MODULE 6 SAQ

AML UNIT 15 SAQ

Question 1
2

Why do we monitor transactions?

Answer:

Transaction monitoring serves to identify suspicious transactions that may indicate the financing of
terrorism or money laundering. This enables firms to report unusual activity to the Financial Intelligence
Unit (FIU).

Question 2
2

What are the key risks involved with transaction-monitoring and filtering activities?

Answer:

The fundamental risk is that a transaction used for TF/ML is not identified. This may occur for a number
of reasons, including:

 unqualified or inexperienced operators, IT testing or audit controls

 poor data-capturing/filtering systems
 insufficient maintenance of risk-profiling/rules parameters/watch lists
 lack of staff training
 poor CDD controls and use of CDD information
 IT systems that are not interoperable or may be legacy systems 
 ineffective escalation procedures and points of contact.

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Question 3
What three pieces of originator information are typically required to be entered for all wire
transaction remittances?

Answer:

Remitter name, address and account number.

Question 4
2

What are three fundamental aspects of any transaction-monitoring or filtering framework?

Answer:

i. Understanding the risks involved

ii. Understanding what functionality the TM system has, including its capacity and the quality of its
performance

iii. Confirming that the system functions can meet and achieve the monitoring aims and objectives
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Question 5
Why is CDD important for transaction monitoring?

Answer:

Customer due diligence information provides a point of reference for determining whether transactions
are suspicious for identifying unusual business activity. Meaningful KYC and CDD enables more
effective development and application of exception-based reporting and peer- group analysis.

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Question 6
2

List the Wolfsberg Group’s recommendations in respect of escalation processes.

Answer:

The Wolfsberg Principles state that firms should ensure that:

 alerts are generated if unusual transactions are   identified

 alerts are tracked in order to ensure that they are appropriately managed within the institution and
that suspicious activity is reported to the authorities as required
 they maintain an audit trail for inspection by the institution’s audit function and by the firm’s
regulatory supervisors
 appropriate management information and statistics are provided.

AML UNIT 16 SAQ

Question 1
What is meant by suspicion?

Answer: In a generic sense, suspicion is a ‘state of conjecture or surmise where proof is lacking’.
Suspicion is subjective in the sense that what is suspicious to one person may not be suspicious to
another. Suspicion is usually formulated via a gradual process. The test of suspicion may be ‘objective’
(based on the ‘reasonable man’ principle), or ‘subjective,’ i.e. did that person actually suspect in those
circumstances?

Question 2
2

How does a defensive report differ from a mandatory report?

Answer: A defensive report is one which is motivated by an individual’s need for a defence to an offence
of money laundering in relation to a suspected relationship to which the reporter is party, rather than any
material or qualified concerns and suspicion. A mandatory report is one that is required by law, e.g. to
comply with compulsory cash currency transaction reporting requirements.

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Question 3
2

Describe how an employee typically develops suspicion.

Answer: In most circumstances the formulation of suspicion is a gradual process. It often starts with the
occurrence of an event within a customer relationship that raises a concern for the employee. This could
be linked to a transaction, series of transactions and/or the customer’s behaviour. Following further
analysis, possibly including some discussion with colleagues and managers where this is permitted, and
after making discreet enquiries of the customer, the employee may form suspicion and make an STR, or
alternatively, the employee may return to a feeling of comfort with the relationship with the customer.

Question 4
2
What constitutes knowledge?

Answer: The concept of knowledge is a complicated term from a legal perspective. In a general sense you
either know something is true, or you know that it is not. From the perspective of having to prove that a
person actually knew that an individual was engaged in money laundering, this is more difficult. How do
you prove the state of a person’s mind? This often has to be inferred from the circumstances (see Baden
Delvaux v Société Générale) and the law will examine a range of aspects of knowledge, including actual
knowledge, willful blindness and constructive knowledge.

Question 5
2

Should employees be encouraged to make enquiries of customers? Give reasons for your answer.

Answer: An employee should be encouraged to make further enquiries of a customer if it assists in

making an evaluation of his or her own concerns relating to the customer and those enquiries can be made
in the ordinary course of business. Nonetheless, any enquiries must be handled with care to avoid the
danger of ‘tipping off’.

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Question 6
2

What would you expect to see in an MLRO’s record of assessment of an SAR?

Answer: An MLRO‘s evaluation record should include:

 the  time and initial details of the internal staff report first received and the reasons given for it by
the employee
 details of the internal and external CDD information that has been obtained and considered
 summaries of discussions with colleagues and the customer where applicable
 details of any further information obtained from the reporting employee
 the decision
 the reasons for the decision
 confirmation of any request for ‘consent’ where relevant and applicable

Question 7
2

What essential information should be included in STRs to law enforcement?

Answer: National templates will vary in the content required for an SAR/STR and the precise details that
are included will vary according to the:

 type of disclosure
 subject of disclosure
 reasons for disclosure.

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AML UNIT 17 SAQ

Question 1
2

Describe what a constructive trust is and how it can arise.

Answer: A constructive trust is a mechanism or remedy in jurisdictions subject to common law in

circumstances where it would be inequitable or unconscionable to allow the possessor of illicit property to
obtain the benefit of that property. For example, if a money launderer deposits the proceeds of crime into
a bank account, and the bank becomes concerned that they are holding the proceeds of crime or is alerted
to this fact, the bank is deemed to hold those monies on a constructive trust for the true owner (i.e.
innocent victim) who can then reclaim them from the bank.

Question 2
2

What are the elements of the offence of tipping off?

Answer: The tipping-off offence is the unauthorised disclosure of information that is likely to prejudice
an investigation or proposed investigation that might be conducted after an SAR/STR has been submitted.

Question 3
2

Explain the dilemma between data protection legislation and the risk of tipping off.

Answer: Data protection legislation obliges organisations to disclose information about customers to

those customers when this is requested. Where an SAR/STR has been made to the FIU concerning the
customer, this information should not be disclosed as this will have the effect of prejudicing a current or
proposed investigation. In many jurisdictions the law therefore permits the firm to remove these details
from the information that is disclosed, in order to avoid ‘tipping off’ the client.

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Question 4
2

Why is record retention an important aspect of an organisation’s defence against money

laundering?

Answer: Customer record retention is important because:

 it can demonstrate effective CDD

 it can demonstrate compliance with local AML/CFT requirements
 it provides a trail of records, facts and transaction details that can assist law enforcement in
respect of suspected customers.

Question 5
2

What is the key issue to consider with transactions requested by a customer after an SAR has been
submitted to the law enforcement authorities?

Answer: There is a balance that has to be made between the banker/customer legal relationship and the
bank’s requirements to seek consent for transactions under PoCA. This was made clear in the HSBC v
Shah case, with the courts effectively   saying that the fight against crime overrides the banker–customer
relationship.

You need to consider the tipping-off issues if there is a need to delay a customer’s transactions. 

Question 6
2

Media enquiries can be a risk to your firm. List the best ways to mitigate these risks.

Answer:

 Ensure that all employees have a standard form of neutral wording they can use to respond to
initial enquires.
 Ensure that a policy and procedure are in place that employees can follow and that require them
to immediately advise a designated person or senior manager of such contact.

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 Ensure that all employees are aware of the procedure.
 Ensure that the designated person (e.g. press officer) is fully aware of AML and CFT obligations,
particularly around tipping off.
 Ensure that the MLRO is aware, particularly where this may be related to an SAR.

AML UNIT 18 SAQ

Question 1
2

Explain the importance of law enforcement consent.

Answer: It is necessary to ensure that in continuing to transact or deal with a customer, an organisation
does not commit a money laundering offence. Obtaining consent from law enforcement to continue with a
transaction that has been the subject of an STR/SAR will help to protect the firm in the event that it is
established that the funds were illicit.

Question 2
2

What is the distinction between an CTR and a SAR?

Answer: A CTR is a cash transaction report for declaring cash transactions that are required to be reported
because they meet minimum thresholds, for example US$10,000. An SAR is a 'suspicious activity report'
of knowledge or suspicion or illegal acts.

Question 3
2

Describe the circumstances in which law enforcement may withhold consent.

Answer: Consent may be withheld in any of the following situations.

 A reporting institution has provided insufficient or meaningless information in the consent report,
so making it difficult for law enforcement to know what consent is needed.
 The police or other authorities have information from an independent source and are conducting
their own separate investigation.
 The arrest of the subject of a report is imminent.
 The confiscation of the property concerned is imminent.

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Question 4
2

What information should not be included in an STR or SAR to law enforcement?

Answer: Any information that is not relevant to the SAR should not be included. SARs should be as
detailed as possible without exposing the organisation to liability of breach of customer confidentiality by
disclosing details that are not pertinent or relevant to the suspicion.

Question 5
2

What is a Production Order?

Answer: A court order obliging the recipient to produce information in its possession within a certain
time period.

Question 6
2

If you receive a request to disclose information to law enforcement contacts, what factors/advice
should you consider in deciding whether to cooperate?

Answer:

 Seek the advice of the MLRO, who will often have a central source of contact with law
enforcement.
 Seek appropriate legal advice.
 As a general principle the firm must only disclose the information specifically requested and
pertinent to the suspicion or request – no other information should be released.
 Determine whether the firm will be liable for breach of customer confidentiality.

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Question 7
2

What are your main considerations if you receive a Restraint Order?

Answer:

 Seek the advice of the MLRO/legal services, as there is the need to carefully analyse the extent
and nature of the property restrained.
 The property subject to restraint is often a live, active structure that requires management,
including the provision of trustees and directors and you need to consider how it can be maintained
during this period.
 You must remember that a Restraint Order does not automatically restrain all the property within
an arrangement.
 There is likely to be a requirement to enter, in conjunction with the MLRO and senior
management, into a dialogue with the authorities in order to establish a mutually agreeable
mechanism for managing the property. In some circumstances it may be necessary to apply to the
court for directions.
 Decide on what to communicate to the customer and/or his or her advisers.

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