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Anti Money Laundering Exam Answers

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Question 1

A legal instrument which is executed between two nations and governs cross-border information sharing is known as a:

Your Answer: Option(s)

Correct Answer: Option(s) C

Rationale

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.

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Question 2

What are the roles of a government Financial Intelligence Unit?

Your Answer: Option(s)

Correct Answer: Option(s) B D E

Rationale

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.

Question 3

What is a name for this typology?

Your Answer: Option(s)

Correct Answer: Option(s) C

Rationale

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.

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Question 4

Which of the following statements is true regarding the 2012 Financial Action Task Force 40 Recommendations and/or 11 Immediate Outcomes?

Your Answer: Option(s)

Correct Answer: Option(s) D

Rationale

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).

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Question 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?

Your Answer: Option(s)

Correct Answer: Option(s) B

Rationale

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.

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