Page 1 of 112
Certified AML and Fraud Professional (CAFP) Exam ACTUAL
EXAM COMPLETE QUESTIONS AND CORRECT ANSWERS
LATEST UPDATE THIS YEAR
✅ CAFCA / AML & Fraud Exam – Short Summarized Coverage
• Money Laundering Basics: Placement, Layering, Integration stages used to disguise illicit funds.
• AML Framework: Laws, regulations, policies, and internal controls to detect and prevent
financial crime.
• KYC/CDD: Customer identification, verification, and understanding purpose of accounts.
• EDD (Enhanced Due Diligence): Applied to high-risk customers, including PEPs and complex
entities.
• Risk-Based Approach: Customers categorized by risk (low, medium, high) based on behavior,
geography, and transactions.
• Beneficial Ownership: Identifying the true individuals who ultimately control or benefit from
accounts.
• Transaction Monitoring: Systems and analytics used to detect unusual patterns and anomalies.
• Red Flags: Structuring, unusual activity, inconsistent profiles, rapid transfers, unexplained
transactions.
• Structuring: Breaking large transactions into smaller ones to avoid reporting thresholds.
• Layering Techniques: Multiple transfers, intermediaries, cross-border movements to obscure
audit trails.
• Integration: Final stage where illicit funds are introduced into the legitimate economy.
• Fraud Types: Identity theft, account takeover, phishing, synthetic identity fraud, mule accounts,
insider fraud.
• Sanctions Compliance: Screening individuals/entities against restricted or prohibited lists.
• Trade-Based Money Laundering (TBML): Misuse of invoices (over/under-invoicing) and trade
documents to move funds.
• Suspicious Activity Reporting (SAR): Reporting suspected illegal activity to regulators.
• Geographic Risk: Higher scrutiny for transactions involving high-risk or sanctioned jurisdictions.
• Ongoing Monitoring: Continuous review of customer activity to detect behavioral changes.
• Internal Controls: Policies, segregation of duties, audits, documentation, escalation procedures.
• Audit & Compliance: Ensures adherence to AML regulations and organizational policies.
• Cyber/Fraud Indicators: Unusual logins, device changes, credential misuse, abnormal access
patterns.
• Goal of AML & Fraud Programs: Detect, prevent, and report illicit financial activity while
protecting the financial system.
Question 1
A financial institution notices a customer making frequent cash deposits just below reporting thresholds
over several days. What is the most likely concern?
, Page 2 of 112
A. Normal savings behavior
B. Structuring to avoid reporting requirements
C. Loan repayment activity
D. Payroll processing
Answer: B
Rationale: Splitting deposits to avoid reporting thresholds is known as structuring.
Question 2
Which of the following best describes the “placement” stage of money laundering?
A. Moving funds between accounts
B. Introducing illicit funds into the financial system
C. Converting funds into legitimate assets
D. Disguising ownership
Answer: B
Rationale: Placement is the initial stage where illicit funds enter the financial system.
Question 3
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A customer frequently transfers funds internationally without clear economic purpose. What risk is
indicated?
A. Credit risk
B. Operational risk
C. Money laundering risk
D. Market risk
Answer: C
Rationale: Unexplained cross-border transfers are a red flag for laundering.
Question 4
What is the primary purpose of Customer Due Diligence (CDD)?
A. Increase transaction speed
B. Verify customer identity and assess risk
C. Eliminate audits
D. Reduce compliance costs
Answer: B
Rationale: CDD ensures proper identification and risk evaluation of customers.
, Page 4 of 112
Question 5
A Politically Exposed Person (PEP) opens an account. What should the institution do?
A. Apply standard monitoring only
B. Apply enhanced due diligence
C. Reject the customer automatically
D. Ignore due to reputation
Answer: B
Rationale: PEPs require enhanced scrutiny due to higher corruption risk.
Question 6
Which activity is most indicative of layering?
A. Initial deposit of cash
B. Movement of funds through multiple accounts
C. Final withdrawal of funds
D. Salary deposit
Certified AML and Fraud Professional (CAFP) Exam ACTUAL
EXAM COMPLETE QUESTIONS AND CORRECT ANSWERS
LATEST UPDATE THIS YEAR
✅ CAFCA / AML & Fraud Exam – Short Summarized Coverage
• Money Laundering Basics: Placement, Layering, Integration stages used to disguise illicit funds.
• AML Framework: Laws, regulations, policies, and internal controls to detect and prevent
financial crime.
• KYC/CDD: Customer identification, verification, and understanding purpose of accounts.
• EDD (Enhanced Due Diligence): Applied to high-risk customers, including PEPs and complex
entities.
• Risk-Based Approach: Customers categorized by risk (low, medium, high) based on behavior,
geography, and transactions.
• Beneficial Ownership: Identifying the true individuals who ultimately control or benefit from
accounts.
• Transaction Monitoring: Systems and analytics used to detect unusual patterns and anomalies.
• Red Flags: Structuring, unusual activity, inconsistent profiles, rapid transfers, unexplained
transactions.
• Structuring: Breaking large transactions into smaller ones to avoid reporting thresholds.
• Layering Techniques: Multiple transfers, intermediaries, cross-border movements to obscure
audit trails.
• Integration: Final stage where illicit funds are introduced into the legitimate economy.
• Fraud Types: Identity theft, account takeover, phishing, synthetic identity fraud, mule accounts,
insider fraud.
• Sanctions Compliance: Screening individuals/entities against restricted or prohibited lists.
• Trade-Based Money Laundering (TBML): Misuse of invoices (over/under-invoicing) and trade
documents to move funds.
• Suspicious Activity Reporting (SAR): Reporting suspected illegal activity to regulators.
• Geographic Risk: Higher scrutiny for transactions involving high-risk or sanctioned jurisdictions.
• Ongoing Monitoring: Continuous review of customer activity to detect behavioral changes.
• Internal Controls: Policies, segregation of duties, audits, documentation, escalation procedures.
• Audit & Compliance: Ensures adherence to AML regulations and organizational policies.
• Cyber/Fraud Indicators: Unusual logins, device changes, credential misuse, abnormal access
patterns.
• Goal of AML & Fraud Programs: Detect, prevent, and report illicit financial activity while
protecting the financial system.
Question 1
A financial institution notices a customer making frequent cash deposits just below reporting thresholds
over several days. What is the most likely concern?
, Page 2 of 112
A. Normal savings behavior
B. Structuring to avoid reporting requirements
C. Loan repayment activity
D. Payroll processing
Answer: B
Rationale: Splitting deposits to avoid reporting thresholds is known as structuring.
Question 2
Which of the following best describes the “placement” stage of money laundering?
A. Moving funds between accounts
B. Introducing illicit funds into the financial system
C. Converting funds into legitimate assets
D. Disguising ownership
Answer: B
Rationale: Placement is the initial stage where illicit funds enter the financial system.
Question 3
, Page 3 of 112
A customer frequently transfers funds internationally without clear economic purpose. What risk is
indicated?
A. Credit risk
B. Operational risk
C. Money laundering risk
D. Market risk
Answer: C
Rationale: Unexplained cross-border transfers are a red flag for laundering.
Question 4
What is the primary purpose of Customer Due Diligence (CDD)?
A. Increase transaction speed
B. Verify customer identity and assess risk
C. Eliminate audits
D. Reduce compliance costs
Answer: B
Rationale: CDD ensures proper identification and risk evaluation of customers.
, Page 4 of 112
Question 5
A Politically Exposed Person (PEP) opens an account. What should the institution do?
A. Apply standard monitoring only
B. Apply enhanced due diligence
C. Reject the customer automatically
D. Ignore due to reputation
Answer: B
Rationale: PEPs require enhanced scrutiny due to higher corruption risk.
Question 6
Which activity is most indicative of layering?
A. Initial deposit of cash
B. Movement of funds through multiple accounts
C. Final withdrawal of funds
D. Salary deposit
