Sample Questions and Answers
Which international organization develops global AML standards?
United Nations
B. Financial Action Task Force (FATF)
C. World Bank
D. International Monetary Fund (IMF)
Answer: B
Explanation: FATF sets AML guidelines followed by many countries.
What is the best way to identify the source of funds for a high-net-worth client?
Assume funds are legitimate
B. Conduct enhanced due diligence including documentation review and interviews
C. Skip due diligence
D. Accept verbal confirmation only
Answer: B
Explanation: Enhanced due diligence is essential for high-risk clients to verify legitimacy.
Which of the following is NOT a common method used to launder money?
Structuring
B. Layering
C. Integration
D. Payroll processing
Answer: D
Explanation: Payroll processing is a normal business function, not a laundering method.
Why is ongoing monitoring important in AML?
To detect changes in customer behavior or transactions that may indicate risk
B. To increase marketing opportunities
C. To close accounts faster
D. To reduce paperwork
Answer: A
Explanation: Continuous monitoring helps identify suspicious activities over time.
What does Enhanced Due Diligence (EDD) involve?
Simplified customer checks
B. More extensive scrutiny and documentation for higher-risk customers
C. Skipping verification
D. Automatic account closure
Answer: B
Explanation: EDD is required when higher risk is identified to reduce AML risks.
Which of the following is a key element of a comprehensive AML program?
Marketing strategies
B. Internal controls, training, independent audit, and compliance officer appointment
C. Increasing loan approvals
D. Employee performance reviews
Answer: B
Explanation: These elements are foundational for an effective AML framework.
What is a “red flag” in AML?
An indicator that a transaction or customer behavior may be suspicious
B. A holiday notification
C. A customer complaint
D. A marketing alert
Answer: A
Explanation: Red flags help identify activities that warrant further investigation.
What is the importance of verifying a customer’s identity?
To personalize marketing offers
B. To prevent fraud and comply with regulatory requirements
C. To expedite loan approvals
D. To simplify paperwork
Answer: B
Explanation: Identity verification is crucial to prevent identity theft and laundering.
Which document is typically NOT required for customer identification?
Government-issued ID
B. Proof of address
C. Birth certificate (for adults)
D. Recent utility bill
Answer: C
Explanation: Birth certificates are generally not required for adult customers.
What is the purpose of ongoing customer due diligence?
One-time verification
B. Continuous assessment of customer transactions and risk profile
C. Marketing segmentation
D. Customer loyalty programs
Answer: B
Explanation: Ongoing due diligence tracks changes that could increase risk.
What should a financial institution do if it suspects money laundering?
Report internally and file a Suspicious Activity Report (SAR) as required
B. Inform the customer
C. Ignore it
D. Freeze all accounts
Answer: A
Explanation: Proper reporting ensures regulatory compliance and helps law enforcement.
Which of the following could be a suspicious indicator?
Transactions consistent with normal business
B. Customer refuses to provide source of funds information
C. Customer has a long-standing business relationship
D. Regular payment of utility bills
Answer: B
Explanation: Refusal to provide information is a red flag.
What does the “layering” stage in money laundering typically involve?
Introducing illicit funds into the financial system
B. Complex transactions to obscure the source of funds
C. Using illicit funds in the economy
D. Depositing cash
Answer: B
Explanation: Layering separates illicit funds from their origin.
Which of the following is NOT typically required for beneficial ownership identification?
Name and address
B. Social Security Number or Tax ID
C. Marketing preferences
D. Ownership percentage
Answer: C
Explanation: Marketing preferences are unrelated to ownership verification.
What type of transaction is often associated with trade-based money laundering?
Invoices for goods with inflated or deflated prices
B. Routine salary payments
C. ATM withdrawals
D. Utility bill payments
Answer: A
Explanation: Trade-based laundering manipulates invoices to move illicit funds.
What is an example of a non-financial red flag?
Frequent cash deposits
B. Customer providing false or inconsistent information
C. Large wire transfers
D. Multiple accounts
Answer: B
Explanation: False info can indicate attempts to hide illicit activities.
What is a key component of AML training programs?
Teaching employees how to identify and report suspicious activity
B. Product sales training
C. Customer service skills
D. Marketing strategies
Answer: A
Explanation: Training ensures staff understand AML requirements.
Which of the following actions is required after filing a SAR?
Inform the customer
B. Maintain confidentiality and do not disclose SAR filing to the customer
C. Close the customer account
D. Increase customer credit limit
Answer: B
Explanation: SARs must be kept confidential by law.
How can technology assist AML efforts?
Automating transaction monitoring and screening processes
B. Replacing human staff completely
C. Increasing marketing reach
D. Reducing customer service
Answer: A
Explanation: Technology improves detection efficiency but does not replace human judgment.
What is a “shell company”?
A company with real operations
B. A company without active business or significant assets, often used to hide ownership
C. A public company
D. A non-profit
Answer: B
Explanation: Shell companies facilitate money laundering by concealing ownership.
Which is an example of a high-risk customer?
Customer with transparent, verifiable income
B. Politically exposed persons (PEPs)
C. Local small business owner
D. Student
Answer: B
Explanation: PEPs are higher risk due to potential corruption.
What is the main goal of AML regulatory examinations?
To assess compliance with AML laws and program effectiveness
B. To increase bank profits
C. To improve marketing
D. To reduce customer complaints
Answer: A
Explanation: Exams evaluate how well institutions manage AML risks.
What is the significance of the “integration” stage in money laundering?
Introducing illegal funds into the system
B. Using laundered funds for legitimate investments or purchases
C. Hiding funds through complex transactions
D. Structuring deposits
Answer: B
Explanation: Integration legitimizes illicit proceeds.
What does the term “KYC” stand for?
Know Your Client
B. Keep Your Cash
C. Know Your Customer
D. Keep Your Compliance
Answer: C
Explanation: KYC involves verifying the identity of customers.
What is the consequence of failing to comply with AML regulations?
Enhanced reputation
B. Legal penalties, fines, and reputational damage
C. More customers
D. Increased profits
Answer: B
Explanation: Non-compliance leads to serious regulatory sanctions.
Which of the following best describes “structuring”?
Combining multiple accounts
B. Breaking large sums into smaller transactions to avoid detection
C. Making a single large deposit
D. Investing in stocks
Answer: B
Explanation: Structuring is designed to evade reporting thresholds.
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