Which of the following is a key advantage of a Risk-Based Approach (RBA) to AML/CFT?

• Strict "check-the-box" compliance
• Flexibility to adapt to varying risks
• Uniform procedures for all customers
• Eliminates all ML risks

Answer explanation

The RBA allows institutions to tailor controls based on risk levels, reducing unnecessary burdens on low-risk customers.

According to FATF, which factor classifies a customer as high risk?

• Verified residential address
• Non-resident status
• Low transaction volume
• Government employment

Answer explanation

Non-resident customers pose higher risks due to lack of local oversight.

Which of these is a FATF-recommended geographic risk factor?

• Countries with robust AML laws
• Sanctioned jurisdictions
• High corruption levels
• Stable democracies

Answer explanation

Sanctions and corruption indicate higher ML/TF risks.

What is a prohibited risk category under AML/CFT?

• Medium-risk retail businesses
• Transactions with OFAC-listed entities
• Low-risk corporate accounts
• Non-profit organizations

Answer explanation

Prohibited risks include dealings with sanctioned entities.

A cash-intensive business falls under which risk category?

• Low risk
• Medium risk
• High risk
• Prohibited risk

Answer explanation

Cash-intensive businesses are high risk due to anonymity.

Which of these is a high-risk customer type?

• Publicly traded corporations
• Casinos
• Virtual currency exchanges
• Local charities

Answer explanation

Casinos and crypto exchanges are prone to ML.

What is a core element of CDD per FATF?

• Skipping beneficial ownership checks
• Verifying customer identity
• Ignoring transaction monitoring
• Only screening PEPs

Answer explanation

CDD requires identity verification and ongoing monitoring.

When is Enhanced Due Diligence (EDD) required?

• For all customers
• Only for PEPs and high-risk jurisdictions
• Only for non-profits
• Never for corporate accounts

Answer explanation

EDD applies to PEPs, high-risk countries, and complex ownership.

Which activity is a red flag for structuring?

• Depositing $9,000 once
• Three $2,900 cash deposits in one day
• Wiring funds for a home purchase
• Using a debit card for groceries

Answer explanation

Structuring involves splitting transactions to evade reporting.

What is a red flag for trade-based money laundering?

• Accurate invoices
• Overpricing goods in invoices
• Direct payments to suppliers
• Transparent shipping records

Answer explanation

Over/under-invoicing disguises illicit fund movements.