocol
- Key Yield Certificate — a trade finance instrument
- Know Your Counterpart — a SWIFT gpi requirement
Correct answer: Know Your Customer — due diligence on the identity and risk profile of banking clients and counterparties
KYC (Know Your Customer) refers to due diligence processes banks use to verify identities and assess the money laundering risk of clients and correspondent banks.
Question 5: What is the KYC Registry operated by SWIFT?
- A centralized platform where financial institutions share standardized KYC documentation with correspondents (Correct answer)
- A database of sanctioned individuals and entities
- A SWIFT tool for screening transactions against AML watchlists
- A registry of all SWIFT BIC codes worldwide
Correct answer: A centralized platform where financial institutions share standardized KYC documentation with correspondents
The SWIFT KYC Registry allows banks to upload their KYC documentation once and share it securely with multiple correspondent banking partners.
Question 6: What does 'de-risking' mean in the correspondent banking context?
- Banks terminating correspondent relationships with high-risk jurisdictions or clients to avoid AML exposure (Correct answer)
- Reducing SWIFT transaction fees through volume agreements
- Migrating from MT to ISO 20022 messages to reduce errors
- Applying encryption to reduce cybersecurity risk
Correct answer: Banks terminating correspondent relationships with high-risk jurisdictions or clients to avoid AML exposure
De-risking occurs when banks exit correspondent banking relationships in high-risk regions to avoid regulatory penalties for AML failures.
Swift Swift Financial Crime Prevention & AML 1
What is the primary AML concern with correspondent banking via SWIFT?