Treasury Enforcement Agent Exam Financial Crimes & Money Laundering Detection 2 — Questions and Answers
Question 1: Under the USA PATRIOT Act, financial institutions are required to implement Customer Identification Programs (CIP) to verify the identity of customers opening new accounts. This requirement falls under which section?
- Section 311
- Section 314
- Section 326 (Correct answer)
- Section 352
Correct answer: Section 326
Section 326 of the USA PATRIOT Act requires financial institutions to establish CIP procedures to verify customer identities.
Question 2: Which term describes the final stage of money laundering where illegal funds are reintroduced into the legitimate economy?
- Placement
- Layering
- Integration (Correct answer)
- Consolidation
Correct answer: Integration
Integration is the final stage where laundered funds re-enter the legitimate economy, often through real estate, luxury goods, or business investments.
Question 3: A Treasury Enforcement Agent suspects that a business owner is depositing cash just under $10,000 repeatedly to avoid CTR requirements. This is known as:
- Money laundering
- Structuring (Correct answer)
- Embezzlement
- Wire fraud
Correct answer: Structuring
Structuring (also called smurfing) is the deliberate act of keeping transactions below reporting thresholds to evade CTR requirements, which is itself a federal crime.
Question 4: Which of the following is a red flag indicator of potential trade-based money laundering?
- Timely payment of invoices
- Significant over- or under-invoicing of goods (Correct answer)
- Use of letters of credit
- Multiple currency conversions
Correct answer: Significant over- or under-invoicing of goods
Significant discrepancies between invoice values and actual market prices of goods are a key indicator of trade-based money laundering.
Question 5: What is the purpose of OFAC's SDN (Specially Designated Nationals) list?
- To identify high-net-worth individuals for tax auditing
- To list individuals and entities whose assets US persons are prohibited from dealing with (Correct answer)
- To track foreign diplomats with tax obligations in the US
- To identify licensed money service businesses
Correct answer: To list individuals and entities whose assets US persons are prohibited from dealing with
OFAC's SDN list identifies individuals, companies, and groups whose assets are blocked and with whom US persons are generally prohibited from doing business.
Question 6: Hawala is best described as:
- A type of cryptocurrency exchange
- An informal value transfer system operating outside traditional banking (Correct answer)
- A formal bank wire transfer system used in the Middle East
- A Treasury-regulated money services business
Correct answer: An informal value transfer system operating outside traditional banking
Hawala is an informal value transfer system based on trust and a network of brokers, operating largely outside the formal banking system.
Treasury Enforcement Agent Exam Financial Crimes & Money Laundering Detection 2
Under the USA PATRIOT Act, financial institutions are required to implement Customer Identification Programs (CIP) to verify the identity of customers opening new accounts.
This requirement falls under which section?