CFCS Financial Crime SpecialistExam Questions and Answers

Which is the strongest proof to establish grounds for seizure and confiscation of the properly?

Your bank has recently received an online application for a new business account from a company named ACE Operations, LLC By reviewing the operating agreement and other documents included in the application, you determine that ACE is incorporated in the U S state of Wyoming.

A review of the Wyoming corporate registry online shows that ACE was formed 15 years ago. An initial Internet search produces no company website or further information about the company. The registered agent's contact information and address on the company's most recent annual filing is for Capital Solutions a corporate services provider.

Concerned that ACE Operations appears to be a shelf corporation you are conducting further due diligence on the company's ownership structure Which is the MOST appropriate next step to take?

A financial institution operates in multiple jurisdictions and encounters challenges in ensuring consistent compliance with OFAC sanctions across its global operations. What would be the most effective approach for the institution to enhance cross-border sanctions compliance?

You work for a bank that is subject to U.S. sanctions overseen by the Office of Foreign Assets Control (OFAC). In the past your institution has had difficulty keeping the Specially Designated Nationals (SDN) lists up-to-date.

Which is the recommended course of action when dealing with transactions from a sanctioned country through your bank?

Jose who resides in Country Y wants to send funds to Alicia in Country Z. Jose delivers funds to a merchant in Country Y who, in return gives him a code for authentication purposes The merchant then instructs a colleague in Country Z to deliver an equivalent amount in the local currency to Alicia upon presentation of the designated code After the remittance the first merchant has a liability to the second Their positions can also be transferred to other intermediaries who can assume and consolidate the initial positions and settle at wholesale or multilateral levels.

Which type of transaction is this?

A hacker gains access to a client’s email. The hacker, posing as the client contacts the real client's financial advisor and requests a wire transfer of S50,000 The advisor sells stock to generate cash and wires the funds to the account at ABC Bank provided by the hacker Has money laundering occurred?

You are the chief compliance officer for a non-U S Bank that maintains some accounts in the name of U S residents Your country has signed a FATCA Model 1 inter-governmental agreement.

In developing your FATCA compliance program which should be incorporated into your program?

InvestPlus was a securities trading firm that purportedly specialized in high-risk high-reward investment opportunities in developing countries. InvestPlus was losing money on many of its products and began to take funds from new clients to repay earlier investors. The scheme was eventually revealed and InvestPlus collapsed leaving behind numerous defrauded investors InvestPlus is now bankrupt.

A group of investors who lost money has hired your law firm to recover assets InvestPlus had complex holdings and investments in many different countries worldwide Without access to the company s financial records it has been difficult to trace them. The owners of InvestPlus reaped substantial profits but led lavish lifestyles and are thought to have burned through most of their assets.

Which is the BEST way your firm could pursue recovery of damages?

An account is opened for Restaurant A at your bank Jim Smith and Peter Sparks are co-owners of the restaurant, which is located in Odessa Ukraine Peter Sparks is a foreign politically exposed person affiliate because his brother, Steve Sparks is a senior government official.

Which two actions are required for anti-money laundering compliance? Choose 2 answers

Which actions have led to penalties or violations of sanctions regimes overseen by the Office of Foreign Assets Control (OFAC)? Choose 2 answers

You are an investigator for a U S -based financial institution and have identified suspicious wire activity in an account at your institution Over the last 16 months $18 million was sent from the main account into three linked accounts a bank account located in Germany an International Business Company (IBC) located in the Bahamas and a trust account in Panama During your investigation you noticed two major residential property purchases were made over the last 16 months by the IBC in the Bahamas.

Where should you start your investigation to identify the beneficial owners of the IBC?

You are asked to investigate the apparent deterioration of financial condition within a company.

Considering the income statement above where should you begin your investigation?

You are a federal investigator and have identified assets in an offshore jurisdiction that you have strong evidence are the proceeds of illicit activities that look place in your jurisdiction.

While you have convincing evidence that would tie the assets to the financial crime you are investigating you have been unable to obtain documents that show true beneficial ownership because of secrecy laws.

Which action is MOST likely to gain control of the properly or identify the true beneficial owner?

You are the Chief Anti-Money Laundering Officer for a large multinational financial institution and you are building your risk-based Enhanced Due Diligence (EDO) program.

Which business would LEAST likely be targeted tor EDD?

The money laundering control officer at a bank has determined that there are three business accounts at the bank that are conducting related high velocity transactions that do not match the profile for the stated business activities of the account. Further investigation determines that the signatories of the three accounts were joint defendants in a civil fraud lawsuit ten years earlier.

Which action must the money laundering control officer at the bank lake?

You are asked to investigate a potential fraud at an automobile dealership. The president of Bank A provides inventory financing to the dealership and suspects that it may be providing fraudulent documentation to the bank to increase its funding.

Which documents would provide the MOST effective evidence of potential fraudulent activity?

You are a compliance officer for a bank that provides services to a third-party payment processor. The processor facilitates credit card payments for online and physical retail stores located within your own country.

You conducted enhanced due diligence on the client when the account was originally opened two years ago. Since then, periodic reviews have noted no changes in the client s operations ownership structure or other information.

Recently regulators in your country have issued penalties against other banks that had insufficient AML controls and monitoring on accounts held by payment processors Concerned, your legal department has asked you to review the client's risk status.

Which is the primary reason for your conclusion that the customer relationship is higher risk?

Company A required capital to purchase wholesale consumer products to resell to retail outlets Company A solicited working capital by offering investors promissory notes in exchange for borrowed funds. The promissory notes promised a high annual interest rate of 14% Company A paid the promised 14% returns and a commission from the new funds received from later investors No wholesale products were purchased with the investors funds and there was no underlying business.

Which type of fraud is being described?

Ms. Lee, a compliance analyst at a multinational bank, discovers that a new client has close business ties with entities in a country subject to comprehensive OFAC sanctions. What is the most appropriate action for Ms. Lee to take regarding the onboarding of the new client?

An investigator was retained by Corporation A to locale and recover assets in a significant civil Fraud matter. During this engagement the investigator uncovers significant assets and relers them to the legal team for seizure.

The investigator is later engaged by Corporation B to locate and recover assets in a separate civil fraud matter. During the asset identification process the investigator learns that Corporation B and Corporation A have competing interests and are both pursuing assets from the same subject.

Since only a few weeks have elapsed the investigator uses the information developed for Corporation A and merely updates the information. He submits an invoice to Corporation B for the number of hours it would have taken to properly complete the project if there were no pre-existing work that had already been completed.

Were the investigator's actions appropriate?

You are an investigator in the compliance department of a bank in a border region. The country on the other side of the border has an active narcotics trade run by organized crime gangs operating on both sides of the border Recently, you have become concerned your bank is being used by a narcotics gang to smuggle bulk cash out of your country.

Which evidence is Ihe strongest indicator that bulk cash smuggling is taking place?

As an internal auditor for a commercial financial institution you are reviewing fixed term loans to a commercial customer that you are convinced were used to launder proceeds of crime.

Which three situations support your suspicion of money laundering? Choose 3 answers

The Director of Purchasing at Company A in the US is in charge of purchasing raw materials for vehicle manufacturing. To his supervisors the director appears to live a lifestyle well above his annual salary at the company You are asked to perform a financial investigation lo identify any red flags in Ihe purchasing / inventory departments.

Which two are red flags? Choose 2 answers

ABC LLC is a company that is incorporated in an offshore jurisdiction Bank A opens an account for ABC LLC after completing a standard Customer Due Diligence questionnaire ABC LLC is a holding company for another firm that does business with arms companies in North Korea that are rumored to supply a number of militant groups.

Which two statements may be true about Bank A? Choose 2 answers ^

You operate a convenience store that also sells and cashes money orders and offers wire transfer services.

Which three activities on their own are sufficient red flags to warrant further due diligence into whether a transaction may be related to terrorist financing? Choose 3 answers

During an organizational overview of financial crime controls, Ms. Lee, the compliance analyst, discovers that certain high-risk customers have not undergone enhanced due diligence (EDD) as required by regulatory guidelines. What is the most appropriate action for Ms. Lee to take?

One of the tasks for an employee of a U S bank is to administer overseas large value drafts. The employee receives a draft from Country X that is identified as a high-risk and non-cooperative jurisdiction by the FATF According lo the FATF 40 Recommendations, which action should the employee take?

You are investigating a Hong Kong clothing manufacturer that is allegedly laundering money (or a human trafficking organization.

Deposits to the corporate bank account totaled $4.5 million (USD) for the year 2011 and originated from a single source in Panama that makes payment through a bank account in Riga Latvia.

Payments are received through wire transfers They are always in odd amounts of dollars and cents and the SWIFT messaging always slates that the payments are for a seasonal line of women s dresses.

Which is NOT a red flag for money laundering?

Your country has received a spontaneous transmittal of information from Switzerland indicating lhal Person A the Director of Procurement from your country's Ministry of Internal Development maintains a bank account in Zurich with an average balance of $7,000 000. Previously there have been numerous allegations that Person A has received bribes in return tor favorable contract awards.

Which activity should be done FIRST to maximize the probability that these lunds are repatriated to your country?

A real estate developer secured a $9.5 million construction loan from the Bank of China for a high-rise office building When the developer declared bankruptcy. The bank realized that this had become a problem loan and they began to investigate the borrower.

The developer had submitted False invoices for work that was never performed In addition, a portion of the loan money was deposited into the construction business account to pay subcontractor invoices. These invoices were never paid instead the money was diverted into private bank accounts owned by the developer and his family members.

Which type of financial crime did the forensic audit uncover?

During a sanctions compliance training session, an employee asks about the consequences of facilitating transactions involving individuals or entities on a sanctions list. What is the most accurate response to the employee’s inquiry?

Mr. Johnson, a compliance officer at ABC Corporation, is conducting due diligence on a potential business partner based in a foreign country. During the due diligence process, Mr. Johnson discovers that the potential partner’s principal shareholder is a politically exposed person (PEP) from a country subject to OFAC sanctions. What is the most appropriate action for Mr. Johnson to take?

You are an investigator pursuing a suspected fraudster whom you believe is leading a multi-million dollar Ponzi scheme targeting the elderly in your country You believe you are close to gathering the evidence needed to recover some of the victims losses However you are missing some transaction records from a financial institution that would connect the suspect to accounts holding the proceeds of the fraud.

These records can only be released to law enforcement or government regulators. You have a friend in the local police department who is willing to contact the institution and request the records under the pretenses they are needed for an unrelated police investigation.

Given these circumstances would it be ethical for you to ask your friend to obtain the records?

During a sanctions compliance review, a financial institution discovers that one of its clients has conducted transactions with individuals and entities on a sanctions list. What is the most appropriate action for the institution to take?

Your company acquires new mortgage loans through a network of independent brokers and you have experienced losses attributed to one of your brokers You suspect that the broker did not act alone You are revisiting your institution's policies and procedures to effectively mitigate the risks of collusion.

Which specific task would NOT be effective in mitigating the risk of collusion?

A law enforcement agent is pursuing an asset recovery case against a defendant accused of running a multimillion-dollar securities fraud scam. The defendant is thought to have moved more than $25 million through a corporate brokerage account held by a corporation formed in Las Vegas. Nevada.

It is believed that funds were sent to accounts held by shell companies in the Netherlands and the Bahamas. It is also suspected that the defendant purchased luxury goods including several high-end sports cars with proceeds of the fraud. The vehicles are registered and tilled to a trust company with a mailing address that is a post office box in Delaware. The agent is attempting to connect the vehicles to the defendant to make the case that they should be seized.

Which item below would BEST support this effort?

A U.S. citizen opens an account in an offshore bank in a country that has a bilateral Model II FATCA agreement with an initial deposit of $10,000. USD Over the course of time the kinds in the account exceed $60,000 USD.

Which obligation under FATCA applies?

You are an investigator in a country that has a money laundering law that uses the list approach to identify the predicate offenses. There are 12 crimes on this list of predicate offenses. You are currently investigating a public official for suspected money laundering, and the source of the official's illegal income is not yet known You have just discovered a hidden bank account owned by the official in which $5 million has been transacted in the past year.

Which is Ihe MOST important in order to prove money laundering?

An offshore energy company is attempling to make payment to Iran for a bulk oil purchase The payment is routed through the offshore bank's New Y affiliate bank where the funds are converted to USD to be forwarded to Iranian Oil LTD, Tehran, Iran.

Which forward payment scheme is MOST likely to be used by banks to defeat the U.S. Office of Foreign Assets Control (OFAC) Sanctions?

A law enforcement agent is investigating the owner of a small grocery store thought to be involved in a financial crime scheme II is believed that the store owner is moving illicit proceeds, but it is not clear how it might be happening.

The agent is conducting surveillance on the grocery store and makes the following observations.

• Individuals occasionally enter the store and ask to speak with the owner, who meets with them and takes notes in a notebook he keeps on his person

• Individuals sometimes arrive at the store with small packages or bags and leave without groceries

• The owner periodically visits another store in the neighborhood that acts as an agent for a large international money services business

The agent has subpoenaed the bank account and transaction records for the grocery store Transaction patterns do not seem out of the ordinary given the type of business and the area and no suspicious transaction reports have been filed on the account. The store is a sole proprietorship and the owner is not listed as owning or controlling any other business entities.

Based on this information what is the MOST LIKELY conclusion of Ihe law enforcement agent?

Bank A is a mid-size financial institution in Poland that primarily holds accounts (or individual and small-business customers While the bank has no U S branches or affiliates the bank's compliance officers realize they must still implement a FATCA compliance program.

Which step should Bank A take FIRST to commence its FATCA compliance program?

An international construction company was bidding on a large contract to redevelop and modernize a hydroelectric power system in a central Asian country. The project was being administered by an agency in the country's federal government but federal officials directed the company to contact a number of local officials for additional details on the project and its scope The company later wins its bid for the redevelopment contract and

completes the protect.

A year later an internal auditor is conducting a routine review of past projects and notices certain irregularities in the bidding process for Ihe power system redevelopment. All of the company's major competitors had been rejected in the first round of bidding despite offering competitive pricing of the other firms considered in later rounds of bidding most were small companies and several were incorporated recently in the country where the project was taking place All of them put in bids that were higher or much lower than the company's winning bid.

The auditor is concerned that these unusual findings may indicate the company won its bid through a corruption scheme involving government officials. Which further finding BEST supports this possibility?

During a routine audit, a financial institution discovers that its sanctions screening software has not been updated to include the latest changes to the OFAC SDN list. What is the most appropriate action for the institution to take?

During a risk assessment of its correspondent banking relationships, a financial institution discovers that one of its correspondent banks operates in a high-risk jurisdiction known for weak anti-money laundering (AML) controls. What is the most effective approach for the institution to manage the risks associated with this correspondent banking relationship?

Ms. Rodriguez, the compliance officer at XYZ Bank, is reviewing the bank’s sanctions screening process. She notices that the screening system has a high rate of false positives, leading to delays in processing transactions. What is the most effective approach for Ms. Rodriguez to improve the efficiency of the sanctions screening process?

You have been asked to review Ihe annual report lor a startup company that provides digital identity verification services to online merchants. The company's founder has recently approached several groups of investors to sell a portion of his shares in the company, but after reviewing financial statements the investors had concerns over potential improper accounting to misrepresent the company's position and have asked you to review further.

Based on Ihe annual report it appears the company's total net position has increased each quarter for the past year Looking at sales records you determine a significant portion of the company's revenue comes from one client, a contract with a software development firm for $800,000 each quarter.

Which further finding from the annual report and financial statements is Ihe BEST focus for your investigation?

Jane is a dual citizen of the United Stales and Country B a known lax haven, she has permanently relocated to Country B The lax authorities in the U.S. and Country B have a well-established cooperation agreement to reduce tax evasion.

Upon relocating in Country B she legally changed her name and obtained government identification in Country B's official language. She used this new identification to establish bank accounts in Country B. She created new shell companies and opened new business ventures which generated millions of dollars of income for her.

Jane files proper tax returns in Country B and discontinues filing U.S. income tax returns. Which statement is true?

A casino needs to hire an auditor (or sensitive financial operations where the employee will have access to large amounts of cash The interviewer needs to be sure that this employee is scrupulously honest lo protect the company.

Which is the MOST effective technique to vet this prospective employee?

During a sanctions compliance training session, an employee asks about the implications of conducting transactions with individuals or entities on the OFAC Sectoral Sanctions Identifications (SSI) list. What is the most accurate response to the employee’s inquiry?