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Client On-Boarding Process
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Question 1 of 30
1. Question
Which of the following enables financial institutions to detect and assess whether customers’ transactions pose suspicion when considered against their respective backgrounds and profiles?
Correct
An effective transaction monitoring system enables financial institutions to detect and assess whether customers’ transactions pose suspicion when considered against their respective backgrounds and profiles. Transaction monitoring systems also facilitate the holistic reviews of customer transactions over periods of time, in order to monitor for any unusual or suspicious trends, patterns or activities that may take place.
Incorrect
An effective transaction monitoring system enables financial institutions to detect and assess whether customers’ transactions pose suspicion when considered against their respective backgrounds and profiles. Transaction monitoring systems also facilitate the holistic reviews of customer transactions over periods of time, in order to monitor for any unusual or suspicious trends, patterns or activities that may take place.
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Question 2 of 30
2. Question
An effective transaction monitoring system comprises of different elements. Which of the following is likely to be an element of an effective transaction monitoring system?
I. A well-calibrated framework.
II. Meaningful integration.
III. Robust risk awareness.
IV. Passive reactionCorrect
An effective transaction monitoring system comprises the following elements:
– A well-calibrated framework.
– Meaningful integration.
– Robust risk awareness.
– Active oversight.Incorrect
An effective transaction monitoring system comprises the following elements:
– A well-calibrated framework.
– Meaningful integration.
– Robust risk awareness.
– Active oversight. -
Question 3 of 30
3. Question
Which of the following is characterized by the personalized delivery of a wide variety of financial services and products to wealthy individuals?
I. Public banking
II. Private banking
III. Government banking
IV. Wealthy bankingCorrect
Private banking is banking, investment, and other financial services and products provided by banks and financial services firms to wealthy individuals with high levels of income or sizable assets.
Incorrect
Private banking is banking, investment, and other financial services and products provided by banks and financial services firms to wealthy individuals with high levels of income or sizable assets.
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Question 4 of 30
4. Question
Taking into consideration the close relationships, sophistication, and complexity in managing the wealth of individuals, which of these statements is true for financial institutions engaging in private banking businesses?
Correct
Financial institutions engaging in private banking businesses are inherently more vulnerable to money laundering and terrorism financing (ML/TF) risks because of the close relationships, sophistication, and complexity in managing the wealth of high-net-worth individuals.
Incorrect
Financial institutions engaging in private banking businesses are inherently more vulnerable to money laundering and terrorism financing (ML/TF) risks because of the close relationships, sophistication, and complexity in managing the wealth of high-net-worth individuals.
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Question 5 of 30
5. Question
Which of the following is characteristic of financial institutions involved in private banking, with more robust and effective controls?
I. Financial institutions with a strong culture of control-consciousness permeating across all functions within the institution.
II. Financial institutions with a strong culture of control-consciousness permeating across all levels within the institution.
III. Financial institutions with a board and senior management setting the tone at the top.
IV. Financial institutions with a weak culture of team collaboration and communication.Correct
Financial institutions involved in private banking with more robust and effective controls tend to be the ones with a strong culture of control-consciousness permeating across all levels and functions within the institutions, with a board and senior management setting the tone at the top.
Incorrect
Financial institutions involved in private banking with more robust and effective controls tend to be the ones with a strong culture of control-consciousness permeating across all levels and functions within the institutions, with a board and senior management setting the tone at the top.
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Question 6 of 30
6. Question
Private banking is banking, investment and other financial services provided by banks and financial services firms primarily to high-net-worth individuals. Which of these is one of the things that sound private banking business is centered upon?
I. Subjecting higher-risk accounts to zero proactive monitoring.
II. Having an effective customer due diligence.
III. Having an effective customer onboarding policy.
IV. Subjecting higher-risk accounts to more extensive due diligence.Correct
Sound private banking business is centered upon having an effective customer due diligence (CDD) and customer onboarding policy where higher-risk accounts, including those of politically exposed persons, are subjected to more extensive due diligence as well as closer and more proactive monitoring.
Incorrect
Sound private banking business is centered upon having an effective customer due diligence (CDD) and customer onboarding policy where higher-risk accounts, including those of politically exposed persons, are subjected to more extensive due diligence as well as closer and more proactive monitoring.
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Question 7 of 30
7. Question
Which of the following group of individuals is it their duty to set the right tone at the top and foster a strong and enduring control culture and risk awareness throughout their financial institutions?
I. It is the responsibility of the Board.
II. It is the responsibility of senior management.
III. It is the responsibility of the covered persons.
IV. It is the responsibility of the customer care department.Correct
Board and senior management are charged with setting the right tone at the top and fostering a strong and enduring control culture and risk awareness throughout their institutions.
Incorrect
Board and senior management are charged with setting the right tone at the top and fostering a strong and enduring control culture and risk awareness throughout their institutions.
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Question 8 of 30
8. Question
Certain factors are considered by financial institutions in determining the ML/TF risk classification of customers. Which of the following is one of the factors used in determining the ML/TF risk classification of customers?
I. Involvement in high-risk countries/business industries.
II. Political connections of the customer and related individuals.
III. Unknown adverse information on the customer.
IV. Complexity of structures used.Correct
Factors considered by financial institutions in determining the ML/TF risk classification of customers typically include the following:
– Political connections of the customer and related individuals.
– Involvement in high-risk countries/business industries.
– Complexity of structures used.
– Known adverse information on the customer.Incorrect
Factors considered by financial institutions in determining the ML/TF risk classification of customers typically include the following:
– Political connections of the customer and related individuals.
– Involvement in high-risk countries/business industries.
– Complexity of structures used.
– Known adverse information on the customer. -
Question 9 of 30
9. Question
Under which of the following conditions are financial institutions expected not to proceed with establishing business relations with the customer?
I. When the legitimacy of the customer’s source of wealth can be ascertained.
II. When the legitimacy of the customer’s or beneficial owner’s source of wealth cannot be reasonably ascertained.
III. When the legitimacy of the beneficial owner’s source of wealth can be ascertained.
IV. When the customer’s or beneficial owner’s source of wealth is discovered.Correct
Financial institutions are expected not to proceed with establishing business relations with the customer when the legitimacy of the customer’s or beneficial owner’s source of wealth cannot be reasonably ascertained.
Incorrect
Financial institutions are expected not to proceed with establishing business relations with the customer when the legitimacy of the customer’s or beneficial owner’s source of wealth cannot be reasonably ascertained.
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Question 10 of 30
10. Question
For which of the following reasons is it critical for all outgoing payment instructions to contain complete originator information?
I. To prevent the passing of funds through different financial institutions.
II. To stop the tracing of funds from one financial institution to another.
III. To hinder the tracing of funds passing through different financial institutions.
IV. To enable the tracing of funds passing through different financial institutions.Correct
It is critical for all outgoing payment instructions to contain complete originator information, in order to facilitate the tracing of funds passing through different financial institutions.
Incorrect
It is critical for all outgoing payment instructions to contain complete originator information, in order to facilitate the tracing of funds passing through different financial institutions.
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Question 11 of 30
11. Question
In private banking, the close and trusted nature of the relationship between which of the following individuals exposes the financial institution to a higher risk of fraud?
I. The relationship between the teller and the accountant.
II. The relationship between the relationship manager and the accountant.
III. The relationship between the customer and the relationship manager.
IV. The relationship between the customer and the next of kin.Correct
The close and trusting nature of the relationship between the customer and the relationship manager (RM) in private banking, exposes the financial institution to a higher risk of fraud.
Incorrect
The close and trusting nature of the relationship between the customer and the relationship manager (RM) in private banking, exposes the financial institution to a higher risk of fraud.
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Question 12 of 30
12. Question
Which of the following is most likely the most common means through which internal fraud involving account transfers from inactive/dormant accounts to third party accounts at another financial institution is perpetrated?
Correct
Internal frauds are usually perpetrated via signature-based falsification involving account transfers from inactive/dormant accounts to third party accounts at another financial institution.
Incorrect
Internal frauds are usually perpetrated via signature-based falsification involving account transfers from inactive/dormant accounts to third party accounts at another financial institution.
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Question 13 of 30
13. Question
External fraud is another risk that financial institutions have to confront and manage. Which of the following events is an example of external fraud?
I. Employees performing unauthorized transactions.
II. Payroll fraud committed by the human resource person.
III. Fraudulent email instructions to release funds from customers’ accounts to third-party accounts.
IV. Non-reporting of transactions intentionally by the financial accountant.Correct
External Fraud is the risk of unexpected financial, material or reputational loss as the result of fraudulent activities of persons external to the firm. A typical example of external fraud is a case where a financial institution receives fraudulent email instructions to release funds from their customers’ accounts to third party accounts at other financial institutions.
Incorrect
External Fraud is the risk of unexpected financial, material or reputational loss as the result of fraudulent activities of persons external to the firm. A typical example of external fraud is a case where a financial institution receives fraudulent email instructions to release funds from their customers’ accounts to third party accounts at other financial institutions.
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Question 14 of 30
14. Question
Many financial institutions have instituted call-backs as an enhanced fraud risk control in place to authenticate customer instructions. Which of the following factors affects the effectiveness of call-backs in mitigating fraud risks?
I. The absence of call-backs as a fraud risk control.
II. The quality of implementation of call-backs.
III. The presence of call-backs as a fraud risk control.
IV. The financial institution’s dependence on call-backs.Correct
The quality of implementation affects the effectiveness of call-backs in mitigating fraud risks as the processes detailing who, when, and how call-backs are performed, vary across financial institutions.
Incorrect
The quality of implementation affects the effectiveness of call-backs in mitigating fraud risks as the processes detailing who, when, and how call-backs are performed, vary across financial institutions.
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Question 15 of 30
15. Question
Financial institutions must establish the authenticity of all customer instructions before acting on them. Which of the following should perform this authentication?
Correct
Authentication of customer instructions before acting on them should be performed by parties independent of the front office, against the institution’s official records.
Incorrect
Authentication of customer instructions before acting on them should be performed by parties independent of the front office, against the institution’s official records.
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Question 16 of 30
16. Question
Call-back procedures are generally performed by parties independent of the front office. Which of the following is most likely used in making call-backs?
Correct
Call-backs are generally performed using customers’ contact number(s) maintained in the financial institution’s official records. Call-back procedures should generally be performed by parties independent of the front office.
Incorrect
Call-backs are generally performed using customers’ contact number(s) maintained in the financial institution’s official records. Call-back procedures should generally be performed by parties independent of the front office.
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Question 17 of 30
17. Question
Some financial institutions adopt a risk-based approach for call-back procedures. Which of the following statements best describes the risk-based approach for call-back procedures?
Correct
Risk-based approaches for call-back procedures are those whereby only transactions and transfers above pre-determined thresholds are verified via independent call-backs. Such approaches can be easily circumvented by having multiple transactions below the predetermined thresholds so as to bypass such authentication controls.
Incorrect
Risk-based approaches for call-back procedures are those whereby only transactions and transfers above pre-determined thresholds are verified via independent call-backs. Such approaches can be easily circumvented by having multiple transactions below the predetermined thresholds so as to bypass such authentication controls.
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Question 18 of 30
18. Question
Financial institutions generally do not accept email or fax instructions for high fraud risk transactions. Which of the following is most likely the reason why financial institutions do not accept email or fax instructions for high fraud risk transactions?
Correct
Financial institutions generally do not accept email or fax instructions for high fraud risk transactions because such modes of instructions are vulnerable to forgery and tampering. However, where such means of customer instructions are allowed, financial institutions normally limit the transaction amount involved and apply additional controls, including enhanced verification procedures to mitigate the fraud risk.
Incorrect
Financial institutions generally do not accept email or fax instructions for high fraud risk transactions because such modes of instructions are vulnerable to forgery and tampering. However, where such means of customer instructions are allowed, financial institutions normally limit the transaction amount involved and apply additional controls, including enhanced verification procedures to mitigate the fraud risk.
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Question 19 of 30
19. Question
To enhance the timely detection of unauthorized funds withdrawals and transactions, which of the following types of information technology should financial institutions make use of to alert customers of their account activities?
I. SMS
II. Email
III. Television
IV. RadioCorrect
To enhance the timely detection of unauthorized funds withdrawals and transactions, financial institutions could use information technology, such as SMS and emails to alert customers of their account activities. These alerts should be sent to the customers’ address maintained in the institution’s official records.
Incorrect
To enhance the timely detection of unauthorized funds withdrawals and transactions, financial institutions could use information technology, such as SMS and emails to alert customers of their account activities. These alerts should be sent to the customers’ address maintained in the institution’s official records.
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Question 20 of 30
20. Question
Given the ease with which customers’ signatures can be forged and their email addresses and fax numbers compromised or tampered with, enhanced independent verification procedures can be conducted. Which of the following is most likely an example of an enhanced verification procedure?
Correct
Due to the ease with which customers’ signatures can be forged and their email addresses and fax numbers compromised or tampered with, enhanced independent verification procedures, such as independent call-backs, when conducted properly, can help to deter and identify potential unauthorized transactions/instructions before they are executed.
Incorrect
Due to the ease with which customers’ signatures can be forged and their email addresses and fax numbers compromised or tampered with, enhanced independent verification procedures, such as independent call-backs, when conducted properly, can help to deter and identify potential unauthorized transactions/instructions before they are executed.
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Question 21 of 30
21. Question
Hold-mail stops mail delivery to your address but does not redirect it. For which of the following reasons are accounts with hold-mail services more susceptible to being abused?
Correct
Customers’ receipt of account statements on a delayed basis creates opportunities for misappropriation of assets and other irregularities to go undetected. Therefore, accounts with hold-mail services are more susceptible to being abused.
Incorrect
Customers’ receipt of account statements on a delayed basis creates opportunities for misappropriation of assets and other irregularities to go undetected. Therefore, accounts with hold-mail services are more susceptible to being abused.
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Question 22 of 30
22. Question
Financial institutions should not offer hold-mail services except in exceptional circumstances and upon request by customers. Requests for hold-mail services should be ascertained and approved by parties independent of which of the following persons?
Correct
Requests for hold-mail services should be ascertained and approved by parties independent of relationship managers. Examples of reasons accepted by some financial institutions to provide hold-mail include unreliable postal service or for security reasons.
Incorrect
Requests for hold-mail services should be ascertained and approved by parties independent of relationship managers. Examples of reasons accepted by some financial institutions to provide hold-mail include unreliable postal service or for security reasons.
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Question 23 of 30
23. Question
For which of the following reasons should financial institutions only offer non-system generated (i.e. manually compiled) or customized statements to their customers on a selective basis?
Correct
To safeguard against false or tampered statements being provided to customers to conceal fraudulent activities, financial institutions should only offer non-system generated (i.e. manually compiled) or customized statements to their customers on a selective basis.
Incorrect
To safeguard against false or tampered statements being provided to customers to conceal fraudulent activities, financial institutions should only offer non-system generated (i.e. manually compiled) or customized statements to their customers on a selective basis.
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Question 24 of 30
24. Question
Financial institutions typically require customers to collect their retained mail within a certain period of time. Within what period time do financial institutions require customers to collect their retained mail?
Correct
Financial institutions typically require customers to collect their retained mail within a 12-month period. Processes are generally in place to ensure adherence to this requirement, and accounts with long uncollected retained mail are escalated to management’s attention.
Incorrect
Financial institutions typically require customers to collect their retained mail within a 12-month period. Processes are generally in place to ensure adherence to this requirement, and accounts with long uncollected retained mail are escalated to management’s attention.
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Question 25 of 30
25. Question
Accounts with long uncollected retained mail are escalated to management’s attention. The rigor and extent of follow-up on such accounts vary across institutions. Which of the following is likely to be a follow-up action on accounts with long uncollected retained mail?
I. Financial institutions could temporarily block the accounts.
II. Financial institutions could impose a forced despatch of the retained mail to the registered mailing address as per the institution’s official records.
III. Financial institutions could conduct independent confirmations of account balances and/or activity directly with the customers.
IV. Financial institutions could request an arrest and issue a warning to the customers.Correct
Accounts with long uncollected retained mail are escalated to management’s attention. However, the extent and rigor of follow-up on such accounts vary across financial institutions. Some financial institutions temporarily block the accounts, while others impose a forced despatch of the retained mail to the registered mailing address as per the institution’s official records. There are some that conduct independent confirmations of account balances and/or activity directly with the customers.
Incorrect
Accounts with long uncollected retained mail are escalated to management’s attention. However, the extent and rigor of follow-up on such accounts vary across financial institutions. Some financial institutions temporarily block the accounts, while others impose a forced despatch of the retained mail to the registered mailing address as per the institution’s official records. There are some that conduct independent confirmations of account balances and/or activity directly with the customers.
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Question 26 of 30
26. Question
Which of the following is likely to be an effective means of timely detection of account irregularities that have been implemented by financial institutions?
Correct
Various measures of timely detection of account irregularities have been implemented by financial institutions, one of which is for an independent party to inform customers with uncollected retained mail of more than a certain period, e.g. one year, about their account activities.
Incorrect
Various measures of timely detection of account irregularities have been implemented by financial institutions, one of which is for an independent party to inform customers with uncollected retained mail of more than a certain period, e.g. one year, about their account activities.
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Question 27 of 30
27. Question
Which of the following statements concerning retained mail is true?
I. Financial institutions should ensure that retained mail is not delivered to third parties without written instructions from customers to confirm that these individuals are duly authorized to collect the retained mail on their behalf.
II. Financial institutions should not have retained mail left uncollected for an extended period of time.
III. Financial institutions can have retained mail left uncollected for an unlimited period of time.
IV. Relationship managers should not be allowed to deliver retained mail to customers without the involvement of independent parties.Correct
Retained mail is mail retained by the financial institutions. The following statements concerning retained mail are true:
– Financial institutions should ensure that retained mail is not delivered to third parties without written instructions from customers to confirm that these individuals are duly authorized to collect the retained mail on their behalf.
– Relationship managers should not be allowed to deliver retained mail to customers without the involvement of independent parties.
– Financial institutions should not have retained mail left uncollected for an extended period of time.Incorrect
Retained mail is mail retained by the financial institutions. The following statements concerning retained mail are true:
– Financial institutions should ensure that retained mail is not delivered to third parties without written instructions from customers to confirm that these individuals are duly authorized to collect the retained mail on their behalf.
– Relationship managers should not be allowed to deliver retained mail to customers without the involvement of independent parties.
– Financial institutions should not have retained mail left uncollected for an extended period of time. -
Question 28 of 30
28. Question
Unauthorized withdrawals from inactive/dormant accounts could escape detection if proper controls are not in place. What is the reason behind unauthorized withdrawals from inactive/dormant accounts escaping detection?
Correct
Inactive/dormant accounts typically receive minimal or no notice from their holders. Therefore, unauthorized withdrawals from such accounts could escape detection if proper controls are not in place. This, in turn, increases the risk of misappropriation.
Incorrect
Inactive/dormant accounts typically receive minimal or no notice from their holders. Therefore, unauthorized withdrawals from such accounts could escape detection if proper controls are not in place. This, in turn, increases the risk of misappropriation.
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Question 29 of 30
29. Question
Financial institutions have frameworks in place to govern the operations of inactive/dormant accounts. Which of the following is one of the frameworks governing the operations of inactive/dormant accounts?
I. Preventing active accounts from becoming inactive/dormant.
II. Stating the approval authority for an inactive/dormant account’s reactivation.
III. Defining when an account is classified as inactive/dormant.
IV. Stating conditions under which such inactive/dormant may be reactivated.Correct
The frameworks governing the operations of inactive/dormant accounts include the following:
– Defining when an account is classified as inactive/dormant.
– Stating conditions under which such inactive/dormant may be reactivated.
– Stating the approval authority for an inactive/dormant account’s reactivation.Incorrect
The frameworks governing the operations of inactive/dormant accounts include the following:
– Defining when an account is classified as inactive/dormant.
– Stating conditions under which such inactive/dormant may be reactivated.
– Stating the approval authority for an inactive/dormant account’s reactivation. -
Question 30 of 30
30. Question
Which of the following is the mostly widely used definition for a dormant/inactive account by financial institutions?
Correct
A dormant account has had no activity for a long period of time, other than posting interest. Most financial institutions classify an account as inactive/dormant if there are no customer-initiated instructions and/or transactions in the account over a 12-month period.
Incorrect
A dormant account has had no activity for a long period of time, other than posting interest. Most financial institutions classify an account as inactive/dormant if there are no customer-initiated instructions and/or transactions in the account over a 12-month period.