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Which of the following risk factors are commonly associated with money laundering in insurance products? (Choose two.)

A.

Surrendering a policy early to liquidate funds

B.

Focusing excessively on the investment performance of an insurance product

C.

Using a credit card to purchase an insurance policy

D.

Using cryptocurrencies or other non-fiat currencies to fund an insurance policy

A compliance officer is developing management reporting information to provide leadership with insights into the financial crime risk related to an institution's customer population.

Which of the following is a key risk indicator to include in the reporting to allow leadership to monitor whether there are any key changes to the inherent risk of the customer population? (Choose two.)

A.

Percentage of regulatory reports for high-risk customers not completed within the required regulatory deadlines

B.

Percentage change of transaction monitoring alerts escalated for investigation compared to the previous quarter

C.

Percentage of customers for whom onboarding verification was not completed within KYC policy service-level agreement (SLA) requirements

D.

Number and percentage of senior politically exposed persons (PEPs) who were onboarded in the past quarter compared to all active customers

One of the basic elements of an effective AML/CFT compliance program is:

A.

A system of enterprise risk management

B.

An artificial intelligence-based transaction monitoring system

C.

An independent and skilled audit function

D.

An artificial intelligence-based enhanced due diligence system

Perpetual KYC includes: (Choose two.)

A.

triggers identifying static data changes and data based on client's behaviors in real time.

B.

periodic refreshing at one-, three- and five-year cycles.

C.

ability to prioritize better based on client data rather than driven by schedules alone.

D.

classification of clients into categories of risk.

When the Financial Action Task Force (FATF) places a jurisdiction on the list of "jurisdictions under increased monitoring," also known as the "grey list," the jurisdiction:

A.

Accepts to participate in an off-cycle FATF mutual evaluation to be held within the next 12 months.

B.

Must pay a fine to be removed from the list before the next FATF plenary.

C.

Has committed to swiftly resolving the deficiencies identified in a FATF mutual evaluation.

D.

Poses a high money laundering, terrorist financing and proliferation financing risk and must be restricted from accessing the international financial system.

When applying new technologies to AML, application programming interfaces (APIs) allow for:

A.

Digital identification on mobile devices

B.

Different applications to connect and communicate

C.

Authentication via artificial intelligence (AI) and biometrics

D.

Quick CDD and client traits analysis during onboarding

An AML analyst at a bank is investigating cases triggered by transaction monitoring alerts.

Which circumstances might cause the analyst to suspect a case involves terrorist financing? (Select Two.)

A.

Transactions involving non-profit organizations with no internet presence

B.

Small dollar payments sent to crowdfunding initiatives with detailed descriptions of the project being financed

C.

Transactions involving structured currency deposits below the reporting threshold to avoid paying taxes

D.

Small dollar payments sent to higher-risk jurisdictions with no prior history

E.

Transactions involving domestic non-profit organizations providing charitable aid to refugees from higher-risk countries

A global financial institution is conducting a comprehensive review of its due diligence processes to strengthen its defenses against financial crime. Recent incidents have highlighted vulnerabilities related to employee misconduct, including unauthorized transactions and sharing of sensitive customer information. Additionally, the FI has faced issues with third-party vendors who failed to meet compliance standards, leading to increased regulatory scrutiny.

Which of the following measures would be most effective in addressing the bank's due diligence needs for employees, vendors, and third parties to mitigate insider threats and ensure compliance with AML regulations?

A.

Relying on self-reported compliance certifications from vendors and employees to confirm adherence to AML standards on a periodic basis

B.

Establishing a surveillance program for employees, vendors, and third parties, including periodic risk assessments, access controls, and regular reviews of their compliance with AML policies

C.

Implementing background checks for employees and vendors prior to onboarding or the start of engagement to identify any red flags

D.

Limiting the number of vendors and third parties in high-risk jurisdictions in order to reduce exposure to compliance risks

A financial institution is conducting an enterprise-wide risk assessment (EWRA) and has identified a high inherent risk of money laundering associated with its private banking division due to the clientele’s high net worth and complex financial structures. However, the institution has implemented robust customer due diligence (CDD) and enhanced due diligence (EDD) procedures, along with sophisticated transaction monitoring systems.

How would these controls impact the assessment of residual risk?

A.

The residual risk would be eliminated entirely because the controls are sufficient to mitigate all potential risks

B.

The residual risk would be significantly reduced due to the effectiveness of the controls in place

C.

The residual risk would remain high due to the inherent nature of the private banking business

D.

The residual risk would be moderately reduced, but further controls may be necessary to achieve an acceptable level

What is the first step in designing an effective controls framework using a risk-based approach?

A.

Establishing risk controls

B.

Assessing risk controls

C.

Ongoing risk monitoring

D.

Conducting a risk assessment