CAFCA Exam Questions with correct
Answers
What is financial crime? - Correct Answers -Illegal activities that are usually
economically motivated
Examples include money laundering, terrorist financing, and tax evasion.
What is the impact of financial crime? - Correct Answers -Certain countries are more
prone to financial crimes
Impact of crime has increased globally
Threatens financial systems and economies
Money Laundering - Correct Answers -Engaging in financial transactions to conceal the
identity, source, or destination of illegally gained funds.
"The process of making illegal funds appear legitimate"
Three stages of Money Laundering - Correct Answers -1. Placement
2. Layering
3. Integration
What is placement? - Correct Answers -Putting "dirty money" into the financial system
What is Layering? - Correct Answers -Concealing the origin of the "dirty money"
What is integration? - Correct Answers -Using the "dirty money" in the legitimate
economy
Terrorist Financing - Correct Answers -Terrorist financing (proceeds for crime)
provides funds for terrorist activity.
Can be legal and/or illegal activity
Sanctions - Correct Answers -Foreign policy and security tool
Target individuals, organizations, jurisdictions, vessels
, Main types: Financial, economic, trade
What are the features of fraud? - Correct Answers -An intentional act of criminal
deception in order to obtain an unjust advantage
Results in financial or personal gain
Can be committed by one or more individuals
What are the three reasons someone commits fraud? - Correct Answers -Referred to as
the Fraud Triangle
Pressure
Opportunity
Rationalization
Tax avoidance vs tax evasion - Correct Answers -Tax avoidance uses legal practices to
reduce taxes owed
Tax evasion uses illegal practices to evade paying taxes owed
Tax evasion includes hiding taxable assets from the authorities
Panama Papers (Case example) - Correct Answers -A classic example of the use of
shell companies to conceal customer wealth
Millions of secret documents were leaked to the press
Over 200,000 shell companies set up by law firm in Panama
What is a negative impact of financial crime? - Correct Answers -Financial crime
jeopardizes the soundness of financial institutions
What is the primary purpose of money laundering? - Correct Answers -To make
criminally derived property or funds appear to be legitimate
What is a feature of terrorist financing - Correct Answers -The money is not necessarily
derived from illicit proceeds
What is a red flag of fraud? - Correct Answers -A sense of urgency and pressure to act
immediately is a common red flag of fraud.
True or False: Some industries are at higher risk for bribery than others, especially
those in which commercial success is driven by getting approval, authority, or contracts
from government entities. - Correct Answers -True
What is sign of a jurisdiction that facilitates tax evasion? - Correct Answers -They levy
low or minimal taxation on the income of non-residents, and provide tax advantages to
non-residents
Answers
What is financial crime? - Correct Answers -Illegal activities that are usually
economically motivated
Examples include money laundering, terrorist financing, and tax evasion.
What is the impact of financial crime? - Correct Answers -Certain countries are more
prone to financial crimes
Impact of crime has increased globally
Threatens financial systems and economies
Money Laundering - Correct Answers -Engaging in financial transactions to conceal the
identity, source, or destination of illegally gained funds.
"The process of making illegal funds appear legitimate"
Three stages of Money Laundering - Correct Answers -1. Placement
2. Layering
3. Integration
What is placement? - Correct Answers -Putting "dirty money" into the financial system
What is Layering? - Correct Answers -Concealing the origin of the "dirty money"
What is integration? - Correct Answers -Using the "dirty money" in the legitimate
economy
Terrorist Financing - Correct Answers -Terrorist financing (proceeds for crime)
provides funds for terrorist activity.
Can be legal and/or illegal activity
Sanctions - Correct Answers -Foreign policy and security tool
Target individuals, organizations, jurisdictions, vessels
, Main types: Financial, economic, trade
What are the features of fraud? - Correct Answers -An intentional act of criminal
deception in order to obtain an unjust advantage
Results in financial or personal gain
Can be committed by one or more individuals
What are the three reasons someone commits fraud? - Correct Answers -Referred to as
the Fraud Triangle
Pressure
Opportunity
Rationalization
Tax avoidance vs tax evasion - Correct Answers -Tax avoidance uses legal practices to
reduce taxes owed
Tax evasion uses illegal practices to evade paying taxes owed
Tax evasion includes hiding taxable assets from the authorities
Panama Papers (Case example) - Correct Answers -A classic example of the use of
shell companies to conceal customer wealth
Millions of secret documents were leaked to the press
Over 200,000 shell companies set up by law firm in Panama
What is a negative impact of financial crime? - Correct Answers -Financial crime
jeopardizes the soundness of financial institutions
What is the primary purpose of money laundering? - Correct Answers -To make
criminally derived property or funds appear to be legitimate
What is a feature of terrorist financing - Correct Answers -The money is not necessarily
derived from illicit proceeds
What is a red flag of fraud? - Correct Answers -A sense of urgency and pressure to act
immediately is a common red flag of fraud.
True or False: Some industries are at higher risk for bribery than others, especially
those in which commercial success is driven by getting approval, authority, or contracts
from government entities. - Correct Answers -True
What is sign of a jurisdiction that facilitates tax evasion? - Correct Answers -They levy
low or minimal taxation on the income of non-residents, and provide tax advantages to
non-residents
