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CFCS (Other exams) practice questions

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Question 1Financial Crime Compliance Programs and Risk Management

Under a risk-based approach to AML/CFT, how should a financial institution allocate its compliance resources?

  1. According to the volume of alerts closed in the previous calendar year
  2. Equally across every customer segment so that no segment receives different treatment
  3. According to the assessed risk of customers, products, and geographies Correct answer.
  4. Primarily toward the customers holding the largest account balances

Explanation

A risk-based approach directs effort and resources toward the areas of highest assessed money laundering and terrorist financing risk. Risk ratings for customers, products, services, and geographies determine the intensity of controls applied. Treating all customers identically or sizing effort by balances or prior alert volume does not reflect actual risk.

Question 2Financial Crime Compliance Programs and Risk Management

Which set of elements is generally required for a formal AML compliance program?

  1. Internal controls, a compliance officer, training, and independent testing Correct answer.
  2. Marketing review, liquidity testing, capital planning, and audit
  3. Customer satisfaction surveys, product pricing, branch expansion, and annual budgeting
  4. Fraud hotline, credit scoring, collections, and vendor management

Explanation

A formal AML program typically rests on written internal controls, a designated compliance officer, ongoing employee training, and independent testing of the program. These elements work together to ensure policies are followed and weaknesses are identified. The other listed activities belong to unrelated operational or commercial functions.

Question 3Financial Crime Compliance Programs and Risk Management

What is a core responsibility of an institution's designated AML compliance officer?

  1. Overseeing day-to-day compliance with the AML program Correct answer.
  2. Negotiating contracts with external technology vendors
  3. Setting the interest rates offered on deposit products
  4. Approving the institution's annual financial statements

Explanation

The designated compliance officer is responsible for the day-to-day administration and oversight of the AML program. This includes monitoring, reporting, training coordination, and escalation of issues to senior management and the board. Financial reporting, product pricing, and vendor contracting are separate functions.

Question 4Financial Crime Compliance Programs and Risk Management

A suspicious activity report is primarily intended to do which of the following?

  1. Serve as admissible evidence in a civil lawsuit between two banks
  2. Notify the customer that their account is under review
  3. Provide authorities with information on suspected criminal activity Correct answer.
  4. Recover funds stolen from the reporting institution

Explanation

A suspicious activity report gives financial intelligence to the authorities about activity that may involve criminal conduct or regulatory violations. It is a reporting tool, not a recovery mechanism, and it does not replace a civil cause of action. Institutions are generally prohibited from telling the customer that a report was filed.

Question 5Financial Crime Compliance Programs and Risk Management

Under the common U.S. beneficial ownership rule, what ownership percentage generally triggers identification of a natural person?

  1. 10 percent or more
  2. 50 percent or more
  3. Any ownership interest at all
  4. 25 percent or more Correct answer.

Explanation

The common rule requires identification of each natural person who owns 25 percent or more of a legal entity, plus one individual with significant managerial control. Lower percentages and any-interest thresholds are broader than the standard requires. The threshold applies to equity interests in the legal entity customer.

Question 6Financial Crime Compliance Programs and Risk Management

A politically exposed person is best described as someone who does which of the following?

  1. Has been convicted of a financial crime abroad
  2. Owns more than one offshore company
  3. Works in the compliance department of a foreign bank
  4. Holds or has held a prominent public function Correct answer.

Explanation

A politically exposed person is an individual entrusted with a prominent public function, along with close associates and family members under many standards. The status creates heightened corruption risk and generally requires enhanced due diligence. A criminal conviction or offshore ownership is not the defining criterion.

Question 7Financial Crime Compliance Programs and Risk Management

Independent testing of an AML program is meant to do which of the following?

  1. Replace the need for ongoing transaction monitoring
  2. Evaluate whether the program is adequate and functioning as designed Correct answer.
  3. Confirm that every individual customer file is complete
  4. Certify the institution's quarterly tax filings

Explanation

Independent testing provides an objective assessment of whether the AML program is adequate and operating effectively. It examines the design and the actual operation of controls, not just individual files. It complements rather than replaces transaction monitoring and other controls.

Question 8Financial Crime Compliance Programs and Risk Management

Why do AML rules require institutions to retain records of customer identification and transactions?

  1. To help marketing teams target new products
  2. To allow regulators and law enforcement to reconstruct activity Correct answer.
  3. To satisfy tax reporting obligations to shareholders
  4. To reduce the cost of storing paper documents

Explanation

Retention requirements support the ability of regulators and law enforcement to reconstruct customer activity and verify compliance after the fact. Records provide an audit trail for investigations and examinations. Cost reduction, marketing, and shareholder tax reporting are not the purpose.

Question 9Financial Crime Compliance Programs and Risk Management

A bank onboards a cash-intensive convenience store in a jurisdiction with weak AML supervision. Which factor most directly raises the customer's risk rating?

  1. The owner's preference for quarterly statements
  2. The combination of cash intensity and weak country controls Correct answer.
  3. The store's use of a standard business bank account
  4. The store's relatively small number of employees

Explanation

Customer risk ratings are driven by factors such as the nature of the business, cash intensity, and the strength of the jurisdiction's AML regime. The combination of high cash use and weak country controls compounds risk. Employee count, use of a normal business account, and statement frequency are not material risk drivers.

Question 10Financial Crime Compliance Programs and Risk Management

A monitoring alert shows a customer making many small deposits just below the reporting threshold. What is the appropriate next step?

  1. Investigate the pattern and document findings before deciding Correct answer.
  2. Increase the customer's credit limit to retain the business
  3. Automatically file a report without further review
  4. Close the alert because no single deposit was reportable

Explanation

Structuring or threshold-avoidance patterns require investigation because the significance lies in the pattern rather than any single transaction. The analyst should review the activity, consider the customer profile, and document conclusions. Closing without review or filing automatically bypasses the required analysis.

Question 11Financial Crime Compliance Programs and Risk Management

A sanctions screening system flags a customer whose name matches a designated person, but the date of birth and nationality differ. What should the analyst do?

  1. Ignore the alert because name matches are common
  2. Document the comparison and clear the alert as a false positive Correct answer.
  3. Block the account permanently without further review
  4. Report the customer to the board of directors immediately

Explanation

Screening alerts must be adjudicated by comparing identifiers such as date of birth, nationality, and address against the designated person. When key identifiers do not match, the alert can be cleared as a false positive with the comparison documented. Permanent blocking or ignoring the alert bypasses this analysis.

Question 12Financial Crime Compliance Programs and Risk Management

Before opening a correspondent account for a foreign bank, what should the institution conduct?

  1. Conduct enhanced due diligence on the respondent and its ownership Correct answer.
  2. Rely solely on the foreign bank's published annual report
  3. Accept the foreign bank's self-certification without review
  4. Limit due diligence to the foreign bank's local regulator

Explanation

Correspondent banking relationships require enhanced due diligence on the respondent bank, including its ownership, management, AML controls, and the jurisdiction's risk. Annual reports and self-certifications alone are insufficient. Reliance on the local regulator does not substitute for the institution's own analysis.

Question 13Financial Crime Compliance Programs and Risk Management

What is the main purpose of an AML risk appetite statement?

  1. To define the level of risk the institution is willing to accept Correct answer.
  2. To list every customer the institution plans to exit
  3. To replace the annual enterprise-wide risk assessment
  4. To set the interest rate for high-risk accounts

Explanation

A risk appetite statement articulates the amount and type of financial crime risk the institution is willing to accept in pursuing its objectives. It guides decision-making, product approvals, and customer relationships. It does not list exit targets, set pricing, or substitute for the risk assessment.

Question 14Financial Crime Compliance Programs and Risk Management

How can an institution best measure whether its AML training is effective?

  1. By shortening the training to under ten minutes
  2. By outsourcing all training to a third-party vendor
  3. By counting how many employees attended the session
  4. By testing employee knowledge and observing behavior changes Correct answer.

Explanation

Effectiveness is demonstrated when employees understand their obligations and apply them in practice. Knowledge testing and observed behavior, such as proper escalation, provide evidence of learning. Attendance counts, duration, and outsourcing say little about whether staff actually understand the material.

Question 15Financial Crime Compliance Programs and Risk Management

Under the U.S. PATRIOT Act section 314(b), what may two participating financial institutions do?

  1. Subpoena each other's customer records directly
  2. Share customer funds without a court order
  3. File a joint suspicious activity report with FinCEN
  4. Share information about suspected money laundering under safe harbor Correct answer.

Explanation

Section 314(b) allows financial institutions that have registered and met the conditions to share information with one another about suspected money laundering or terrorist financing, with a safe harbor from liability. It does not authorize transferring funds, filing joint reports, or issuing subpoenas.

Question 16Financial Crime Compliance Programs and Risk Management

An enhanced due diligence review asks a customer to explain how they acquired their overall wealth. This is a request for which of the following?

  1. Source of wealth Correct answer.
  2. Source of funds for a single transaction
  3. The customer's expected account activity
  4. The customer's beneficial ownership percentage

Explanation

Source of wealth refers to how the customer accumulated their total assets or net worth over time. Source of funds concerns the origin of the money used in a specific transaction or account. Expected activity and ownership percentage are separate concepts.

Question 17Financial Crime Compliance Programs and Risk Management

In the three lines of defense model, what role does the business unit play in managing financial crime risk?

  1. It provides independent assurance to the board
  2. It audits the compliance function's work
  3. It sets the institution's risk appetite and policies
  4. It owns and manages the risk in its day-to-day activities Correct answer.

Explanation

The first line, the business unit, owns the risk and is responsible for applying controls in daily operations. The second line provides oversight and compliance guidance, while the third line, internal audit, gives independent assurance. The board and senior management set the risk appetite.

Question 18Financial Crime Compliance Programs and Risk Management

What type of information is most useful in a periodic AML report to the board?

  1. Marketing plans for new high-risk products
  2. Detailed transaction-level data for every customer
  3. The personal contact details of all analysts
  4. Risk trends, significant issues, and the status of remediation Correct answer.

Explanation

Board reporting should be concise and decision-useful, focusing on risk trends, significant compliance issues, and progress on remediation. Transaction-level detail is too granular for board oversight. Personal details and marketing plans do not support governance of financial crime risk.

Question 19Financial Crime Compliance Programs and Risk Management

Which event should most clearly trigger a refresh of a financial institution's AML risk assessment?

  1. A routine change in office cleaning vendor
  2. A change in the company's marketing slogan
  3. An annual employee satisfaction survey
  4. Launching a new product line for high-risk customers Correct answer.

Explanation

Risk assessments should be updated when the institution's risk profile changes, such as when offering new products or entering new markets that attract higher-risk customers. Routine administrative changes and branding updates do not alter financial crime risk. An annual survey is unrelated to the risk assessment.

Question 20Financial Crime Compliance Programs and Risk Management

Which indicator most strongly suggests elevated country risk for AML purposes?

  1. A large number of tourist arrivals each year
  2. A high ranking on a global competitiveness index
  3. Weak enforcement of anti-money laundering laws Correct answer.
  4. Membership in a regional trade agreement

Explanation

Country risk assessments focus on the strength of a jurisdiction's AML/CFT legal framework, supervision, and enforcement. Weak enforcement signals that illicit proceeds may flow with little deterrence. Economic competitiveness, tourism volume, and trade membership are not direct measures of AML risk.

Question 21Financial Crime Compliance Programs and Risk Management

An institution completes separate risk assessments for each business line. What is the key challenge when aggregating them into an enterprise-wide view?

  1. Reducing the number of risk categories to fewer than three
  2. Eliminating all inherent risk so residual risk is zero
  3. Confirming that every business line uses the same software vendor
  4. Ensuring consistent scales and assumptions across the assessments Correct answer.

Explanation

Aggregation is only meaningful if the underlying assessments use comparable risk scales, definitions, and assumptions. Without that consistency, combining results can overstate or understate enterprise risk. Software uniformity is not the issue, and residual risk can never be reduced to zero.

Question 22Financial Crime Compliance Programs and Risk Management

A bank exits an entire category of money service businesses because managing their risk is difficult. What is the primary regulatory concern with this approach?

  1. It can exclude legitimate customers from the financial system Correct answer.
  2. It increases the bank's exposure to high-risk customers
  3. It eliminates the need for independent testing
  4. It reduces the bank's capital requirements too quickly

Explanation

Wholesale de-risking can cut off legitimate businesses and individuals from banking services, pushing activity into less supervised channels. Regulators expect institutions to manage risk rather than avoid entire categories without analysis. De-risking does not increase exposure, change capital rules, or remove testing obligations.

Question 23Financial Crime Compliance Programs and Risk Management

A customer's activity changes from routine payroll deposits to frequent round-dollar transfers to unrelated overseas parties. Which description best fits this behavior?

  1. Expected activity requiring no further review
  2. A certain sanctions violation requiring immediate blocking
  3. A recordkeeping error to be corrected by operations
  4. Unusual activity warranting investigation for suspicion Correct answer.

Explanation

A departure from the customer's established pattern toward round-dollar transfers to unrelated overseas parties is unusual and should be investigated to determine whether it is suspicious. A finding of suspicion requires analysis; it is not automatic. Recordkeeping correction is not the appropriate response to a change in behavior.

Question 24Financial Crime Compliance Programs and Risk Management

A transaction monitoring system produces a very high false positive rate. What is the most appropriate response?

  1. Disable the rule that generates the most alerts
  2. Raise every customer's risk rating to high
  3. Analyze alert data and adjust thresholds with documented validation Correct answer.
  4. Close all alerts without review to reduce the backlog

Explanation

High false positive rates should be addressed through data analysis, threshold tuning, and validation so that the system remains effective while reducing noise. Disabling rules or closing alerts without review creates unacceptable gaps. Increasing all risk ratings does not address the monitoring design.

Question 25Financial Crime Compliance Programs and Risk Management

Which factor most reliably indicates a weak financial crime compliance culture?

  1. A whistleblowing channel is available to employees
  2. Employees fear retaliation for escalating concerns Correct answer.
  3. Training is refreshed annually for all staff
  4. The board reviews compliance reports quarterly

Explanation

A culture in which employees fear retaliation discourages escalation and allows problems to go unreported. Strong cultures encourage speaking up and protect those who raise concerns. Regular board reporting, annual training, and an available whistleblowing channel are positive indicators.

Question 26Financial Crime Compliance Programs and Risk Management

What does a risk-based approach require of a financial institution's financial crime compliance program?

  1. Reviewing every transaction manually before processing it
  2. Applying identical controls to every customer and transaction
  3. Allocating resources in proportion to assessed risk Correct answer.
  4. Exiting all business lines with above-average risk

Explanation

A risk-based approach means the intensity of controls and the level of resources are calibrated to the risk each customer, product, channel and geography presents. Higher-risk situations attract enhanced measures while lower-risk ones may receive simplified measures. The objective is effectiveness, not uniform treatment.

Question 27Financial Crime Compliance Programs and Risk Management

Who holds ultimate responsibility for approving a financial institution's AML/CFT program?

  1. The compliance analysts who draft the program documents
  2. The external audit firm engaged to test the program
  3. The board of directors together with senior management Correct answer.
  4. The front-line staff who apply the controls each day

Explanation

Governance standards place ultimate ownership of the financial crime program with the board and senior management, who approve policy, set risk appetite and receive reporting. Execution is delegated, but accountability is not. External parties may test or advise but cannot assume responsibility.

Question 28Financial Crime Compliance Programs and Risk Management

Where an institution has submitted a suspicious transaction report on a customer, the prohibition on tipping off generally prevents which of the following?

  1. Retaining a copy of the report in the customer file
  2. Sharing the report with the financial intelligence unit
  3. Reporting the same customer again in the future
  4. Informing the customer that a report was filed Correct answer.

Explanation

Tipping-off rules prohibit disclosing to the subject, or to third parties, that a suspicious activity report has been made, because disclosure could compromise investigations. Filing with the authorities and keeping internal records are expected parts of the process. Additional reports on the same customer are permitted and often required.

Question 29Financial Crime Compliance Programs and Risk Management

In a financial crime risk assessment, residual risk is the level of risk that remains after which of the following is taken into account?

  1. Regulatory fines have been paid in full
  2. Profits from the business line are deducted
  3. The institution's controls have been applied Correct answer.
  4. The institution's total customer base has been counted

Explanation

Inherent risk is the risk before mitigation; residual risk is what remains once the design and effectiveness of controls are considered. This distinction shows whether existing controls bring risk within appetite. Financial results and customer counts do not measure mitigation.

Question 30Financial Crime Compliance Programs and Risk Management

Each quarter a compliance team samples twenty closed monitoring alerts and checks whether analysts recorded a clear rationale and supporting evidence. This activity is best described as which of the following?

  1. An enterprise-wide financial crime risk assessment
  2. Remediation of customer due diligence files
  3. Scenario tuning of the transaction monitoring system
  4. Quality assurance testing of the monitoring process Correct answer.

Explanation

Quality assurance checks whether a process is being performed as designed by reviewing completed work against defined standards. Tuning changes detection rules, a risk assessment evaluates risk levels, and remediation corrects customer files. Sampling closed alerts for documentation quality is a control-testing activity.

Question 31Financial Crime Compliance Programs and Risk Management

During onboarding, a corporate customer discloses three shareholders, none owning 25% or more, and no individual appears to exercise control through other means. What does a risk-based customer due diligence approach require next?

  1. Treating the company as a shell and closing the account
  2. Identifying a senior managing official as controller Correct answer.
  3. Declining the relationship because no owner can be identified
  4. Accepting the company without identifying any individual

Explanation

Where no natural person meets the ownership threshold or is identifiable as a controller, standards require identifying a senior managing official as the person exercising control. This ensures a natural person is always identified. Automatic refusal or closing is not required by the rule.

Question 32Financial Crime Compliance Programs and Risk Management

Which of these is the strongest key risk indicator for a financial crime compliance program?

  1. The total number of customers on the books
  2. The percentage of customer reviews past their due date Correct answer.
  3. The number of staff employed in the compliance team
  4. The total value of transactions processed last quarter

Explanation

A key risk indicator measures the state of controls or exposure in a way that signals rising or falling risk. Overdue periodic reviews directly show that due diligence is not keeping pace with the risk profile. Volume and headcount figures describe scale but carry no directional risk signal on their own.

Question 33Financial Crime Compliance Programs and Risk Management

Before outsourcing its sanctions screening to an external provider, what should an institution do first?

  1. Assess the provider's controls and retain ownership of the risk Correct answer.
  2. Rely on the provider's reputation in the market
  3. Wait for the next independent audit cycle to review the arrangement
  4. Transfer regulatory accountability for screening to the provider

Explanation

Outsourcing a process does not outsource accountability, so the institution must perform due diligence on the provider's controls and monitor performance. Regulatory responsibility remains with the institution. Reputation and later audit review are not substitutes for pre-contract assessment.

Question 34Financial Crime Compliance Programs and Risk Management

A bank plans to launch a new product letting customers send cross-border transfers to unrelated third parties. What should happen before launch?

  1. A marketing review of the product's appeal to customers
  2. A pricing review confirming the product is profitable
  3. A financial crime risk assessment with adjusted controls Correct answer.
  4. A staffing review confirming branch capacity to sell it

Explanation

New products, services and channels require a financial crime risk assessment before launch so that controls, monitoring and due diligence are proportionate to the new exposure. Cross-border transfers to unrelated parties present elevated risk. Commercial considerations do not replace that assessment.

Question 35Financial Crime Compliance Programs and Risk Management

Which element most strengthens the credibility of an institution's financial crime risk assessment?

  1. Scoring criteria that are kept confidential from business units
  2. Documented and consistently applied scoring criteria Correct answer.
  3. Ratings chosen freely by each business unit head
  4. Results reviewed only when a regulator requests them

Explanation

A risk assessment is defensible when its methodology, data sources and scoring rules are documented and applied the same way over time and across the business. Consistency allows comparison and challenge. Concealment, sporadic review or unfettered discretion undermines reliability.

Question 36Financial Crime Compliance Programs and Risk Management

Which feature makes an independent test of a financial crime control most credible?

  1. It samples only the files that management selects
  2. It is performed by staff independent of the area tested Correct answer.
  3. It is performed by the team that designed the control
  4. It relies on management's own summary of the results

Explanation

Independence means the tester has no responsibility for designing or operating the control and can report findings without conflict of interest. Self-review or management-selected samples allow bias. Objective testing supports reliable conclusions about control effectiveness.

Question 37Financial Crime Compliance Programs and Risk Management

A customer's previously reported suspicious pattern has continued for several months without change. What is the most appropriate response?

  1. Review the activity and file further reports where required Correct answer.
  2. Reopen the original report and update it with new dates
  3. Tell the customer the pattern has been reported
  4. Take no action because a report was already submitted

Explanation

Continuing suspicious activity after an initial report requires periodic review and, where the activity remains suspicious, additional or continuing reports. A single filing does not close the matter permanently. Disclosure to the customer would breach tipping-off rules.

Question 38Financial Crime Compliance Programs and Risk Management

A group's parent company is supervised in a strict jurisdiction while its subsidiary operates where local requirements are weaker. How should the group set its financial crime standards?

  1. Apply local standards so the subsidiary stays competitive
  2. Apply the parent's standards only to customers based abroad
  3. Apply the higher standard wherever local law permits Correct answer.
  4. Let each subsidiary pick whichever standard fits its market

Explanation

Group policy normally requires applying the more stringent of group and local requirements where local law allows, so the weakest jurisdiction does not set the floor for the whole group. Where local law prohibits the higher standard, additional controls such as escalation or exit are considered. Uniform minimum standards protect the group's reputation and regulatory standing.

Question 39Financial Crime Compliance Programs and Risk Management

An institution retunes its transaction monitoring scenarios and alert volumes fall by 45%. Which control is most important before the change goes live?

  1. Documented approval and validation of detection coverage Correct answer.
  2. A communication plan telling analysts fewer alerts will be raised
  3. A reduction in the number of analysts assigned to alert review
  4. Confirmation from business units that the change is convenient

Explanation

Changes to detection logic can suppress genuinely suspicious activity, so the change needs documented approval, testing that detection coverage is preserved and post-implementation monitoring. Governance ensures the reduction is deliberate rather than an unnoticed loss of coverage. Commercial or staffing convenience is not a control objective.

Question 40Financial Crime Compliance Programs and Risk Management

A regulator asks an institution to demonstrate that its program is effective rather than merely present. Which evidence best supports that claim?

  1. Confirmation that all staff completed annual training
  2. Testing showing controls operate as designed Correct answer.
  3. A complete set of written policies and procedures
  4. A list of every regulation the institution has mapped

Explanation

Effectiveness is shown by evidence that controls actually operate as intended and achieve their objective, such as testing results and outcome metrics. Policies, training completion and regulatory mapping demonstrate design and inputs, not that risks are being managed. Regulators increasingly focus on outcomes rather than documentation alone.

Question 41Money Laundering

In the traditional three-stage model of money laundering, at which stage are illicit cash proceeds first introduced into the financial system?

  1. Layering
  2. Repatriation
  3. Integration
  4. Placement Correct answer.

Explanation

Placement is the first stage, in which cash from a predicate offense is introduced into the financial system, for example through deposits, currency exchanges or cash purchases. Layering and integration occur later, once the funds are already inside the system.

Question 42Money Laundering

Under the U.S. Bank Secrecy Act, a financial institution must file a Currency Transaction Report for a currency transaction that exceeds which amount in a single business day?

  1. $25,000
  2. $10,000 Correct answer.
  3. $5,000
  4. $3,000

Explanation

The BSA requires a CTR for currency transactions in excess of $10,000 conducted by or on behalf of the same person in a single business day. Transactions of exactly $10,000 are not reportable because the threshold is 'in excess of'.

Question 43Money Laundering

Which sequence correctly states the three stages of money laundering in order?

  1. Integration, placement, layering
  2. Layering, integration, placement
  3. Placement, layering, integration Correct answer.
  4. Placement, integration, layering

Explanation

The model runs from placement of illicit cash into the system, through layering to obscure the trail, to integration where the funds re-enter the legitimate economy as apparently clean assets. The other sequences reverse or misorder these stages.

Question 44Money Laundering

Which activity best illustrates the layering stage of money laundering?

  1. Using illicit funds to buy a luxury car for personal use
  2. Depositing bulk cash at a casino cage and requesting a check
  3. Moving funds through several accounts and jurisdictions to obscure the audit trail Correct answer.
  4. Depositing small cash amounts directly into a business bank account

Explanation

Layering consists of complex, often multi-jurisdictional transactions designed to break the paper trail between the funds and the predicate offense. Purchasing assets or making simple deposits does not by itself create that distance.

Question 45Money Laundering

The international standards issued by the Financial Action Task Force are set out in a set of Recommendations. How many Recommendations are there currently?

  1. 25
  2. 9
  3. 40 Correct answer.
  4. 48

Explanation

The FATF Recommendations number 40 following the 2012 revision, which folded the former Nine Special Recommendations on terrorist financing into the main set. The other figures do not correspond to the FATF standard.

Question 46Money Laundering

A customer deliberately breaks up a $30,000 cash deposit into three deposits of $9,500 on consecutive days to avoid triggering a reporting requirement. This conduct is best described as:

  1. Structuring Correct answer.
  2. Commingling
  3. Integration
  4. Layering

Explanation

Structuring is the deliberate splitting of transactions to evade a reporting or recordkeeping threshold. The conduct is a criminal offense even when no individual transaction crosses the threshold.

Question 47Money Laundering

Which U.S. agency serves as the country's financial intelligence unit and administers the Bank Secrecy Act?

  1. The Federal Reserve
  2. The SEC
  3. FinCEN Correct answer.
  4. OFAC

Explanation

FinCEN is the U.S. financial intelligence unit, receives BSA reports such as CTRs and SARs, and issues implementing regulations. OFAC administers sanctions, while the banking regulators supervise for compliance.

Question 48Money Laundering

Which characteristic is typical of hawala, an informal value transfer system?

  1. Only licensed banks may act as intermediaries
  2. Transfers are documented on standardized government reporting forms
  3. Settlement is always completed through the SWIFT network
  4. Value moves on trust and balances are settled later between hawaladars Correct answer.

Explanation

Hawala relies on trust between brokers, with little or no documentary trail, and obligations between hawaladars are netted and settled later through goods, cash or other transfers. This absence of records is what gives the system its money laundering appeal.

Question 49Money Laundering

A customer makes three separate cash deposits of $4,000 each at the same branch within one business day. What is the institution's reporting obligation?

  1. File a SAR only, because a pattern of deposits is automatically suspicious
  2. No report is required if the customer has held the account for over a year
  3. No report is required, because each individual deposit is below $10,000
  4. File a CTR, because the deposits aggregate to $12,000 in one business day Correct answer.

Explanation

Multiple currency transactions are aggregated when the institution has knowledge that they are by or on behalf of the same person and total more than $10,000 in a single business day. The deposits here total $12,000, so a CTR is required.

Question 50Money Laundering

For a bank, a suspicious activity report generally must be filed no later than how many calendar days after the date of initial detection of facts constituting a reportable transaction?

  1. 10
  2. 90
  3. 60
  4. 30 Correct answer.

Explanation

Banks must file a SAR within 30 calendar days of initial detection, and may take up to 60 calendar days only when no suspect has been identified. The clock starts at detection, not at the completion of an internal investigation.