Certified Anti-Money Laundering (CAFCA) Practice Exam
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Course
Computers
Institution
Computers
The CAFCA Practice Exam is designed for professionals specializing in anti-money laundering compliance. It covers money laundering risks, legal frameworks, detection techniques, and reporting requirements. Candidates will be tested on their ability to identify suspicious activity, conduct investiga...
1. What is the primary purpose of Anti-Money Laundering (AML)
regulations?
A. To reduce financial risks
B. To prevent money laundering and terrorist financing
C. To increase financial transactions
D. To simplify financial regulations
Answer: B. To prevent money laundering and terrorist financing
Explanation: AML regulations are designed to prevent the use of financial systems for
laundering money or financing terrorism, ensuring financial institutions are not used for
illegal activities.
2. Which organization is primarily responsible for setting global AML
standards?
A. World Bank
B. International Monetary Fund (IMF)
C. Financial Action Task Force (FATF)
D. United Nations (UN)
Answer: C. Financial Action Task Force (FATF)
Explanation: The FATF sets international standards and promotes effective implementation
of measures to combat money laundering, terrorist financing, and other threats to the
international financial system.
3. What is the primary objective of governance in AML compliance?
A. To ensure profitability
B. To implement effective AML programs and controls
C. To increase market share
D. To reduce transaction costs
Answer: B. To implement effective AML programs and controls
Explanation: Governance in AML compliance focuses on the establishment and
maintenance of effective AML programs and controls to prevent and detect money
laundering and terrorist financing.
4. Which of the following is a key component of an effective AML compliance
program?
A. Regular financial audits
B. Customer due diligence (CDD)
C. Increased marketing efforts
D. Simplified reporting processes
Answer: B. Customer due diligence (CDD)
Explanation: CDD is a critical component of AML compliance programs, involving the
identification and verification of customers to prevent and detect money laundering and
terrorist financing.
5. What role does the Compliance Officer play in an AML program?
A. Overseeing marketing strategies
B. Managing employee recruitment
C. Ensuring adherence to AML policies and regulations
D. Handling customer complaints
Answer: C. Ensuring adherence to AML policies and regulations
Explanation: The Compliance Officer is responsible for ensuring that the organization
adheres to AML policies, regulations, and internal controls to prevent and detect money
laundering activities.
6. What is the purpose of a risk-based approach in AML compliance?
A. To reduce compliance costs
B. To focus resources on higher-risk areas
C. To increase customer satisfaction
D. To streamline financial transactions
Answer: B. To focus resources on higher-risk areas
Explanation: A risk-based approach in AML compliance helps organizations allocate
resources more effectively by focusing on higher-risk areas where the potential for money
laundering is greater.
A. Know Your Client
B. Know Your Compliance
C. Know Your Company
D. Know Your Customer
Answer: D. Know Your Customer
Explanation: KYC (Know Your Customer) refers to the process of verifying the identity of
customers to ensure they are not involved in money laundering or other financial crimes.
8. Which of the following is a typical measure taken under AML regulations?
A. Monitoring customer transactions
B. Increasing advertising budgets
C. Reducing financial disclosures
D. Expanding product offerings
Answer: A. Monitoring customer transactions
Explanation: Monitoring customer transactions is a common AML measure used to detect
suspicious activities that may indicate money laundering or terrorist financing.
9. What is the significance of suspicious activity reports (SARs) in AML
compliance?
A. They improve customer service
B. They are used to track market trends
C. They help authorities detect and investigate potential money laundering activities
D. They are required for financial forecasting
Answer: C. They help authorities detect and investigate potential money laundering activities
Explanation: SARs are critical in AML compliance as they help financial institutions report
suspicious activities to authorities, facilitating the detection and investigation of money
laundering and related crimes.
10. What does the term "beneficial owner" refer to in AML regulations?
A. The person who provides financial advice
B. The person who has a significant ownership interest in a legal entity
C. The person who manages the day-to-day operations
D. The person who conducts financial transactions
Answer: B. The person who has a significant ownership interest in a legal entity
Explanation: A beneficial owner is an individual who ultimately owns or controls a legal
entity or arrangement, and identifying them is crucial for AML compliance to prevent money
laundering.
11. Which regulation requires financial institutions to maintain a written
AML program?
A. USA PATRIOT Act
B. Dodd-Frank Act
C. Sarbanes-Oxley Act
D. Basel III
Answer: A. USA PATRIOT Act
Explanation: The USA PATRIOT Act mandates that financial institutions maintain a written
AML program to combat money laundering and terrorist financing activities.
12. How often should AML training be provided to employees?
A. Annually
B. Biannually
C. Every five years
D. Only during onboarding
Answer: A. Annually
Explanation: AML training should be provided annually to ensure employees are up-to-date
with current regulations, procedures, and best practices in combating money laundering.
13. What is the main purpose of conducting AML audits?
A. To increase profitability
B. To ensure compliance with AML regulations and policies
C. To attract new clients
D. To expand business operations
Answer: B. To ensure compliance with AML regulations and policies
Explanation: AML audits are conducted to review and ensure that the organization's AML
policies and procedures are effective and compliant with relevant regulations.
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