Financial Crimes & Money Laundering Detection Flashcards

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?

Answer: Section 326

Section 326 of the USA PATRIOT Act requires financial institutions to establish CIP procedures to verify customer identities.

Which term describes the final stage of money laundering where illegal funds are reintroduced into the legitimate economy?

Answer: Integration

Integration is the final stage where laundered funds re-enter the legitimate economy, often through real estate, luxury goods, or business investments.

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:

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.

Which of the following is a red flag indicator of potential trade-based money laundering?

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.

What is the purpose of OFAC's SDN (Specially Designated Nationals) list?

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.

Hawala is best described as:

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.