All Camli originally generated cards

What is client identification?

The process of verifying the identity of individuals and confirming the existence of entities

What is KYC?

Know Your Client processes used to identify assess and manage ML and TF risk

Why is client identification important?

It helps detect prevent and manage ML and TF risks

What is a business relationship?

A relationship that triggers ongoing monitoring obligations

What does PEP stand for?

Politically Exposed Person

What does HIO stand for?

Head of an International Organization

Name four common reporting entities with identification obligations.

Financial entities MSBs casinos and securities dealers

What does MSB stand for?

Money Services Business

What is the purpose of KYC information?

To support risk assessment monitoring and suspicious transaction detection

What generally happens when a business relationship is established?

Ongoing monitoring obligations begin

What is ongoing monitoring?

Reviewing client activity and information throughout the business relationship

What should organizations understand about their clients?

Identity activities products services and risk profile

What are the five major KYC risk areas?

Client type place of origin products and services warning lists and high-risk situations

What type of client is often considered higher risk?

An offshore client

What types of businesses are often considered higher risk?

Cash intensive businesses virtual currency dealers and currency exchanges

What place-of-origin factors may affect risk?

Citizenship residence place of birth and jurisdiction of incorporation

Why can products and services increase ML and TF risk?

They may allow anonymity rapid movement of funds or third-party activity

Name three higher-risk products or services.

Wire transfers virtual currency and correspondent banking

What are warning lists used for?

To identify sanctioned terrorists or other high-risk persons and entities

What can happen when a client appears on a sanctions list?

Restrictions asset freezes or reporting obligations may apply

What is a high-risk situation?

A relationship or activity requiring enhanced due diligence

Name three common high-risk situations.

PEPs HIOs and correspondent banking relationships

What is a foreign PEP?

A person entrusted with a prominent public function in a foreign country

What additional measures may apply to PEPs?

Enhanced due diligence source of wealth review and ongoing monitoring

What additional measures may apply to HIOs?

Enhanced due diligence and ongoing monitoring

What may be required before establishing a high-risk relationship?

Senior management approval

What is source of wealth?

How a person accumulated their overall wealth

What is source of funds?

The origin of funds used in a specific transaction or activity

What is correspondent banking?

A relationship where one financial institution provides services to another financial institution

Why is correspondent banking considered higher risk?

Funds move across institutions and jurisdictions

What must organizations do for higher-risk clients?

Apply enhanced monitoring and additional controls

What threshold applies to DPMS identification requirements?

$10000

What does DPMS stand for?

Dealers in Precious Metals and Stones

What threshold is important for financing and leasing entities?

$100000

What types of financing commonly trigger obligations?

Business-purpose financing and qualifying leasing activities

What transaction amount commonly triggers identification obligations for some MSB activities?

$3000

What transfer amount commonly triggers identification obligations for some MSB remittances?

$1000

What transfer amount commonly triggers identification obligations for virtual currency transfers?

$1000

What should happen if identity cannot be verified when opening certain accounts?

The account cannot be opened

What transaction may still be permitted before identity is verified in some sectors?

An initial deposit

What should an organization do when client risk increases?

Review the relationship and apply additional controls

What is the goal of enhanced due diligence?

To better understand and manage higher ML and TF risks

What criminal penalty may apply for certain identification and record-keeping failures?

Up to 5 years imprisonment and a fine up to $500000

What does AMP stand for?

Administrative Monetary Penalty

What AMP amount was highlighted in this module?

Up to $100000

Who is responsible for complying with identification obligations?

The reporting entity

What is the primary purpose of client identification requirements?

To know who clients are and assess ML and TF risk

What is KYC?

Know Your Client due diligence process used to identify verify and understand clients

Is KYC a one-time form?

No KYC is an ongoing process throughout the client relationship

Why is KYC important?

Helps prevent fraud identity theft money laundering and terrorist financing

What is CDD?

Client Due Diligence

What is the objective of CDD?

Understand expected client behaviour and identify suspicious activity

What are the core components of CDD?

Client identification verification risk assessment and ongoing monitoring

What is EDD?

Enhanced Due Diligence

When is EDD required?

For higher-risk clients relationships or transactions

What should KYC enable an organization to understand?

The types of transactions a client is likely to conduct

What are the three practical components of KYC?

Understanding clients training employees and updating client information when required

What is the purpose of a KYC policy?

To identify verify monitor and manage client risk

What are the five elements of a KYC policy?

Client Acceptance Client Identification Client Verification Risk Management and Accounts and Transaction Monitoring

What is Client Acceptance?

Establishing criteria for accepting or rejecting clients

Why is Client Acceptance important?

It is the easiest point to avoid dealing with illegal money

What is Client Identification?

Determining who the client is and collecting required information

What additional information may be required during identification?

Source of funds and source of wealth

Who remains responsible for identification when intermediaries are used?

The reporting entity

What is Client Verification?

Confirming the client is who they claim to be

What should be used for verification?

Reliable independent documentation

Name common verification methods.

Government ID public searches site visits beneficial ownership checks and references

What special verification considerations apply to PEPs and HIOs?

Enhanced due diligence measures

What are signs of potentially false identification?

Photo mismatch irregular signatures unusual document condition or client unfamiliarity with ID

What is Risk Management in KYC?

Classifying clients by risk and applying appropriate controls

When should client risk ratings be reassessed?

When circumstances or expected activity change

What is Accounts and Transaction Monitoring?

Ongoing review of client activity to identify unusual or suspicious behaviour

Must monitoring be risk-based?

Yes

Are reporting entities required to investigate clients?

No but they must identify suspicious elements in transactions

What should KYC policies describe for high-risk clients?

What monitoring occurs how often and how it is reviewed

What five risks does KYC help mitigate?

Reputational Operational Legal Financial and Concentration risk

What is Reputational Risk?

Damage to the organization's reputation from facilitating illegal activity

What is Operational Risk?

Losses from failed processes systems or controls

What is Legal Risk?

Exposure to fines penalties lawsuits or prosecution

What is Financial Risk?

Losses caused by fraud or inability to recover funds

What is Concentration Risk?

Excessive exposure to one client or related group of clients

What is KYE?

Know Your Employee

Why is KYE important?

Employees can pose AML risks similar to clients

What should a KYE program assess?

Employee background conflicts of interest and ML susceptibility

What controls support a KYE program?

Policies procedures ethics codes authority levels monitoring and accountability

Why are employee background checks important?

To identify criminal history verify qualifications and reduce fraud risk

Should contractors be screened similarly to employees?

Yes

Can agents or mandataries perform client identification activities?

Yes

What must exist when using agents or mandataries?

A written agreement outlining responsibilities

What additional risk do brokers agents and introducers create?

Increased distribution and compliance risk

Why can introducers present AML risk?

They may lack compliance knowledge or prioritize volume over compliance

What is the first step in third-party due diligence?

Identify which third parties are in scope

When should a third party be considered in scope?

When they may represent the organization influence decisions or operate in higher-risk environments

How should the level of third-party due diligence be determined?

Through a risk assessment process

What is one major exam takeaway from this module?

KYC is an ongoing risk-based process not simply client identification

What are the two acronyms most likely to appear on the exam from this module?

CDD and EDD

What are the five KYC policy elements you should know cold?

Client Acceptance Client Identification Client Verification Risk Management and Accounts and Transaction Monitoring

What are the five KYC risk categories you should know cold?

Reputational Operational Legal Financial and Concentration risk

What are the three methods to verify the identity of an individual?

Government-issued photo ID method Credit file method Dual process method

What three qualities must government-issued photo identification possess?

Authentic Valid Current