CFCS (Other exams) flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Three lines of defense
- First line is business units managing risk; second is compliance and risk oversight; third is independent internal audit providing assurance to the board.
- Residual risk
- The level of risk remaining after controls and mitigations are applied; it is compared against risk appetite to decide whether further action is needed.
- Risk-based approach
- Allocating compliance resources and controls in proportion to assessed money laundering and terrorist financing risk, documented through a risk assessment methodology.
- Customer due diligence
- Identifying the customer and beneficial owner, verifying identity, understanding purpose and expected activity, and conducting ongoing monitoring of the relationship.
- Independent AML testing
- Periodic review of the AML program by persons independent of compliance, testing design and effectiveness and reporting findings to senior management or the board.
- Placement stage
- First money laundering stage: introducing illicit cash or assets into the financial system, often through deposits, gambling, or purchases of high-value goods.
- Layering stage
- Second laundering stage: moving funds through multiple transactions, accounts, or jurisdictions to obscure the audit trail and source of ownership.
- Integration stage
- Final laundering stage: reintroducing laundered funds into the legitimate economy as apparently lawful income, investments, or assets.
- Structuring
- Splitting transactions into amounts below reporting thresholds to evade currency transaction reporting; it is illegal even when the underlying funds are legitimate.
- Trade-based money laundering
- Moving value across borders through misinvoicing, over- or under-shipment, or false trade descriptions that disguise payments between parties.
- Terrorist financing
- Providing or collecting funds, assets, or services for terrorist acts or organizations, regardless of whether the funds come from legitimate sources.
- Targeted financial sanctions
- Freezing terrorist or proliferation-linked assets without delay under UN Security Council resolutions, with no prior notice and no threshold amount.
- Hawala
- Informal value transfer system where brokers settle obligations through trust and netting rather than formal banking, leaving limited transaction records.
- NPO sector risk
- Charities and non-profits are high-risk for terrorist financing because legitimate fundraising can be diverted to violent causes or abused for cover.
- Self-funding
- Terrorist financing typology where an individual uses personal salary, savings, loans, or small donations to fund travel or attacks without external sponsorship.
- Fraud triangle
- Three conditions associated with fraud: pressure or incentive, opportunity to commit, and rationalization that justifies the dishonest act.
- Business email compromise
- Fraud where an attacker impersonates an executive or vendor by email to induce an employee to transfer funds or disclose sensitive data.
- Authorized push payment fraud
- Scam where a victim is deceived into authorizing a payment to a fraudster's account; reimbursement depends on the jurisdiction's liability rules.
- Synthetic identity fraud
- Fraud using a fabricated identity combining real and fictitious data, often built slowly to obtain credit before defaulting or cashing out.
- Ponzi scheme
- Investment fraud paying earlier investors with funds from new investors, sustained by fabricated returns and lacking genuine underlying assets.
- Check kiting
- Fraud exploiting the float between bank accounts by depositing checks from one account and withdrawing funds before the check clears.
- Foreign Corrupt Practices Act
- US law prohibiting bribery of foreign officials and requiring accurate books and records and internal accounting controls for issuers.
- UK Bribery Act
- UK law criminalizing bribery, bribery of foreign officials, and a commercial organization's failure to prevent bribery by associated persons.
- Facilitation payment
- Small payment to a low-level official to expedite routine government action; limited FCPA exception but no exception under the UK Bribery Act.
- Politically exposed person
- Individual entrusted with prominent public functions, or a family member or close associate, requiring enhanced due diligence and source-of-wealth review.
- UNCAC
- United Nations Convention against Corruption, the only global legally binding anti-corruption instrument; Chapter V addresses asset recovery.
- OFAC SDN list
- US Treasury list of blocked persons; US persons may not deal with them, and the 50 percent rule extends blocking to majority-owned entities.
- OFAC 50 percent rule
- An entity owned 50 percent or more, directly or indirectly, by one or more blocked persons is itself blocked, even if not listed.
- Secondary sanctions
- Measures taken by one country against non-nationals for conduct outside its jurisdiction, often to deter dealings with a sanctioned state or sector.
- Non-conviction-based forfeiture
- Civil process allowing authorities to seize proceeds of crime without a criminal conviction, typically requiring proof on the balance of probabilities.
- Mutual legal assistance
- Formal cross-border cooperation between authorities to gather evidence, freeze, and confiscate assets for foreign criminal proceedings.
- Asset repatriation
- Return of confiscated stolen assets to the country of origin under UNCAC Chapter V, often through agreements and monitoring of use.