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Quizzes > Business & Finance > Finance & Economics

AML Compliance Quiz: Test Your Knowledge Now!

Ready to master KYC processes and AML compliance? Take the quiz!

Difficulty: Moderate
2-5mins
Learning OutcomesCheat Sheet
Paper art illustration for AML compliance quiz on dark blue background

This AML compliance quiz helps you practice KYC basics, CDD, STR red flags, and the stages of placement, layering, and integration with practical scenarios. Use it to spot gaps before training or an audit and make quicker calls on risk. Start the quiz or try the French version .

What does AML stand for?
Anti-Market Leverage
Automated Money Licensing
Anti-Money Laundering
Anti-Monetary Liability
Anti-Money Laundering (AML) refers to laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. It encompasses the policies and processes that financial institutions implement to detect and report suspicious activities. AML frameworks are enforced by bodies like the Financial Action Task Force (FATF) and national regulators. For more information see .
Which is the first stage of the money laundering process?
Layering
Integration
Placement
Reporting
Placement is the initial stage of money laundering where illicit funds are introduced into the financial system, often through small deposits or purchases of assets. This stage is critical because it is the riskiest point for detection by authorities. Following placement, laundering proceeds to layering and integration. See for more detail.
What does KYC stand for in compliance processes?
Key Youth Compliance
Know Your Customer
Know Your Company
Keep Your Capital
KYC stands for Know Your Customer and refers to the procedures used by financial institutions to verify the identity of clients and assess potential risks. This process helps prevent identity theft, financial fraud, and money laundering. KYC is a key component of Customer Due Diligence (CDD). For further explanations visit .
What is the primary purpose of Customer Due Diligence (CDD)?
To verify and understand a customer's risk profile
To reduce banking fees
To manage internal audits
To process transactions faster
Customer Due Diligence (CDD) aims to identify and verify the identity of customers and understand their financial activities to assess risk. It helps institutions detect and report suspicious transactions in compliance with regulations. CDD is fundamental for an effective AML program. See for more information.
Which document is most commonly used by banks to verify a customer's identity?
Valid passport or government-issued ID
Utility bill alone
Bank statement
Employment contract
A valid passport or government-issued identification (such as a driver's license) is commonly accepted for identity verification because it reliably confirms a customer's identity. Financial institutions use these documents as part of KYC measures. While utility bills can serve as proof of address, they do not alone verify identity. More at .
What does the term "PEP" refer to in AML compliance?
Private Equity Partner
Preferred Economic Program
Politically Exposed Person
Public Enforcement Policy
A Politically Exposed Person (PEP) is an individual who has been entrusted with prominent public functions and thus may be more susceptible to corruption risks. AML regulations require enhanced due diligence on PEPs due to their potential for bribery or corruption. Identification of PEPs is important for risk assessment. See .
Which of the following transactions would most likely trigger a Suspicious Activity Report (SAR)?
A small, routine wire transfer between accounts
A large cash deposit with no clear business purpose
Payment of utility bills
Monthly salary direct deposit
A large cash deposit lacking a clear and legitimate business rationale is a red flag for money laundering and typically triggers a Suspicious Activity Report (SAR). Financial institutions are required to file SARs when transactions appear suspicious. Routine transactions like salary deposits generally do not warrant a SAR. More detail at .
Which international body sets global standards for AML and counter-terrorist financing?
Financial Action Task Force (FATF)
United Nations Security Council
World Bank
International Monetary Fund (IMF)
The Financial Action Task Force (FATF) is the global standard-setter for anti-money laundering and counter-terrorist financing efforts. FATF issues recommendations that guide national laws and regulations. While the IMF and World Bank support AML efforts, FATF standards are most authoritative. See .
What is the primary goal of the layering stage in money laundering?
To invest illicit funds in real estate
To obscure the origin of illicit funds
To declare illicit funds to authorities
To introduce illicit funds into the banking system
Layering involves conducting complex financial transactions such as wire transfers or purchases to obscure the money trail. This stage seeks to separate illicit proceeds from their origin, making detection more difficult. It follows placement and precedes integration. Further reading at .
During which stage of money laundering are illicit funds reintroduced into the legitimate economy as apparently lawful funds?
Integration
Layering
Placement
Exfiltration
Integration is the final stage of money laundering where laundered money is reintroduced into the legitimate economy, appearing as legitimate business revenue or investments. This stage follows layering, which distanced the funds from their illicit origins. Effective controls aim to detect integration activities. See .
What is a Suspicious Transaction Report (STR)?
An internal audit report
A report filed when a financial institution suspects money laundering or terrorist financing
A report on all large cash transactions
A tax declaration form
A Suspicious Transaction Report (STR) is filed by financial institutions when they encounter transactions that are suspicious or anomalous and may involve money laundering or terrorist financing. STRs provide critical intelligence to law enforcement authorities. They are distinct from Currency Transaction Reports (CTRs), which cover all large cash transactions. Learn more at .
Who is considered a beneficial owner in an AML context?
A nominee director
A majority shareholder listed on a registry
Any employee of a company
An individual who ultimately owns or controls a legal entity
A beneficial owner is the natural person who ultimately owns or controls a legal entity or arrangement and on whose behalf a transaction is conducted. This definition goes beyond listed shareholders and includes individuals with significant control. Identifying beneficial owners is crucial to prevent concealment of illicit funds. See .
What does a risk-based approach in AML compliance mean?
Ignoring low-risk jurisdictions
Applying the same level of scrutiny to all customers
Adjusting AML measures based on the assessed risk level of customers or transactions
Focusing only on high-value transactions
A risk-based approach requires financial institutions to allocate their resources and apply enhanced due diligence where higher risks are identified, while applying simplified measures to lower-risk areas. It allows for more efficient and effective AML compliance tailored to the risk profile. Regulators worldwide endorse this principle. Read more at .
Which scenario typically triggers Enhanced Due Diligence (EDD)?
Customer makes routine payroll transactions
Customer is a Politically Exposed Person (PEP)
Customer opens a low-balance savings account
Customer withdraws small daily amounts
Enhanced Due Diligence (EDD) is triggered when a customer presents higher risk, such as being a Politically Exposed Person (PEP), due to the increased risk of corruption. Institutions must apply more rigorous verifications and ongoing monitoring in such cases. Routine transactions or low-risk profiles do not normally require EDD. See .
What is name screening in the context of KYC?
Assessing credit scores
Verifying employment history
Checking customer names against sanctions and watchlists
Reviewing trade references
Name screening involves comparing customer names against global sanctions lists, watchlists, and politically exposed person (PEP) databases to identify potential matches that require further investigation. It is a key step in KYC to prevent prohibited or high-risk persons from onboarding. Automated software often supports this process. For details see .
At what interval should low-risk customers generally have their KYC reviewed?
Every three years
Review not required
Every ten years
Every month
Low-risk customers typically require periodic KYC reviews every three years, though the exact interval may vary by jurisdiction and institution policy. This ensures that any changes in the customer's profile or risk level are identified in a timely manner. More frequent reviews are reserved for higher-risk customers. Guidance is available at .
Which FATF Recommendation specifically addresses customer due diligence and beneficial ownership?
Recommendation 6
Recommendation 10
Recommendation 12
Recommendation 18
FATF Recommendation 10 deals with customer due diligence (CDD) and includes requirements for identifying and verifying beneficial ownership. It mandates financial institutions to undertake risk-based CDD measures. Other recommendations cover related topics, but Rec 10 is dedicated to CDD. See .
What does the term "smurfing" refer to in money laundering?
Structuring multiple small transactions to avoid reporting thresholds
International trade invoicing
Converting cash into cryptoassets
Using shell companies to hold assets
Smurfing, also known as structuring, involves splitting large sums of illicit money into numerous smaller transactions below the reporting threshold to evade detection. This technique is a common form of placement. Financial institutions use systems to detect patterns indicative of smurfing. More on this at .
Which system is primarily used by financial institutions to detect unusual or potentially suspicious transaction patterns?
Transaction monitoring system
Core banking system
Enterprise resource planning
Customer relationship management
Transaction monitoring systems analyze customer transactions in real time or batch mode to detect unusual patterns or behaviors that could indicate money laundering or terrorist financing. These systems apply rules and scenarios to flag suspicious activities for further review. CRM and ERP systems serve different functions. Review .
What information must be included in cross-border wire transfers to comply with global AML guidelines?
Originator and beneficiary information including names and account numbers
Only the beneficiary's name
Only the transfer amount
Purpose of trade only
Global AML guidelines, including the FATF Wire Transfer Recommendations, require that cross-border transfers include detailed originator and beneficiary information (name, account number, and sometimes address) to facilitate traceability. Incomplete information can lead to de-risking and regulatory penalties. For specifics see .
Under U.S. regulations, what is the reporting threshold for a Currency Transaction Report (CTR)?
$5,000
$3,000
$15,000
$10,000
Under U.S. Bank Secrecy Act regulations, financial institutions must file a Currency Transaction Report (CTR) for cash transactions exceeding $10,000 in a single business day by or on behalf of a customer. This requirement helps authorities track large cash movements. Transactions below that threshold are not subject to CTR filing. See .
How long are financial institutions generally required to retain AML-related records in the U.S.?
Five years
Ten years
One year
Three months
U.S. regulations mandate that AML records, including customer identification and transaction records, be retained for a minimum of five years after account closure or the date of the transaction. Retention supports investigations and regulatory examinations. Some records may require longer retention under specific laws. Details at .
Which factor is NOT typically part of a customer risk classification?
Geographic location
Transaction volume
Customer's favorite color
Type of product or service used
Customer risk classification considers factors such as geographic location, product or service type, customer profile, and transaction behavior. Personal preferences, like a favorite color, have no relevance in risk assessment. Effective risk classification focuses on AML risk drivers. Learn more at .
What approach should be followed for ongoing monitoring of customer relationships?
A risk-based approach tailored to each customer's risk level
No monitoring after initial onboarding
Monitoring all customers on a daily basis
Reviewing only inactive accounts annually
Ongoing monitoring should be conducted on a risk-based approach, with higher-risk customers receiving more frequent and detailed reviews, while lower-risk customers are monitored less intensively. This ensures efficient use of resources and effective detection of suspicious activity. Universal daily monitoring is impractical. For guidance see .
What technique in trade-based money laundering (TBML) involves misrepresenting the price, quantity, or quality of imports and exports?
Visa overstay
Smurfing cash deposits
Over-invoicing or under-invoicing of goods
Using crypto mixers
Over-invoicing or under-invoicing of goods is a common TBML technique where criminals manipulate invoice values to transfer illicit funds across borders under the guise of legitimate trade. This misrepresentation obscures the true value of transactions, making detection challenging. Other methods include multiple invoicing and phantom shipments. For a deep dive see .
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Study Outcomes

  1. Understand key stages of money laundering -

    By completing this AML compliance quiz, you will grasp the placement, layering, and integration phases of money laundering and their significance in financial crime prevention.

  2. Identify suspicious transaction patterns -

    This anti-money laundering quiz will help you recognize STR flagging indicators and red flags in customer activity that warrant further investigation.

  3. Differentiate customer risk categories -

    Engage with KYC processes quiz questions to distinguish between low, medium, and high-risk profiles and apply appropriate due diligence measures.

  4. Apply STR flagging techniques -

    Through realistic scenarios in the STR flagging quiz, you will learn how to document and escalate suspicious transactions effectively within compliance frameworks.

  5. Evaluate AML controls and protocols -

    Use AML training questions to assess the effectiveness of anti-money laundering controls and recommend enhancements to strengthen your organization's compliance program.

Cheat Sheet

  1. Three Stages of Money Laundering -

    Review the placement, layering, and integration phases defined by the Financial Action Task Force (FATF) to spot where illicit funds enter, move through, and re-enter the economy. Use the mnemonic "PLI" (Placement, Layering, Integration) to retain each stage and recall examples like smurfing deposits in placement.

  2. KYC Processes and Customer Due Diligence (CDD) -

    Familiarize yourself with Customer Identification Program (CIP) requirements and full CDD protocols from FinCEN guidelines, which mandate verifying identity with at least two independent documents. Also consider periodic reviews and ongoing monitoring to maintain compliance throughout the client lifecycle.

  3. Suspicious Transaction Reporting (STR) Techniques -

    Understand key thresholds for Currency Transaction Reports (CTRs) at $10,000 and Suspicious Activity Reports (SARs) at $5,000 under the U.S. Bank Secrecy Act, plus red-flag indicators like rapid fund movements or sudden account activity. Remember the "SUSPICIOUS" mnemonic - Structuring, Unusual transactions, Sudden wealth, Patterns inconsistent with business - to flag transactions effectively.

  4. Risk-Based Approach & Enhanced Due Diligence -

    Study the risk-scoring matrix from the Basel Committee to classify clients as low, medium, or high risk and apply enhanced due diligence (EDD) for high-risk profiles, such as verifying source of funds. Use the 4 C's mnemonic - Customer, Country, Currency, Channel - to assess each risk dimension systematically.

  5. Key AML Regulations and Global Standards -

    Review the FATF's 40 Recommendations, U.S. Bank Secrecy Act (BSA) obligations, and the EU's Fifth Anti-Money Laundering Directive (AMLD5) for reporting, record-keeping, and compliance program mandates. Remember the "3 Lines of Defense" model to build robust governance, compliance functions, and internal audit controls.

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