1. A legal instrument which is executed between two nations and governs cross-border information sharing is known as a:
A. Memorandum of agreement
B. Declaration of understanding
C. Mutual legal assistance treaty Correct
D. Request for urgent information
E. Memorandum of understanding
Explanation
A mutual legal assistance treaty (MLAT) is a formal agreement between nations for cross-border information sharing to combat crime, particularly in legal investigations. A memorandum of agreement (A) is less formal and typically used for domestic or less binding arrangements. Declaration of understanding (B) is not a recognized legal term in this context. Request for urgent information (D) is not a formal instrument but rather an action. Memorandum of understanding (E) is non-binding and less formal than an MLAT.
2. What are the roles of a government Financial Intelligence Unit?
A. Disseminate analysis of suspicious transaction and suspicious activity reports to foreign judicial systems to enhance their anti-money laundering and terrorist financing investigations and prosecutions
B. Receive reports of suspicious transactions and suspicious activities from reporting institutions or obliged institutions
C. Investigate and where appropriate prosecute all suspicious transaction and suspicious activity reports received from reporting institutions or obliged institutions
D. Analyze all suspicious transaction and suspicious activity reports received from reporting institutions or obliged institutions
E. Disseminate the analysis of suspicious transaction and suspicious activity reports to local law enforcement agencies and foreign FIUs to combat money laundering
Explanation
Financial Intelligence Units (FIUs) are tasked with receiving suspicious transaction and activity reports from obliged entities (B), analyzing these reports to identify patterns or risks (D), and sharing the resulting intelligence with local law enforcement and foreign FIUs (E) to support anti-money laundering efforts. Disseminating directly to foreign judicial systems (A) is not a primary role, as FIUs typically share with counterpart FIUs. Investigating and prosecuting (C) are roles of law enforcement or judicial bodies, not FIUs.
3. What is a name for this typology?
A. Bid-ask spread
B. Reverse flip
C. Wash trading Correct
D. Short position
Explanation
Wash trading refers to a typology where transactions are conducted to create artificial market activity or obscure the true source of funds, often linked to money laundering. Bid-ask spread (A) is a financial market term related to pricing differences, not a money laundering typology. Reverse flip (B) is not a standard AML term. Short position (D) is a legitimate trading strategy, not inherently linked to illicit activity.
4. Which of the following statements is true regarding the 2012 Financial Action Task Force 40 Recommendations and/or 11 Immediate Outcomes?
A. Each jurisdiction can reach out to the FATF for private access to the interpretive notes to the 40 Recommendations
B. The 11 Immediate Outcomes are recommendations specific to high-risk jurisdictions requiring enhanced monitoring
C. The 40 Recommendations have not been updated to reflect the impact of new technology
D. The cornerstone of the 40 Recommendations is the adoption of a risk-based approach by each jurisdiction Correct
Explanation
The 40 Recommendations emphasize a risk-based approach to AML/CFT, tailoring measures to the specific risks of each jurisdiction (D). Interpretive notes are publicly available, not private (A). The 11 Immediate Outcomes apply to all jurisdictions, not just high-risk ones (B). The Recommendations have been updated to address technology, such as virtual assets (C).
5. A financial institution's policy is to apply enhanced due diligence for every new client to ensure the effectiveness of the program. How should a consultant advise the FI's management team?
A. Suggest EDD for 50% of the clients is appropriate
B. Suggest the FI needs to implement a risk-based approach for EDD Correct
C. Suggest the management team select the clients that are chosen for EDD
D. Suggest the management team ask the regulator for advice on EDD measures
Explanation
A risk-based approach for enhanced due diligence (EDD) focuses resources on higher-risk clients, improving efficiency and aligning with global standards like FATF (B). Applying EDD to all clients is resource-intensive and unnecessary. A fixed percentage like 50% (A) is arbitrary and not risk-based. Management selecting clients (C) lacks objectivity and consistency. Asking regulators for specific advice (D) is impractical, as regulators provide general guidance.