// IFF502 — KYC, CDD and reading the red flags
$CATEGORY: VERITAS/IFF502

::IFF502-Q1::Which of the following is NOT one of the four elements of CDD under FATF Rec. 10? {
    ~Identify the customer#Incorrect. AML compliance is risk-based; it does not require or guarantee criminal-history certainty.
    ~Identify the beneficial owner#Incorrect. AML compliance is risk-based; it does not require or guarantee criminal-history certainty.
    ~Understand purpose of the relationship#Incorrect. AML compliance is risk-based; it does not require or guarantee criminal-history certainty.
    =Guarantee absence of criminal history#AML compliance is risk-based; it does not require or guarantee criminal-history certainty.
}

::IFF502-Q2::A single wire transfer to a high-risk jurisdiction, in isolation, is\: {
    ~Proof of laundering#Incorrect. Red flags are probability signals; investigation must combine them with other indicators before filing.
    =A red flag requiring assessment in context#Red flags are probability signals; investigation must combine them with other indicators before filing.
    ~Legally reportable regardless of context#Incorrect. Red flags are probability signals; investigation must combine them with other indicators before filing.
    ~Irrelevant if under $10,000#Incorrect. Red flags are probability signals; investigation must combine them with other indicators before filing.
}

::IFF502-Q3::Enhanced Due Diligence is mandatory for\: {
    ~All new customers#Incorrect. FATF and virtually all national regimes require EDD for PEPs, cross-border correspondent banking and higher-risk jurisdictions.
    =Politically Exposed Persons#FATF and virtually all national regimes require EDD for PEPs, cross-border correspondent banking and higher-risk jurisdictions.
    ~Cash deposits under $10,000#Incorrect. FATF and virtually all national regimes require EDD for PEPs, cross-border correspondent banking and higher-risk jurisdictions.
    ~Domestic wire transfers#Incorrect. FATF and virtually all national regimes require EDD for PEPs, cross-border correspondent banking and higher-risk jurisdictions.
}

::IFF502-Q4::Enhanced Due Diligence (EDD) is triggered by\: {
    ~Any new customer#Incorrect. EDD is required for higher-risk relationships; PEPs, high-risk jurisdictions, unusual transactions, under FATF R.10 and R.12.
    =Politically-exposed persons, high-risk jurisdictions or complex/unusual transactions#EDD is required for higher-risk relationships; PEPs, high-risk jurisdictions, unusual transactions, under FATF R.10 and R.12.
    ~Only cash transactions above USD 10,000#Incorrect. EDD is required for higher-risk relationships; PEPs, high-risk jurisdictions, unusual transactions, under FATF R.10 and R.12.
    ~Only corporate customers#Incorrect. EDD is required for higher-risk relationships; PEPs, high-risk jurisdictions, unusual transactions, under FATF R.10 and R.12.
}

::IFF502-Q5::Red flags in AML analysis should be interpreted\: {
    ~Individually — one is enough#Incorrect. No single red flag proves laundering; it is the co-occurrence of transactional, behavioural and structural flags that shifts probability.
    =Combinatorially — the presence of several together carries the diagnostic weight#No single red flag proves laundering; it is the co-occurrence of transactional, behavioural and structural flags that shifts probability.
    ~Only when confessed#Incorrect. No single red flag proves laundering; it is the co-occurrence of transactional, behavioural and structural flags that shifts probability.
    ~Only when quantitative#Incorrect. No single red flag proves laundering; it is the co-occurrence of transactional, behavioural and structural flags that shifts probability.
}

::IFF502-Q6::A Suspicious Transaction Report (STR)\: {
    ~Is a criminal charge#Incorrect. STRs are filed by obliged entities on a suspicion threshold, deliberately lower than probable cause; so that the FIU can triage.
    ~Requires proof beyond reasonable doubt#Incorrect. STRs are filed by obliged entities on a suspicion threshold, deliberately lower than probable cause; so that the FIU can triage.
    =Is filed on reasonable grounds for suspicion, with a lower threshold than probable cause#STRs are filed by obliged entities on a suspicion threshold, deliberately lower than probable cause; so that the FIU can triage.
    ~Can only be filed by law enforcement#Incorrect. STRs are filed by obliged entities on a suspicion threshold, deliberately lower than probable cause; so that the FIU can triage.
}

::IFF502-Q7::The FATF risk-based approach requires obliged entities to\: {
    ~Apply identical controls to every customer#Incorrect. Since 2012 the FATF standards are explicitly risk-based\: resources scale with risk, not with volume.
    =Allocate controls proportionately to assessed risk#Since 2012 the FATF standards are explicitly risk-based\: resources scale with risk, not with volume.
    ~Report every transaction to the FIU#Incorrect. Since 2012 the FATF standards are explicitly risk-based\: resources scale with risk, not with volume.
    ~Refuse all cash#Incorrect. Since 2012 the FATF standards are explicitly risk-based\: resources scale with risk, not with volume.
}

::IFF502-Q8::The FATF beneficial-ownership threshold is a rebuttable presumption at\: {
    ~≥10% direct ownership#Incorrect. FATF Rec. 10/24 sets the presumption at ≥25% direct or indirect ownership, or effective control by other means.
    =≥25% direct or indirect ownership or effective control#FATF Rec. 10/24 sets the presumption at ≥25% direct or indirect ownership, or effective control by other means.
    ~≥50% voting rights#Incorrect. FATF Rec. 10/24 sets the presumption at ≥25% direct or indirect ownership, or effective control by other means.
    ~Any equity interest#Incorrect. FATF Rec. 10/24 sets the presumption at ≥25% direct or indirect ownership, or effective control by other means.
}

::IFF502-Q9::A trust protector's identity is relevant to CDD because\: {
    ~They own the trust assets#Incorrect. Under FATF R.25 the protector is one of the five roles whose identity must be captured because they may exercise effective control.
    =They may exercise ultimate effective control#Under FATF R.25 the protector is one of the five roles whose identity must be captured because they may exercise effective control.
    ~They pay the beneficiaries directly#Incorrect. Under FATF R.25 the protector is one of the five roles whose identity must be captured because they may exercise effective control.
    ~They audit the trustee's accounts#Incorrect. Under FATF R.25 the protector is one of the five roles whose identity must be captured because they may exercise effective control.
}

::IFF502-Q10::Simplified Due Diligence (SDD)\: {
    ~Requires no verification at all#Incorrect. SDD applies to low-risk categories (listed public companies, supervised FIs, public bodies) with reduced, not absent — verification.
    =Applies to demonstrably low-risk relationships with reduced evidentiary depth#SDD applies to low-risk categories (listed public companies, supervised FIs, public bodies) with reduced, not absent — verification.
    ~Is prohibited under FATF#Incorrect. SDD applies to low-risk categories (listed public companies, supervised FIs, public bodies) with reduced, not absent — verification.
    ~Only applies to cash transactions#Incorrect. SDD applies to low-risk categories (listed public companies, supervised FIs, public bodies) with reduced, not absent — verification.
}