CFCS (Other exams) flashcards

36 cards. Read the term and the definition here. The deck at the top of this page is optional.

Placement stage

The first stage of money laundering, in which illicit cash is introduced into the financial system through deposits, purchases, or cash-intensive businesses to separate it from its origin.

Layering stage

The second money laundering stage, using complex series of transactions, transfers, and corporate structures to obscure the audit trail and distance funds from their criminal source.

Beneficial owner definition

The natural person who ultimately owns or controls a customer or on whose behalf a transaction is conducted, typically identified at an ownership threshold such as 25 percent.

Tipping-off offence

A criminal offence for disclosing to a customer or third party that a suspicious transaction report has been or will be filed, because disclosure may compromise the investigation.

Structuring red flag

Splitting transactions into amounts just below a reporting or approval threshold to avoid scrutiny; a classic placement indicator detectable through threshold-clustering analytics.

Fraud triangle

A model explaining fraud as the convergence of pressure or incentive, opportunity, and rationalization; controls primarily reduce opportunity by removing conditions that permit the act.

Account takeover indicators

Signals such as sudden credential or contact-detail changes, new device or impossible-travel logins, and immediate high-value transfers that suggest an unauthorized party controls the account.

Synthetic identity fraud

Fraud using a fabricated identity combining real and fictitious data elements, often detected only when the identity defaults after building credit history over time.

Segregation of duties

A control splitting incompatible functions, such as payment authorization and account reconciliation, so no single person can both commit and conceal a fraudulent transaction.

Benford's Law analysis

A detection technique comparing the distribution of leading digits in a dataset against an expected logarithmic pattern; significant deviation can indicate fabricated or manipulated figures.

Three lines of defense

A governance model in which business units own risk, a compliance or risk function provides oversight and framework, and internal audit gives independent assurance.

Residual risk

The risk remaining after controls are applied; calculated by adjusting inherent risk for the effectiveness of mitigating controls and used to prioritize remediation.

Design versus operating effectiveness

Design effectiveness asks whether a control can mitigate the risk; operating effectiveness asks whether it actually operated as designed throughout the period tested.

Risk appetite statement

A formal declaration of the level and type of risk an institution is willing to accept, translated into measurable tolerances that guide compliance decisions and escalation.

Fifty percent ownership rule

The sanctions principle that an unlisted entity is blocked if a designated person owns, directly or indirectly, 50 percent or more of it.

Strict liability sanctions

A legal standard under which prohibited dealings with a designated party are penalized regardless of the actor's knowledge or intent, making pre-transaction screening essential.

False positive screening match

An alert generated by name-screening software that resembles a designated party but is not that person, requiring documented adjudication and rationale before clearing.

Sectoral sanctions

Restrictions targeting specific transaction types, such as new debt or equity, with named parties rather than imposing a full asset freeze or total dealing ban.

Cognitive interview technique

An interviewing method that improves recall by reinstating context, recalling events in reverse order, and adopting different perspectives, while minimizing leading questions.

Chain of custody

A chronological record of who handled an exhibit, when, where, and what was done, used to demonstrate integrity and support admissibility of evidence.

Free narrative account

An uninterrupted account given by an interviewee before specific questioning, used to capture the person's own version and reduce contamination of their recollection.

Criminal versus civil forfeiture

Criminal forfeiture follows conviction and targets proceeds or instrumentalities; civil forfeiture proceeds against the property itself, typically with a lower standard of proof.

Restraint order

A court order freezing a person's assets during proceedings to prevent dissipation, usually time-limited and subject to periodic review or extension.

Unexplained wealth order

A court order requiring a person to explain the origin of assets disproportionate to known income; failure to explain can support a presumption that assets are criminal proceeds.

Asset tracing and commingling

Following proceeds through accounts; where tainted and clean funds are mixed, jurisdiction rules such as first-in-first-out or proportionate methods determine the recoverable amount.

Order of volatility

The principle that volatile digital evidence such as memory and network state is captured before disk drives, and disk before removable media or remote logs.

Forensic hash verification

Computing a cryptographic digest such as SHA-256 of a forensic image and comparing it to the original to demonstrate that evidence has not been altered.

Business email compromise

Fraud in which an attacker impersonates or hijacks an executive or vendor mailbox to redirect payments; response includes preserving headers and requesting bank recall.

Self-funding terrorist financing

A financing pattern in which an individual uses legitimate income such as salary or savings for terrorist purposes, so detection focuses on destination and intent rather than source.

Hawala informal transfer

An informal value transfer system operating on trust and settlement between brokers, leaving limited audit trails and often used to move small sums to high-risk regions.

Charitable diversion risk

The risk that funds given to a legitimate charity are redirected to a terrorist organization, mitigated by verifying recipients, end use, and screening trustees and beneficiaries.

Conflicts of interest management

Identifying, disclosing, and mitigating threats to objectivity; where safeguards are insufficient, the engagement or relationship should be declined or terminated.

Confidentiality after relationship ends

The professional duty to keep client information secret that survives termination of the engagement, subject only to permitted or legally required disclosures.

FATF Recommendations

Forty international standards on anti-money laundering, counter-terrorist financing, and proliferation financing, assessed through mutual evaluations and grey or black listing.

Egmont Group

An international network of financial intelligence units that facilitates secure information exchange and sets principles for cooperation between member units.

Wolfsberg Principles

Private-sector guidance on due diligence in correspondent banking, private banking, and trade finance, developed by major banks to interpret AML standards in practice.