Annual AML Training and Testing

1. There are generally three stages of money laundering

True

False

The statement is True. Placement, Layering and Integration

Explanation

The statement is True. Placement, Layering and Integration

2. How does the home address on a utility bill, best assist in identifying the prospect

A) The bank may want to visit the prospect

B) The utility bill shows the monthly expenses

C) The home address coupled with the name is evidence of a place of residence

The correct answer is C. While the bank may want to visit the prospect, that is not the common reason for requesting a utility bill and personal visits are not the norm. Further the monthly expenses (b) has no real relevance.

Explanation

The correct answer is C. While the bank may want to visit the prospect, that is not the common reason for requesting a utility bill and personal visits are not the norm. Further the monthly expenses (b) has no real relevance.

3. Reputation may be affected by a) Quality of clients accepted b) Quality of service offered

A) A only

B) B Only

C) Both A and B

The correct answer is C. Your reputation may be affected by both the quality of clients accepted, and the quality of service offered.

Explanation

The correct answer is C. Your reputation may be affected by both the quality of clients accepted, and the quality of service offered.

4. Who are categorized as exposed persons?

A) Persons with credit exposures

B) Persons whose hidden dealings are discovered

C) Persons who have a level of influence, and are highly visible and accessible

The correct answer is C. Exposed persons are individuals who have a level of influence (authority, perceived immunities, means and resources) and due to their public office, are quite visible and accessible. Choices A and C are not valid descriptions of exposed persons in relation to AML.

Explanation

The correct answer is C. Exposed persons are individuals who have a level of influence (authority, perceived immunities, means and resources) and due to their public office, are quite visible and accessible. Choices A and C are not valid descriptions of exposed persons in relation to AML.

5. Less due diligence is required for charities and non-profit entities

True

False

The statement is False. Equal or greater due diligence is required for Charities and Non-profit entities.

Explanation

The statement is False. Equal or greater due diligence is required for Charities and Non-profit entities.

6. An employee has a duty to report a transaction as a suspicious transaction when he/she a) Knows b) Suspects c) Is advised d) Has reasonable grounds to suspect

A) A Only

B) A and C only

C) A B and D

The correct answer is C.

Explanation

The correct answer is C.

7. The preferable and more effective transaction monitoring system is one that is

A) A combined automated and manual system

B) An automated system only

C) A fully manual system

The Correct answer is A. A combined automated system (which identifies transactions out of a profile) and manual (which investigates transactions identified) is more effective than separate systems.

Explanation

The Correct answer is A. A combined automated system (which identifies transactions out of a profile) and manual (which investigates transactions identified) is more effective than separate systems.

8. Reputation Risk is only the responsibility of the client facing and Compliance staff

True

False

The statement is False. Reputation Risk is the responsibility of all staff

Explanation

The statement is False. Reputation Risk is the responsibility of all staff

9. Where an employee acts in such a way as to notify a client that a STR has been filed on their account, this is classified as

A) Collusion

B) Witness interference

C) Tipping off

The correct answer is C.

Explanation

The correct answer is C.

10. How is a prospective client best identified

A) By a passport

B) By a Drivers License

C) By a Credit Card

The correct answer is A. A passport, being an accepted document for entry into foreign countries, is more complete than a driver's license, containing information such as Nationality, Home Address and Travel history. A credit card is not a valid ID.

Explanation

The correct answer is A. A passport, being an accepted document for entry into foreign countries, is more complete than a driver's license, containing information such as Nationality, Home Address and Travel history. A credit card is not a valid ID.

11. What is enhanced due diligence?

A) When your company has special expertise in due diligence procedures

B) When you rely on due diligence procedures performed by others

C) When specific pre-defined circumstances occur, which demand increased due diligence

The answer is C. Specific circumstances (which are defined) require enhanced due diligence, such as limited interaction with the prospect, an exposed person, a high risk country.

Explanation

The answer is C. Specific circumstances (which are defined) require enhanced due diligence, such as limited interaction with the prospect, an exposed person, a high risk country.

12. Occasional transactions are permitted under law, and require proper identification and declaration of source of funds

True

False

The statement is True.

Explanation

The statement is True.

13. A bank with a tarnished reputation is more likely to lose customer accounts

True

False

The statement is True. A bank with a damaged reputation is more likely to lose accounts than one with its reputation intact.

Explanation

The statement is True. A bank with a damaged reputation is more likely to lose accounts than one with its reputation intact.

14. The Financial Action Task Force (FATF) is

A) Composed of 25 member countries

B) Headquartered in Brussels

C) Made 40 Recommendations in 2003 used to measure effectiveness of AML regimes.

The correct answer is C, since both A (there are least 34 member countries) and B (it is headquartered in Paris) are incorrect.

Explanation

The correct answer is C, since both A (there are least 34 member countries) and B (it is headquartered in Paris) are incorrect.

15. Corporations, being non-personal entities, are held to a lesser standard in due diligence

True

False

The statement is False. Corporations (and beneficial owners) are held to similar standards in due diligence as personal prospects.

Explanation

The statement is False. Corporations (and beneficial owners) are held to similar standards in due diligence as personal prospects.

16. When considering a cash transaction, and having verified the identity of the depositor, the bank is most concerned with

A) The intended use of the funds

B) the amount of the deposit

C) The source of the funds

The correct answer is C. Having identified the depositor, the source of the funds is very relevant, more so than the deposit amount, or ultimate intended use.

Explanation

The correct answer is C. Having identified the depositor, the source of the funds is very relevant, more so than the deposit amount, or ultimate intended use.

17. It is important to document training records so that

A) A training history is established

B) The bank can ensure that training costs decrease each year

C) Training Certificates may be secured.

The correct answer is A. Choices B and C are not valid reasons for documenting training records.

Explanation

The correct answer is A. Choices B and C are not valid reasons for documenting training records.

18. Who do you report a Suspicious Transaction to in your office

A) The Board of Directors

B) The President of the Bank

C) The MLRO

D) Senior Management

The correct answer is C. Suspicious Transactions should be reported to the Money Laundering Reporting Officer.

Explanation

The correct answer is C. Suspicious Transactions should be reported to the Money Laundering Reporting Officer.

19. Client accounts on the 'Watch-list' are normally considered Low to Moderate Risk

True

False

The statement is False. Clients on a 'watch list' are generally considered High Risk.

Explanation

The statement is False. Clients on a 'watch list' are generally considered High Risk.

20. To be classified as an eligible introducer, local entities should be:

A) Licensed under a financial services regulator

B) A reputable law firm

C) Known to the bank

The correct answer is A. Local entities licensed under a financial services regulator qualify as eligible introducers.

Explanation

The correct answer is A. Local entities licensed under a financial services regulator qualify as eligible introducers.

21. Our laws regarding money laundering is not specific to our geographical area, being the Caribbean and Americas, but follows international standards.

True

False

The statement is True. Our laws are framed to follow international standards, and not specific to our geographical area.

Explanation

The statement is True. Our laws are framed to follow international standards, and not specific to our geographical area.

22. In determining whether a transaction is suspicious, the best question to ask is if the transaction is outside the profile

True

False

The statement is True.

Explanation

The statement is True.

23. To be labeled a PEP, one must be a Member of Parliament

True

False

The statement is False. Politically Exposed Persons are not limited to Members of Parliament.

Explanation

The statement is False. Politically Exposed Persons are not limited to Members of Parliament.

24. Where undue relationships are forged with bank employees, a common objective is for the purpose of

A) Fraud through collusion

B) More efficient service

C) Negligence

The correct answer is A. Most attempts to forge undue relationships with bank employees is for the intent to commit fraud.

Explanation

The correct answer is A. Most attempts to forge undue relationships with bank employees is for the intent to commit fraud.

25. For efficient service, new client acceptance is usually conducted and approved by one peron

True

False

The statement is False.. Acceptance of new clients should be a process which is independent, meaning that the decision is a joint one either directly or through the approval process.

Explanation

The statement is False.. Acceptance of new clients should be a process which is independent, meaning that the decision is a joint one either directly or through the approval process.

26. The threats we face as a jurisdiction relate only to accepting the proceeds of crime

True

False

The statement is False. Our threats also include the use of funds within the system, and our reputation for competent customer service and a global partner in the effort against Money Laundering.

Explanation

The statement is False. Our threats also include the use of funds within the system, and our reputation for competent customer service and a global partner in the effort against Money Laundering.

27. Which experiences below are not likely to have a negative effect on a bank's reputation?

A) Outsourcing to a Service Provider without sufficient due diligence

B) Stories within the local gossip column

C) Employee non-compliance with confidential requirements

The correct answer is B. The other choices are valid, while B, is mostly disregarded.

Explanation

The correct answer is B. The other choices are valid, while B, is mostly disregarded.

28. Which of the following is not considered law subject to penalties, but for advice and direction which if ignored, may lead to sanctions under applicable law?

A) Laws

B) Regulations

C) Guidelines

The correct answer is C. Laws and Regulations are enforceable by penalties, while Guidelines are intended to present practical advice on how the bank licensee should conduct itself. In the absence of evidence that the bank is following advice, the regulator may conclude that the bank is carrying on business in a manner which may give rise to sanctions under the applicable law.

Explanation

The correct answer is C. Laws and Regulations are enforceable by penalties, while Guidelines are intended to present practical advice on how the bank licensee should conduct itself. In the absence of evidence that the bank is following advice, the regulator may conclude that the bank is carrying on business in a manner which may give rise to sanctions under the applicable law.

29. Generally speaking, the lower a client account is risk rated, the lower the frequency of reviews.

True

False

The statement is True. Higher risk rated accounts are reviewed more regularly.

Explanation

The statement is True. Higher risk rated accounts are reviewed more regularly.

30. A company shows evidence of being duly formed by producing a

A) Certificate of Incorporation

B) Memorandum and Articles of Association

C) Register of Officers and Directors

The correct answer is A. The issuance of a Certificate of Incorporation by a Registrar is proof of a duly formed company. Items B and C are documents which are required in forming a company, but not evidence that is has been registered.

Explanation

The correct answer is A. The issuance of a Certificate of Incorporation by a Registrar is proof of a duly formed company. Items B and C are documents which are required in forming a company, but not evidence that is has been registered.

31. The effort to combat money laundering is cultural and specific to jurisdictions, and there is little global cooperation given the diversity of countries and cultures

True

False

The statement is False. The effort is global, with international bodies and standards, encouraging and enabling cooperation despite diversity of countries and cultures.

Explanation

The statement is False. The effort is global, with international bodies and standards, encouraging and enabling cooperation despite diversity of countries and cultures.

32. The periodic client review is conducted not to determine

A) Whether there has been any change in the client personal profile

B) the transaction activity in comparison to the account profile

C) Whether a change in risk rating is necessary

D) Whether an 'ad-hoc' review has been conducted

The correct answer is D. All of the other answers are valid reasons why a periodic client review is performed.

Explanation

The correct answer is D. All of the other answers are valid reasons why a periodic client review is performed.

33. What is not considered an element of a new client profile?

A) Purpose of Account

B) Nature and size of assets

C) Account holder's political persuasion

D) Account holder's identification

The correct answer is C. The client's political persuasion has no rlevant effect on the profile, except if the client is an exposed person. A, B and D are all factors in establishing a profile.

Explanation

The correct answer is C. The client's political persuasion has no rlevant effect on the profile, except if the client is an exposed person. A, B and D are all factors in establishing a profile.

34. Why is it so important to know that your client is the person they claim to be

A) Because it is the law

B) Because the relationship is based on the integrity of the representations

C) Because identity theft is quite common

The correct answer is B. The relationship to be established is based on the integrity of the representations made to the bank on the prospect and a complete reliance that the person is who they represent themselves to be.

Explanation

The correct answer is B. The relationship to be established is based on the integrity of the representations made to the bank on the prospect and a complete reliance that the person is who they represent themselves to be.

35. The best time to intercept a Suspicious Transaction is at the time of integration

True

False

The statement is False. The best time to intercept a Suspicious Transaction is at Placement.

Explanation

The statement is False. The best time to intercept a Suspicious Transaction is at Placement.

36. Reputation risk refers to what type of publicity

A) Positive

B) Negative

C) Any kind

The correct answer is B. Risk to your reputation result from negative publicity, while positive publicitiy (answers A and C) should generally help your company.

Explanation

The correct answer is B. Risk to your reputation result from negative publicity, while positive publicitiy (answers A and C) should generally help your company.

37. Should a staff member not report a suspicious transaction, they are in contravention of which legislation

A) The Financial Intelligence Unit Act

B) The Central Bank of The Bahamas Act

C) The Financial Transactions Reporting Act

The correct answer is C. The FIU Act authorizes enforcement of penalties under the POCA, while The Central Bank of The Bahamas Act establishes the Central Bank as the regulatory body with defined duties and powers.

Explanation

The correct answer is C. The FIU Act authorizes enforcement of penalties under the POCA, while The Central Bank of The Bahamas Act establishes the Central Bank as the regulatory body with defined duties and powers.

38. Cash transactions which are broken into small segments, to comply with a limit requirement is referred to as

A) Phishing

B) Layering

C) Structuring

D) Tagging

The correct answer is C.

Explanation

The correct answer is C.

39. Risk to your reputation may result from a) Business decisions made in good faith b) Poor ethical decisions

A) A Only

B) B Only

C) Both A and B

D) None of the above

The correct answer is C. Decisions made in good faith and poor ethical decisions can result in risks to your reputation.

Explanation

The correct answer is C. Decisions made in good faith and poor ethical decisions can result in risks to your reputation.

40. Reputation Risk is measured by

A) Potential of an event occuring

B) Unlikelihood of an event

C) Actual events

The correct answer is A. Reputation Risk is measured by the potential that negative publicity about your company may result in negative consequences. Both B and C are incorrect, because Risk is measured in likelihood not unlikelihood, and not in actual events, but the potential that an event may occur.

Explanation

The correct answer is A. Reputation Risk is measured by the potential that negative publicity about your company may result in negative consequences. Both B and C are incorrect, because Risk is measured in likelihood not unlikelihood, and not in actual events, but the potential that an event may occur.

41. What component is the most important element in the prevention of money laundering?

A) The Laws

B) The Systems in Place

C) The People within the System

The correct answer is C. The most important component in the prevention of Money Laundering is the people who operate the systems intended to facilitate compliance with the laws. Without the people, the systems would be inoperable, and the laws unenforceable.

Explanation

The correct answer is C. The most important component in the prevention of Money Laundering is the people who operate the systems intended to facilitate compliance with the laws. Without the people, the systems would be inoperable, and the laws unenforceable.

42. The overriding Act which makes money laundering unlawful within The Bahamas is the

A) Criminal Justice Act

B) Proceeds of Crime Act

C) The Evidence Act

The correct answer is B, the Proceeds of Crime Act which grants the authorities power over the proceeds of crime related to money laundering and connected purposes; both A and C relate to proceedings in foreign jurisdiction.

Explanation

The correct answer is B, the Proceeds of Crime Act which grants the authorities power over the proceeds of crime related to money laundering and connected purposes; both A and C relate to proceedings in foreign jurisdiction.

43. In considering a prospective client, the bank is more concerned with the source of wealth than the legal structure of the proposed entity.

True

False

The statement is True. The origin and legality of the wealth being offered takes precedence to the legal structure being proposed.

Explanation

The statement is True. The origin and legality of the wealth being offered takes precedence to the legal structure being proposed.

44. The transaction monitoring program is most dependent on

A) The assigned risk rating

B) The frequency of deposits

C) The policies of the bank

The correct answer is A. The transaction monitoring program should be structured in relation to the risk rating; higher risk rated accounts require more extensive monitoring. While B and C are relevant, they are not most relevant.

Explanation

The correct answer is A. The transaction monitoring program should be structured in relation to the risk rating; higher risk rated accounts require more extensive monitoring. While B and C are relevant, they are not most relevant.

45. Unincorporated entities compared to incorporated, attract an equal standard of due diligence.

True

False

This statement is True. Equal due diligence is required whether the entity is incorporated or not.

Explanation

This statement is True. Equal due diligence is required whether the entity is incorporated or not.

46. Risk Rating assignment is required when the first transaction occur

True

False

The statement is False. Risk Rating assignment is required before the first transaction occurs.

Explanation

The statement is False. Risk Rating assignment is required before the first transaction occurs.

47. Do the regulations allow you to rely on KYC procedures performed by third parties?

True

False

The statement is True. The regulations allow for reliance on KYC procedures performed by third parties who qualify as 'eligible introducers'

Explanation

The statement is True. The regulations allow for reliance on KYC procedures performed by third parties who qualify as 'eligible introducers'

48. In determining whether a transaction is suspicious, the employee should ask themselves which question

A) Does it make economic sense

B) What does my supervisor think

C) What have I been trained to consider

D) The state of the economy

The correct answer is A. While B and C is recommended. D is not relevant.

Explanation

The correct answer is A. While B and C is recommended. D is not relevant.

49. In terminating a client relationship, a company should seek advice on its duty owed to a) The client b) Third parties c) The regulator

A) A only

B) B only

C) A and B only

The correct answer is C. A. company should act to limit its liability to clients and third parties; and independent professional advice is recommended; with regard to the regulator, a company may simply consult the regulator with any queries.

Explanation

The correct answer is C. A. company should act to limit its liability to clients and third parties; and independent professional advice is recommended; with regard to the regulator, a company may simply consult the regulator with any queries.

50. For high-risk prospects, regulations require that the source of wealth is

A) Verified by the Manager

B) Verified by the introducer

C) Verified by an independent source

D) Verified by the prospect

The correct answer is C. All the others may have a connection with the prospect, and would be considered less than independent.

Explanation

The correct answer is C. All the others may have a connection with the prospect, and would be considered less than independent.

51. The Wolfsberg Principles were composed by a consortium of Compliance Officers

True

False

The statement is False. The Wolfsberg Principles were established by a consortium of 11 global banks.

Explanation

The statement is False. The Wolfsberg Principles were established by a consortium of 11 global banks.

52. The group of Financial Intelligence Units who collaborate for information sharing and assistance is called the

A) Egmont Group

C) FATF

C) EU Directive

The correct answer is A, formed during 1995 for information sharing and exchange.

Explanation

The correct answer is A, formed during 1995 for information sharing and exchange.

53. Deposits may be accepted and placed on 'suspense' until the account is formally accepted.

True

False

The statement is False. Deposits should be accepted only upon the account being duly accepted.

Explanation

The statement is False. Deposits should be accepted only upon the account being duly accepted.

54. International initiatives are issued to achieve all of the following, except

A) Standard approaches

B) To engender cooperation

C) To share information

D) To impose law across jurisdictions

The correct answer is D, since international initiatives cannot impose law in foreign jurisdictions, but encourage the other three (A, B and C) which may result in laws being enacted within the foreign jurisdiction.

Explanation

The correct answer is D, since international initiatives cannot impose law in foreign jurisdictions, but encourage the other three (A, B and C) which may result in laws being enacted within the foreign jurisdiction.

55. The regulatory bodies within The Bahamas (for the purpose of Money Laundering does not include

A) The Gaming Board

B) The Business Licensing Authority

C) The Insurance Commission

The correct answer is B. The regulatory bodies include both The Gaming Board and the Insurance Commission; the Business Licensing Authority is concerned with the issuance of Business Licenses for specific activity, and has no role in regulating Money Laundering.

Explanation

The correct answer is B. The regulatory bodies include both The Gaming Board and the Insurance Commission; the Business Licensing Authority is concerned with the issuance of Business Licenses for specific activity, and has no role in regulating Money Laundering.

56. The Acts which do not deal specifically with foreign jurisdictional proceedings are

A) The Criminal Justice Act

B) The Evidence Act

C) The Financial Intelligence Unit Act

The correct answer is C. the FIU Act grants power to enforce penalties within The Bahamas. Both A and B deal with foreign proceedings.

Explanation

The correct answer is C. the FIU Act grants power to enforce penalties within The Bahamas. Both A and B deal with foreign proceedings.

57. If wealth is gotten in a foreign jurisdiction by a business activity that is illegal in The Bahamas, but not in the foreign jurisdiction, it would be illegal to accept the funds here

True

False

The statement is False because funds are accepted based on a premise that the funds were legally gotten in the home country; in spite of an activity being illegal within The Bahamas, should it be legal in the home country, and The Bahamas accepts that country as a business introducer, then it is legal to accept such funds within The Bahamas

Explanation

The statement is False because funds are accepted based on a premise that the funds were legally gotten in the home country; in spite of an activity being illegal within The Bahamas, should it be legal in the home country, and The Bahamas accepts that country as a business introducer, then it is legal to accept such funds within The Bahamas

58. The Compliance Officer is duty bound to make reports of Suspicious Transaction Reports to the Financial Intelligence Unit.

True

False

The statement is False. The MLRO is duty bound to report to the FIU, not the compliance officer.

Explanation

The statement is False. The MLRO is duty bound to report to the FIU, not the compliance officer.

59. How many years should a record of transactions be held according to the law

A) 5

B) 6

C) 7

The correct answer is C. A transaction should be held for seven years after its process date.

Explanation

The correct answer is C. A transaction should be held for seven years after its process date.

60. The profile of the prospective client determines a) Whether the prospect will be accepted b) The risk rating to be assigned, if accepted c) Whether mitigating controls should be considered

A) A and B only

B) B and C only

C) A B and C

The answer is A. Choice C is incorrect because every account has an element of risk, hence mitigating controls should always be considered regardless of the profile.

Explanation

The answer is A. Choice C is incorrect because every account has an element of risk, hence mitigating controls should always be considered regardless of the profile.