MODULE 5 SAQ

AML UNIT 12 SAQ

Question 1
2

List four factors that may influence the internal design of the AML/CFT compliance systems in
place in an organisation.

Answer:

Any four from the list of:

 risk appetite of the firm

 nature of the business operations of the  firm
 diversity of the business operations
 complexity of business operations
 size and scale of the business
 volume  of transactions
 size of the transactions.
 domestic and/or international operations

Question 2
2

Which of the following has the primary responsibility for ensuring that the organisation’s
AML/CFT systems are compliant:

 MLRO
 AML/CFT compliance team
 the board and senior management.

Answer: Primary responsibility lies with the board and senior management, though this is often delegated
to the AML/CFT compliance team working through the MLRO and business divisions.

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Question 3
2

List some of the key roles and responsibilities  of an effective MLRO.

Answer:

 Oversees risk assessment process

 Ensures that the process of receiving, evaluating and deciding upon internal SARs and CTR’s is
effective and appropriate
 Staff training on AML and CFT compliance matters
 Keeping the business up to date on AML and CFT developments
 Managing the relationship with the regulator and law enforcement

Question 4
2
List five factors that are relevant to the choice of the MLRO.

Answer:

 Size of the organisation

 Nature of the business activities of the organisation
 Scope of the role as defined by local legislation
 Skills and experience
 The types of customer and product

  Question 5
2
What areas should the MLRO annual report cover?
Answer: As a minimum:

 total number of SARs/STRs – any  trends and outcomes

 information on any legislative/regulatory changes
 risk assessment and key MI on AML/CFT controls.
 results of quality assurance monitoring
 update on sanction controls
 adequacy of resourcing to support the MLRO, including systems and people
 new products and services
 high risk activities and relationships including PEP and Correspondent Banking relationships
 regulatory breaches and confirmed crime incidents
 update on ongoing customer relationships 

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 status of any ongoing criminal cases currently in progress

Question 6
Explain the purpose and objectives of senior management responsibilities with regard to ML and
TF.
Answer: Firms must establish adequate and appropriate policies and procedures for forestalling and
preventing money laundering and terrorism financing in regulated firms, and to guard against being used
for the purposes of financial crime.

For example, in the UK, firms must ensure that money laundering compliance remains on the senior
management agenda, The FCA Handbook SYSC 3.2.6 makes senior management jointly and severally
accountable for money laundering compliance. The FCA expects senior managers to be fully engaged in
the firm’s AML/CFT policy and ensure that they are provided with sufficient information to enable them
to manage the firm’s risk in relation to money laundering and terrorism financing.

Question 7
2

How can an MLRO keep up to date?

Answer: Many updating methods are used by MLROs, which include:

 conferences and workshops

 website news services
 CPD events
 news texts or bulletins
 videos
 online products
 in-house training
 certified professional  qualifications training
 membership of professional groups and committees

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AML UNIT 13 SAQ

Question 1
2

What is the purpose of an AML/CTF policy and what should it cover?

Answer: The AML/CFT policy is an integral statement of the firm's risk appetite that is designed to guide
staff and to protect the organisation against exposure to money laundering. It is a clear statement of
corporate intent to all relevant parties and is a valuable indicator of effective corporate governance. The
policy should be set at a high level but can include some important procedural detail. In practice, any
high-level policy must be linked to, and correspond with, detailed procedures. The MLRO will need to
monitor compliance with the policy and procedures on a continual basis and, it makes considerable sense
to report to senior management regularly. 

 The policy should address the following key compliance principles:

 cultural and ethical values and objectives

 risk appetite
 escalation, exit and de-risking considerations including financial inclusion
 compliance with the statutory and regulatory requirements
 cooperation with the enforcement agencies
 defining and determining the risk-based approach
 sub-policies relating to specific high-risk areas such as:

      recognition and management of PEP risks, including the need for a PEP register, where  appropriate
      other high risk products and services, including trade finance, private banking and non-face-to-face
channels where applicable
      compliance with sanctions legislation and screening, including, where appropriate, the policy on
screening against sanctions lists
      reliance on intermediaries and introducers where this is an integral part of the firm’s business
strategy
      management of correspondent relationships, including the  prohibition of dealing with shell banks
      responsibilities and personal accountabilities, including those for the board or governing body
      testing procedures, particularly for technology and software that supports transaction monitoring and
sanction controls

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Question 2
2

How would you monitor compliance with AML/CTF policies and procedures?

Answer: Monitoring procedures will:

 cover all key controls in all business activities

 be performed independently
 observe the recognised three lines of defence model
 be planned and prioritised on a risk basis
 ensure that results are documented and reported appropriately in an organised and timely manner
 include clear escalation requirements 
 be 'outcomes focused', ensuring that crime risks are appropriately covered 

And include the subjects of:

 people
 processes
 systems and technology
 training
 record keeping

Question 3
2

Why is record retention an important aspect of an organisation’s defence against the offence of
money laundering?

Answer: Retention of adequate records ensures that the organisation can demonstrate compliance with
local laws and regulations. They are an integral part of the framework of systems and controls, and
provide an audit trail to confirm the work that has been completed and will support any actual crime
investigation. They will also help an organisation to demonstrate whether a customer’s transactions and
conduct provided any grounds for reportable knowledge or suspicion.

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Question 4
2
What would you normally expect to see in an AML/CFT handbook?
Answer: An AML/CFT handbook will typically include:

 an explanation of the purpose of the handbook

 an explanation of what money laundering and terrorism financing are, why they are carried out,
howthey are achieved and why it is important to prevent them
 the reasons why the products and services offered by a business may be vulnerable to money
laundering
 an explanation of what factors in customer relationships can affect the degree of risk to which the
business is exposed
 the organisation’s legal responsibilities
 the employee’s personal and legal responsibilities
 guidance on knowledge and suspicion and how to report these details
 the importance of avoiding tipping off or prejudicing an investigation
 how to maintain customer  confidentiality
 what is meant by CDD and why it is vital in the recognition and reporting of unusual customer
transactions or activity
 identification and verification procedures
 monitoring and testing procedures
 reporting  procedures
 the identity of MLRO, and deputy  MLROs (where applicable) and other AML team members
 record-keeping  procedures
 examples of suspicious activities involving relevant products and services including red flags, and
 appendices with standard internal documents, e.g. internal SAR/STR form.

Question 5
2
Once the internal compliance framework is established, effective implementation is
essential for ensuring that the system is fit for purpose. What are probably the key features of
successful implementation of your framework?

Answer: 

 Obtaining appropriately skilled and qualified people and sufficient resources to complete the task
 Ensuring ‘buy in’,  i.e. commitment from senior  management

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 Ensuring that all staff are aware of the requirements – which means having a strong
communications policy and procedure
 A sound structure for the compliance team
 Appropriate monitoring
 Taking action on the results of monitoring.

Question 6
2

Unfortunately, money laundering prevention and compliance functions are often thought of only as
cost centres. List your arguments against thinking of these functions in this way.

Answer:

 It could cost your firm a considerable sum if you were penalised by your regulator – as in the
cases of BNP Paribas,  HSBC etc.
 There is a legal obligation to take AML/CFT seriously. Management has personal responsibilities
which it may overlook if not supported by compliance action.
 The functions allow different parts of the business to focus on their own areas of expertise but
with the appropriate guidance from the compliance team
 The functions ensure that adequate, appropriate and, in some cases, mandatory training is
delivered to ensure a suitably qualified team of staff
 Combatting money laundering and terrorist activity is a moral and ethical responsibility for all
people and firms

In addition other commercial opportunities during the CDD process and subsequent relationship
management

Question 7
2

Does the requirement for ‘fit and proper’ staff apply to everybody in your firm?

Answer: Yes – it is a matter of the integrity of your firm that the requirement applies to all staff, but
particularly to senior management and those staff in regulated positions. The details of the requirement
should be laid out clearly in your AML/CFT manual.

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AML UNIT 14 SAQ

Question 1
2

What issues should be covered in the firm's policy for initial AML/CTF/CTF staff training?

Answer:

 An update on crime awareness (including red flags)

 Staff responsibilities for recognising and reporting of suspicious activity
 Policies and procedures relating to job roles, the operating environment and jurisdiction
 Jurisdictional updates and news on AML/CFT
 The identity of the MLRO or nominated officer

Question 2
2

Explain why culture is an important factor in the creation of an internal control system.

Answer: Culture affects attitudes towards the implementation of, and compliance with, internal control
systems, etc. and will therefore influence the willingness of staff to fulfill their responsibilities.

Question 3
2

Identify three common barriers to implementing and maintaining an effective compliance culture
within a business.

Answer:

 An attitude or belief that ‘my suspicion doesn’t count’.

 Management pressure.
 Lack of senior management ‘buy-in’.
 An attitude or belief that ‘compliance is not my   responsibility’.

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 Territorial attitudes towards key customers.
 Inadequate resourcing of the compliance function

Question 4
2

What are the key objectives of staff AML/CTF/CFT training?

Answer:

 Apprising staff of current and emerging crime threats

 Encouraging staff to be vigilant at all times.
 Making staff aware of their legal obligations.
 Demonstrating why relevant products, services and some jurisdictions are more vulnerable.
 Educating staff in how to recognise and report unusual or suspicious transactions.
 Making staff aware of the organisation’s AML/CFT policy and   procedures.
 Educating staff in the importance of quality CDD.
 Identifying the MLRO and the deputy MLROs.

Question 5
2

List what you consider to be the main techniques that a firm can use to keep its staff up to date on
AML/CFT developments.

Answer:

 Internal procedures that prompt employees to obtain information and seek authorisation
 Issuing regular information bulletins to all employees giving details of relevant legal and
regulatory developments
 Effective and timely communication of internal procedural developments
 Circulation of case studies, regulatory authority enforcement updates and money laundering cases
and prosecutions
 Feedback on SARs, both on content and quality

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 Support evidenced from senior management (e.g. make sure they do the annual training first so
that they can then support an MLRO in a communication to all staff, as a lot of staff do not always
see the benefit of regular refresher training)
 A knowledgeable, competent and approachable MLRO

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