Wise Test Wise Compliance and Regulation 3 — Questions and Answers
Question 1: Which of the following best describes the purpose of Wise's Enhanced Due Diligence (EDD) process?
- To offer premium account features to high-value customers
- To apply additional scrutiny to higher-risk customers or transactions (Correct answer)
- To comply with credit reporting requirements
- To verify business customers qualify for lower transfer fees
Correct answer: To apply additional scrutiny to higher-risk customers or transactions
EDD involves deeper investigation of customers who present higher money laundering or fraud risks, such as PEPs or customers from high-risk jurisdictions.
Question 2: Under US regulations, how long must Wise retain records related to customer transactions?
- 1 year
- 3 years
- 5 years (Correct answer)
- 10 years
Correct answer: 5 years
The BSA requires MSBs to retain transaction and customer identification records for a minimum of 5 years.
Question 3: What is a Politically Exposed Person (PEP), and how does it affect Wise's compliance approach?
- A customer who holds political opinions; no special treatment required
- A current or former senior government official who requires enhanced due diligence (Correct answer)
- A customer who refuses to provide identification documents
- A business customer registered in a sanctioned country
Correct answer: A current or former senior government official who requires enhanced due diligence
PEPs are individuals who hold prominent public positions and are subject to EDD because of their elevated risk of corruption and bribery.
Question 4: Wise operates under money transmitter licenses in US states. What happens if Wise facilitates a transfer in a state where it is not licensed?
- The transfer proceeds normally with a small surcharge
- Wise is in violation of state money transmission laws and subject to penalties (Correct answer)
- The customer must obtain a personal exemption from the state
- Federal MSB registration covers all state requirements automatically
Correct answer: Wise is in violation of state money transmission laws and subject to penalties
State money transmitter licenses are separate from federal MSB registration, and operating without a state license is an illegal act subject to fines and criminal penalties.
Question 5: Which of the following is a 'red flag' that Wise's compliance team would flag for AML review?
- A customer sending regular monthly transfers of consistent amounts
- A customer sending multiple transfers to different recipients immediately after account funding (Correct answer)
- A business customer with high monthly transfer volume consistent with stated purpose
- A customer who uses the same payment method for every transaction
Correct answer: A customer sending multiple transfers to different recipients immediately after account funding
Rapid fan-out transfers to multiple recipients shortly after funding is a classic layering red flag in money laundering.
Question 6: What regulatory obligation does Wise have if it discovers that a SAR it previously filed contains incorrect information?
- No action needed; SARs cannot be amended
- File an amended SAR to correct the information (Correct answer)
- Notify the customer about the original SAR filing
- Report the error to the state banking regulator only
Correct answer: File an amended SAR to correct the information
Wise must file an amended SAR (checking the 'correct/amend prior report' box) to ensure FinCEN has accurate information.
Question 7: What does the 'Travel Rule' require in the context of Wise's wire transfers?
- Customers must disclose their travel destination when sending international transfers
- Wise must pass identifying information about the sender and recipient to the receiving financial institution (Correct answer)
- All international transfers must be reviewed by customs authorities
- Wise must hold international transfers for 24 hours for security screening
Correct answer: Wise must pass identifying information about the sender and recipient to the receiving financial institution
FinCEN's Travel Rule (31 CFR § 103.33) requires transmitters to pass originator and beneficiary identity information with transfers of $3,000 or more.
Wise Test Wise Compliance and Regulation 3
Which of the following best describes the purpose of Wise's Enhanced Due Diligence (EDD) process?