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Questions # 1:

From 2010 to 2018, a company had an average turnover of 1 million USD. In 2019, the turnover increased to 8 million USD. When asked for the reason of the increase, the company claims that business increased and refuses to give any further explanation despite several attempts at requesting information. Which is the best next step?

Options:

Note to make a suspicious activity report if the increased turnover continues.

Continue to ask for an explanation of the increased business.

File a suspicious activity report as soon as possible.

Make a note to check next year's turnover.

Expert Solution

Questions # 2:

A KYC analyst is performing EDD on a customer because of a deviation in expected transaction activity. Which factor should the analyst keep in mind if contacting the customer as part of this due diligence?

Options:

Discussions with the customer should refrain from tipping off the customer.

Communication with the customer should only be performed by the AML officer.

Discussions with the customer should focus on the nature of the due diligence request.

Communication with the customer should be performed on a secure phone line.

Expert Solution

Questions # 3:

During adverse media screening, a KYC analyst discovers a customer’s beneficial owner is implicated in an article about a tax evasion scandal. Which is the best next step?

Options:

Cross-reference the article's source and consider a second source.

Ask the beneficial owner about its involvement in the tax evasion scandal

Check that the customer's risk rating is inherently high risk.

Reject the customer due to the risk of tax evasion

Expert Solution

Questions # 4:

A KYC analyst notices frequent use of letters of credit as a method of trade finance. It further appears that trades covered by letters of credit are not consistent with the customer’s usual business. What should be the next action taken by the KYC analyst?

Options:

Notify the Board of Directors and obtain the Board's approval for filing a STR.

Refer internally for a potential suspicious transaction report

Establish internally the existence of a criminal violation.

Prepare to close the customer’s account.

Expert Solution

Questions # 5:

A longstanding client asks to open two additional accounts, one for a trust and one for private equity investments. The trust account will be funded with dividends stemming from the investments as well as a one-off transfer from one of the client's existing accounts. As a first step, a KYC analyst should properly document the:

Options:

initial transfer from the client's existing account

beneficiary/beneficiaries of the trust

dividends from the private equity investments.

transactions between the two new accounts.

Expert Solution

Questions # 6:

According to the Financial Action Task Force (FATF) Risk-Based Approach Guidance, institutions should

Options:

incorporate only higher risk customers into its risk profile.

adjust customers’ EDD processes independent from the institution's risk profile.

incorporate customer risks into the business line risk profiles, but not into the institutional risk profile

adjust the extent and depth of EDD monitoring in line with their risk profile.

Expert Solution

Questions # 7:

During the regular periodic review of a high-risk client, a KYC analyst performs EDD checks and detects the presence of a politically exposed person. The KYC analyst should escalate this issue to the:

Options:

onboarding team for the assessment of risk

management team for approval or denial of risk

head of the KYC team for approval or denial of risk.

privacy officer for the assessment of risk

Expert Solution

Questions # 8:

A politically exposed person (PEP) wants to open an account with a financial institution and provides no evidence for source of wealth.

Which procedure should the financial institution follow?

Options:

Accept the customer without any evidence for the customer’s source of wealth.

Condition the acceptance of the customer on receiving evidence for the customer's source of wealth

Reject the customer on the basis of being a PEP and possibly corrupt

Accept the customer and request source of wealth evidence during next year’s updating procedures.

Expert Solution

Questions # 9:

A KYC analyst receives a notification that the Office of Foreign Assets Control (OFAC) has updated its sanctioned entity and individual list. The analyst reviews the list and identifies a current customer. Which step should the analyst take first?

Options:

Report the issue to the Money Laundering Reporting Officer.

Form a sanctions committee to develop standard processes and procedures

Freeze the customer's account and assets.

Contact the customer to request clarification

Expert Solution

Questions # 10:

A physical person assessed as a medium-risk customer makes an extraordinary large cash deposit in his account at a financial institution. The customer is unable to provide an explanation for the large cash deposit. Which action should be taken next?

Options:

Terminate the relationship with the customer

Warn the customer not to repeat such transactions.

File a suspicious transaction report as needed.

Escalate the customer risk to high.

Expert Solution

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