Money Laundering Risks and Compliance in Financial Institutions

These flashcards cover the key concepts related to money laundering risks and compliance in financial institutions.

What are the main consequences of noncompliance with AFC regulations?

Disqualification from senior roles, asset freezes, travel restrictions, and personal legal and reputational risks.

Which industries are considered 'obliged entities' subject to stringent financial crime regulations?

Banks, nonbank financial institutions, payment service providers, legal firms, and accountants.

What was the significant consequence of HSBC's AML compliance failure in 2012?

HSBC was fined $1.9 billion and had to overhaul its global compliance operations.

What type of risks do organizations face from financial crime exposure?

Operational, legal, concentration, and reputational risks.

What is the role of effective customer due diligence (CDD) in financial compliance?

It helps manage and mitigate risks of money laundering and terrorist financing.

What are shell and shelf companies, and why are they considered high risk?

Shell companies have no significant operations and can conceal beneficial ownership; both can facilitate money laundering.

What is considered a politically exposed person (PEP)?

Individuals in prominent political functions, their immediate family, and close associates.

How can private banking and wealth management contribute to money laundering risks?

High-net-worth individuals may seek to exploit their financial relationships and utilize complex ownership structures.

What are some red flags that might indicate money laundering in e-commerce?

Prices inconsistent with fair market value, frequent and low-value transactions, and attempts to obscure buyer identity.

Why are cryptocurrency transactions considered risky in terms of money laundering?

They offer pseudonymity and can facilitate easy cross-border transfers without regulatory oversight.