ACFE Money Laundering Investigation 3 — Questions and Answers
Question 1: The Financial Action Task Force (FATF) Recommendations are best described as:
- Legally binding international laws enforceable in all member nations
- Internationally recognized standards for combating money laundering and terrorist financing (Correct answer)
- A US-specific framework administered by FinCEN
- Criminal statutes adopted by the United Nations
Correct answer: Internationally recognized standards for combating money laundering and terrorist financing
FATF Recommendations are internationally recognized standards, not binding law, but they guide national AML/CFT legislation across member countries.
Question 2: In a real estate money laundering scheme, which tactic is most commonly used during the integration stage?
- Purchasing property with cash and reselling at market value (Correct answer)
- Renting properties to collect legitimate rental income
- Mortgaging a property and defaulting on the loan
- Transferring title through a series of shell LLCs
Correct answer: Purchasing property with cash and reselling at market value
Buying property with dirty cash and selling it converts illicit funds into apparently legitimate proceeds from a real estate transaction.
Question 3: A Suspicious Activity Report (SAR) filed with FinCEN must be kept confidential because:
- It contains classified government intelligence
- Tipping off the subject could obstruct the investigation and is prohibited by law (Correct answer)
- SAR filers are immune from civil liability only if the report stays secret
- FinCEN requires a 180-day embargo on all financial filings
Correct answer: Tipping off the subject could obstruct the investigation and is prohibited by law
Federal law prohibits SAR filers from disclosing the existence of a SAR to the subject because it could alert them to an investigation and result in criminal obstruction.
Question 4: Which statute is the primary US federal law criminalizing money laundering?
- 18 U.S.C. § 1956 (Correct answer)
- 31 U.S.C. § 5313
- 12 U.S.C. § 1829b
- 21 U.S.C. § 881
Correct answer: 18 U.S.C. § 1956
18 U.S.C. § 1956 is the primary federal money laundering statute, prohibiting financial transactions involving proceeds of specified unlawful activities.
Question 5: What is the purpose of a 'Know Your Customer' (KYC) program at financial institutions?
- To cross-sell financial products based on customer profiles
- To verify customer identity and assess money laundering risk (Correct answer)
- To comply with credit underwriting requirements
- To satisfy FDIC deposit insurance documentation rules
Correct answer: To verify customer identity and assess money laundering risk
KYC programs are designed to verify the identity of customers and understand the nature of their activities to assess money laundering and terrorist financing risk.
Question 6: In a money laundering investigation, 'red flags' related to wire transfers include which of the following?
- Wires sent to established trading partners in amounts matching invoices
- Wires to high-risk jurisdictions with no apparent business purpose (Correct answer)
- Wires accompanied by a signed letter from the company CFO
- Wires processed during normal banking hours with standard fees
Correct answer: Wires to high-risk jurisdictions with no apparent business purpose
Wire transfers to high-risk or secrecy jurisdictions with no apparent legitimate business purpose are a classic red flag for potential money laundering.
Question 7: Which of the following best describes the 'hawala' system in the context of money laundering?
- A formal SWIFT-based international wire transfer network
- An informal value transfer system operating outside regulated banking (Correct answer)
- A UN-supervised remittance platform for developing nations
- A crypto-to-fiat conversion service licensed in multiple jurisdictions
Correct answer: An informal value transfer system operating outside regulated banking
Hawala is an informal value transfer system based on trust between brokers, operating largely outside regulated financial channels, making it attractive to money launderers.
ACFE Money Laundering Investigation 3
The Financial Action Task Force (FATF) Recommendations are best described as: