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Quizzes > Quizzes for Business > Finance

Master AML and KYC Compliance Quiz

Assess your due diligence and AML proficiency

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting elements related to AML and KYC Compliance Quiz

Get ready to test your AML and KYC compliance skills with an engaging 15-question quiz designed for compliance professionals and students alike. Whether you're preparing for audits or seeking practical experience, this AML quiz covers anti-money laundering and customer due diligence essentials. Explore related assessments like AML/CTF Compliance Quiz and AML Compliance Knowledge Quiz to broaden your understanding. Everyone from risk analysts to financial officers can benefit from these realistic scenario questions. Feel free to modify this quiz in our editor and discover more quizzes to craft your custom compliance curriculum.

What does KYC stand for?
Know Your Contribution
Keep Your Customers
Know Your Client
Know Your Customer
KYC is an acronym for Know Your Customer, referring to the process of verifying a client's identity. It ensures financial institutions understand who their customers are and assess associated risks.
Which of the following is a primary objective of AML regulations?
Increase banking profits
Collect taxes
Promote branch expansion
Prevent money laundering
AML regulations are designed to prevent the process of disguising illegally obtained funds as legitimate assets. Preventing money laundering protects the financial system from abuse.
Which step is part of customer due diligence (CDD)?
Marketing new services
Verifying customer identity
Offering loan products
Meeting sales targets
Verifying customer identity is a core component of CDD to confirm that clients are who they claim to be. Other options are business activities unrelated to compliance.
What does SAR stand for in an AML context?
Standard Audit Record
Suspicious Account Registry
Suspicious Activity Report
Systemic Assessment Review
A Suspicious Activity Report (SAR) is filed by financial institutions to alert authorities about suspected money laundering or other illicit financial activities. It is a key AML reporting requirement.
What is the reporting threshold for currency transactions in the U.S. requiring a Currency Transaction Report?
USD 15,000
USD 10,000
USD 20,000
USD 5,000
In the U.S., any cash transaction exceeding USD 10,000 in a single business day must be reported via a Currency Transaction Report. This threshold helps authorities monitor large cash movements.
A customer makes multiple over-the-counter cash deposits just under USD 10,000 to avoid CTR filing. Which suspicious activity indicator does this represent?
Unusual wire transfers
Round-number deposits
Structuring deposits
Bulk cash deposits
Structuring involves breaking up large amounts into smaller transactions to evade reporting thresholds. It is a classic red flag for potential money laundering activity.
Which document is most appropriate for verifying a customer's residential address during KYC?
Passport photo
Bank promotional letter
Credit card statement older than 6 months
Recent utility bill
A recent utility bill typically shows the customer's name and address, making it a valid proof of residence. Older or promotional documents usually fail to meet verification standards.
Under a risk-based approach, clients identified as high risk should undergo:
Automated due diligence only
Simplified due diligence
No due diligence
Enhanced due diligence
Enhanced due diligence (EDD) is required for high-risk clients to obtain a deeper understanding of their activities and risk profile. It involves more comprehensive checks than standard CDD.
A Politically Exposed Person (PEP) is best described as:
A corporate vendor
A passive investor
A retail customer under 18
An individual with prominent public functions
PEPs hold significant public roles and therefore pose higher risk for bribery or corruption schemes. Identifying PEPs triggers enhanced monitoring obligations.
In KYC, the 'beneficial owner' refers to:
Person with ultimate ownership or control >25%
Registered incorporation agent
Insurance broker
Bank relationship manager
A beneficial owner is someone who ultimately owns or controls a legal entity, usually measured by a threshold of more than 25% ownership. Identifying them is critical to prevent concealment of illicit funds.
Generally, how many days does a financial institution have to file a SAR after detecting suspicious activity?
14 days
7 days
30 days
90 days
Most jurisdictions require a SAR to be filed within 30 days of detecting suspicious activity to ensure timely reporting to authorities. Delayed filings can hinder investigations.
AML/CFT regulations typically apply to which type of entity?
Residential homeowners
Retail clothing stores
Financial institutions
Public libraries
Financial institutions are the primary subjects of Anti-Money Laundering and Counter-Financing of Terrorism regulations due to their role in handling large monetary flows. Other entities have limited or no AML obligations.
Which scenario could signal suspicious activity in cryptocurrency transactions?
Large transfers to unknown wallets with no business purpose
Regular salary payments
Small peer-to-peer transfers with clear invoices
Family gift remittances
Large, purposeless transfers to unknown crypto wallets can indicate layering or movement of illicit funds. Legitimate transactions usually have clear, documented business or personal reasons.
For low-risk customers, which type of due diligence is generally acceptable?
Continuous monitoring only
Enhanced due diligence
No due diligence
Simplified due diligence
Simplified due diligence (SDD) can be applied to clients assessed as low risk, reducing the extent of verification measures. It still requires basic ID checks and risk review.
A new corporate account is opened with nominee shareholders and no clear business rationale. This is most indicative of:
Shell company usage
Family-owned business
Retail merchant activity
Legitimate trust structure
Nominee shareholders and lack of a real business purpose are red flags for shell companies often used in money laundering schemes. Proper due diligence helps uncover such arrangements.
Under FATF recommendations, which factor allows simplified due diligence for a third-country financial institution during onboarding?
Country in same time zone
Country with equivalent AML/CFT standards
Country with lower currency thresholds
Country with large banking sector
FATF allows reliance on simplified due diligence when a third country's AML/CFT regime is deemed equivalent. Equivalence ensures consistent standards of customer verification and reporting.
Under the USA PATRIOT Act, which section mandates the Customer Identification Program (CIP) requirements?
Section 314
Section 326
Section 501
Section 312
Section 326 of the USA PATRIOT Act requires financial institutions to implement CIP to verify the identity of customers opening accounts. This provision strengthens the legal framework against illicit financing.
Which option best describes trade-based money laundering?
Misrepresenting the value or quantity of goods in cross-border trade
Using shell companies for internal fund allocations
Structuring cash deposits under the reporting threshold
Smurfing transactions within a single bank
Trade-based money laundering involves falsifying invoices or shipment details to move value across borders illicitly. It is one of the more complex laundering methods requiring specialized detection.
A client requests an urgent wire transfer to a high-risk jurisdiction that is inconsistent with their normal profile. What is the most appropriate action?
Place a hold on the transfer and investigate
Process immediately to maintain service levels
Decline without further review
Refer to marketing for upsell opportunities
An unexpected request to a high-risk jurisdiction should trigger an internal review and potential SAR filing. Holding the transaction allows investigation and compliance checks before release.
Under the EU Fourth Anti-Money Laundering Directive (4AMLD), how often must high-risk customer CDD information be reviewed?
Only at account opening
At least annually
Monthly
Every five years
The EU 4AMLD requires enhanced ongoing monitoring of high-risk customers, including at least an annual review of their CDD information. This ensures that any changes in risk profile are promptly addressed.
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Learning Outcomes

  1. Identify key AML and KYC compliance requirements
  2. Analyze suspicious activity indicators in case studies
  3. Evaluate customer due diligence procedures effectively
  4. Apply risk-based approaches to client onboarding
  5. Demonstrate knowledge of regulatory reporting obligations

Cheat Sheet

  1. Grasping AML and KYC essentials - Kickstart your compliance journey by diving into the core pillars of AML (Anti-Money Laundering) and KYC (Know Your Customer). Discover how customer due diligence, clever risk management, and ongoing monitoring form the ultimate defense against illicit finance. Learn more about AML and KYC basics
  2. Mastering Customer Identification Programs (CIP) - Customer identities can be sneaky, but you'll be sneakier! Unpack CIP best practices to verify who's who, stop fraudsters in their tracks, and keep your organization safe. Check out top CIP strategies
  3. Analyzing real-life AML slip-ups - Slip on someone else's banana peel (or bank scandal) so you don't! Peek into failures like the Deutsche Bank saga to see what happens without solid compliance controls. Explore AML case studies
  4. Dialing up Enhanced Due Diligence (EDD) - Got high rollers or Politically Exposed Persons (PEPs) knocking at your door? Learn when to crank up your due diligence to VIP level, sniff out hidden risks, and keep compliance tight. Dive into Enhanced Due Diligence
  5. Adopting a risk-based onboarding approach - One size doesn't fit all! Customize your onboarding steps based on each customer's risk profile, balancing efficiency with bulletproof safeguards. See risk-based onboarding tactics
  6. Navigating regulatory reporting and SARs - When something smells fishy, you file a Suspicious Activity Report (SAR). Get the lowdown on when and how to report, plus tips to avoid common reporting pitfalls. Discover SAR reporting essentials
  7. Understanding non-compliance penalties - Spoiler alert: ignoring regulations can cost you a fortune. Dive into the hefty fines, legal headaches, and reputational bruises that come with cutting corners. Learn about AML penalties
  8. Mastering ongoing transaction monitoring - Compliance isn't a one-and-done deal. Stay sharp by automating and analyzing transactions in real time to spot patterns of sneaky business. Unlock monitoring best practices
  9. Learning from the HSBC scandal - Talk about a blockbuster! Unpack how lapses in AML systems led to one of the biggest compliance flops in history - and the lessons you can apply today. Review the HSBC case study
  10. Staying ahead of global KYC standards - Regulations are a world tour - FATF, EU directives, and more. Keep your global compliance passport stamped by staying updated on the latest cross-border rules. Stay current with FATF guidelines
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