A legal entity applies to open an account in a financial institution. The owners of the entity are 20
individuals with equal shareholding. Who should be identified as the Ultimate Beneficial Owner
(UBO), per Financial Action Task Force (FATF) guidelines?
D
Explanation:
FATF guidelines require identifying UBOs as individuals owning more than 25% or, if no one meets
that threshold, those who exercise control through other means. In this case, no shareholder owns
more than 25%, so the UBO is identified based on control, typically the person(s) in senior
management.
Assets under management show an increase of investors whose income originates from high-risk
jurisdictions. This indicates higher risk in which area?
B
Explanation:
FATF considers jurisdictions with weak AML/CFT controls as high-risk. An increase in investors from
such regions raises geographical risk, since the customers’ funds originate from locations with
elevated money laundering or terrorism financing threats.
During a routine CDD update in a financial institution, a junior member of the compliance
department identifies that the spouse of the reviewed client was elected as a member of
government. Which action should the junior member take?
D
Explanation:
FATF guidelines require enhanced due diligence when a client becomes a Politically Exposed Person
(PEP) or is related to one. Since the client’s spouse is now a government member, the client must be
classified as related to a PEP, and the institution’s records must be updated accordingly.
A KYC analyst is onboarding a high-net-worth client and, during the screening process, notices that
the prospective client is the parent of a government minister. After the analyst performs a source of
wealth analysis, whose approval is needed before opening the account?
B
Explanation:
FATF requires that the decision to establish or continue a business relationship with a Politically
Exposed Person (PEP), or their close family members, must be approved by senior management after
appropriate enhanced due diligence has been completed.
A politically exposed person (PEP) is eager to open a private account with an international bank. In
addition to performing the normal CDD, which measure should be required from the AML officer?
B
Explanation:
FATF requires that before establishing a business relationship with a PEP, financial institutions must
obtain senior management approval, along with applying enhanced due diligence measures such as
verifying the source of wealth and funds.
Which factor would be a reason for concern when corroborating the source of wealth of an individual
client?
A
Explanation:
Inconsistent or changing explanations from a client when asked for supplementary information
about their wealth can indicate potential misrepresentation or concealment, making it a key red flag
during source of wealth verification.
In automated screening, a “false positive” match is a match which:
A
Explanation:
In automated screening, a “false positive” occurs when the system flags a potential match to a
sanctions list, PEP list, or adverse media, but upon manual review it is determined that the match is
incorrect.
An owner of several trading companies worldwide is advised to register a new company for the
legitimate purpose of controlling foreign assets of their trading companies. This new company is
commonly referred to as a:
A
Explanation:
A holding company is established to own and control shares or assets of other companies, often for
organizational, tax, or asset protection purposes, without engaging directly in the day-to-day
operations of those businesses.
In which circumstance must a KYC analyst obtain source of wealth information on a client subject to
CDD?
D
Explanation:
FATF requires obtaining and verifying source of wealth information in higher-risk situations, such as
when there is increased involvement with high-risk jurisdictions or Politically Exposed Persons
(PEPs), as part of enhanced due diligence.
Customers opening accounts online identify their occupation from a drop-down list. A KYC analyst
notices a high volume of applicants selecting “Accountant” because itis at the top of the list. The
institution’s KYC policy does not require evidence to verify occupation.
Which is the most appropriate action for the KYC analyst to take?
D
Explanation:
A sudden pattern in occupation selection can indicate inaccurate self-reporting or potential misuse
of the onboarding process. Even if policy does not require occupation verification, such anomalies
should be escalated to the KYC manager for review and potential policy or process adjustments.
Which situation would most likely increase the inherent risk of a corporate customer?
D
Explanation:
Expanding business operations beyond the home country increases inherent risk due to cross-border
transactions, exposure to multiple jurisdictions, and potential dealings with regions of higher money
laundering or terrorism financing risk.
A compliance officer in an international bank is reviewing new customer onboarding files. The
relationship manager provides a whole set of customer documents, in addition to information from
open source research. What information should be used by the compliance officer as secondary
documentation to verify the primary documentation?
A
Explanation:
Secondary documentation for verification purposes should be recent, reliable, and issued by a
trusted source. Utility bills, phone bills, or bank statements issued within the last three months are
commonly accepted to confirm address and identity details provided in primary documentation.
Sanctions screening is important before onboarding a customer, or when using the services of a
financial institution, because it:
C
Explanation:
Sanctions screening is conducted to detect whether a customer or related party is on a sanctions list
or linked to a sanctioned location, ensuring compliance with legal and regulatory requirements
before establishing or continuing a business relationship.
Which is the best technique to effectively document a customer profile?
D
Explanation:
Effective customer profile documentation should be clear, precise, and free from subjective
language. Providing context and avoiding ambiguity ensures the information is reliable, verifiable,
and usable for risk assessment and compliance purposes.
A KYC analyst is running an adverse media search on a prospective client’s directors and learns that
one of the directors has been accused of receiving bribery payments. Which step should the KYC
analyst take next?
B
Explanation:
Allegations of bribery involving a director are a significant red flag for potential financial crime risk.
The KYC analyst should escalate the finding to the compliance team for assessment and guidance
before making any decision on the business relationship.