ACFE law ACTUAL EXAM Questions And
CORRECT Answers
Even though Green is innocent, he generally will not be able to recover under a defamation
theory because Black's statement was not "published" to a third party. Defamation is an
unprivileged publication of a false statement about a person that causes harm to that person's
reputation. To recover for defamation, the plaintiff must prove the following elements:
• The defendant made an untrue statement of fact.
• The statement was communicated (published) to third parties.
• The statement was made on an unprivileged occasion.
• The statement damaged the subject's reputation. - CORRECT ANSWERS
In 2002, FinCEN announced a new rule requiring brokers and dealers in securities to report
suspicious activity via the Suspicious Activity Report by Securities and Futures Industries (SAR-
SF; FinCEN Form 101). These firms are obligated to report suspicious transactions that are
conducted or attempted by, at, or through a broker-dealer and involve or aggregate at least
$5,000 in funds or other assets. Brokers and dealers in securities are required to report to
FinCEN transactions that fall into one of the four categories below:
• Transactions involving funds derived from illegal activity, or intended or conducted in order to
hide or disguise funds derived from illegal activity
• Transactions designed, whether through structuring or other means, to evade the
requirements of the Bank Secrecy Act
• Transactions that appear to serve no business or apparent lawful purpose or are not the sort
of transactions in which the pa - CORRECT ANSWERS 2
Businesses that deal in large amounts of cash sales have always been popular for money
laundering. Such businesses make accurate audits difficult. These types of businesses include
bars, restaurants, and nightclubs. These businesses charge relatively high prices, and customers
vary widely in their purchases. Sales are generally in cash, and it is notoriously difficult to match
the cost of providing food, liquor, and entertainment with the revenues they produce. -
CORRECT ANSWERS 3
,The Bank Secrecy Act (BSA), which went into effect in 1970, was the first major piece of
legislation aimed at detecting and preventing money laundering. The purpose of the law as
stated in Section 5311 is "to require certain reports or records where they have a high degree of
usefulness in criminal, tax, or regulatory investigations or proceedings."
The BSA sets forth a system of reporting and recordkeeping requirements designed to help track
large, unusual, and suspicious financial transactions. Title I contains provisions requiring that
financial institutions and securities brokers and dealers keep extensive records of the
transactions and accounts of their customers. Title II of the BSA (originally entitled Currency and
Foreign Transactions Reporting Act) requires banks, "financial institutions" (which include
casinos, securities brokers and dealers, and currency exchanges), and, in some cases, individuals
to rep - CORRECT ANSWERS
A money laundering scheme cannot be successful until the paper trail is eliminated or made so
complex that individual steps cannot be easily traced. The number of steps used depends on
how much distance the money launderer wishes to put between the illegally earned cash and
the laundered asset into which it is converted. A greater number of steps increases the
complexity of tracing the funds, but it also increases the length of the paper trail and the chance
that the transaction will be reported. - CORRECT ANSWERS
Money services businesses (MSBs) refer to non-depository financial service providers operating
in one or more of the following capacities:
• Currency exchangers
• Check cashers
• Issuers, sellers, or redeemers of traveler's checks, money orders, or stored value
• The United States Postal Service
• Money transmitters
• Prepaid access providers or sellers
,MSBs offer an alternative to depository institutions for both financial services and money
laundering. For this reason, an individual unable to transfer illegal funds into the U.S. banking
system might turn to MSBs. In addition, MSBs generally operate under less strict regulations
than traditional financial institutions. These overall less stringent requirements tend to raise the
money laundering risk in certain transactions involving users of MSBs. For example, an MSB
might not check a customer's credit report before opening an account, or it might require less
rigo - CORRECT ANSWERS
In addition to traditional financial institutions such as banks and credit unions, a number of
industries are also required to file Suspicious Activity Reports with FinCEN if they suspect that a
client or customer is attempting to launder funds or engage in other illegal activity. These
include securities broker-dealers; casinos and card clubs; insurance companies; and
unregistered investment firms. - CORRECT ANSWERS
Alternative remittance systems (also called parallel banking systems) are methods of
transferring funds from a party at one location to another party (whether domestic or foreign)
without the use of formal banking institutions. These systems are characterized by the lack of
direct physical or digital transfer of currency from the sender to the receiver. Instead, in the
typical alternative remittance system, the payer will transfer funds to a local broker who has a
connection in the region where the payee is located. The latter broker will then distribute the
funds to the payee.
Transferring funds in this manner is not necessarily illegal (although some jurisdictions require
brokers to register with the government). If available, using such systems can be beneficial
because the commission that the networked brokers take might be lower than a banking fee for
international transactions. Additionally, the payers and pay - CORRECT ANSWERS
Insurance policies are designed to protect assets (as well as life and health), but they are also
assets in their own right. As is the case with most assets, they can become part of a money
laundering scheme.
Launderers do not always need to keep or redeem the insurance policies they purchase. Many
policies have cancellation provisions that, for a certain amount of time, allow the launderer to
, cancel the policy and have any unused premiums returned. This technique can be used to
temporarily store illicit assets and confuse the money trail by having the cancellation paid out to
a different account. - CORRECT ANSWERS
Placement of funds into a financial institution is the initial step in the process. It is at this step
that legislation has been developed to prevent launderers from depositing or converting large
amounts of cash at financial institutions or taking cash out of the country. Money laundering
schemes are most often detected at this stage. - CORRECT ANSWERS
The USA PATRIOT Act defines the term "financial institution" broadly to include not only insured
and commercial banks, but also securities brokers and dealers, investment companies, currency
exchanges, issuers of cashier's checks and money orders, credit card companies, insurance
companies, travel agencies, and a host of other businesses. The complete list can be found at 31
U.S.C. Section 5312 (a)(2). - CORRECT ANSWERS
Money laundering is the disguising of the existence, nature, source, ownership, location, and
disposition of property derived from criminal activity. Businesses that are commonly used to
front money laundering operations include bars, restaurants, and nightclubs. These businesses
charge relatively high prices, and customers vary widely in their purchases. Sales are generally in
cash, and it is notoriously difficult to match the cost of providing food, liquor, and entertainment
with the revenues they produce. As a result, a red flag of front businesses is observing a low
amount of business, despite the business's books showing a relatively high income for that
period. - CORRECT ANSWERS
The Financial Action Task Force (FATF) is an intergovernmental body that was established at the
G-7 Economics Summit in 1989. Its purpose is to develop and promote standards and policies to
combat money laundering and terrorist financing at both the national and international levels.
The FATF's Recommendations, revised in 2012, created the most comprehensive standard with
which to measure a country's anti-money laundering, counterterrorism, and nuclear
proliferation laws and policies. They serve as a basic framework of laws that its members should
have. While the recommendations are not required by members and the FATF acknowledges
that following each rule might not be possible, members of the FATF often adopt them.
CORRECT Answers
Even though Green is innocent, he generally will not be able to recover under a defamation
theory because Black's statement was not "published" to a third party. Defamation is an
unprivileged publication of a false statement about a person that causes harm to that person's
reputation. To recover for defamation, the plaintiff must prove the following elements:
• The defendant made an untrue statement of fact.
• The statement was communicated (published) to third parties.
• The statement was made on an unprivileged occasion.
• The statement damaged the subject's reputation. - CORRECT ANSWERS
In 2002, FinCEN announced a new rule requiring brokers and dealers in securities to report
suspicious activity via the Suspicious Activity Report by Securities and Futures Industries (SAR-
SF; FinCEN Form 101). These firms are obligated to report suspicious transactions that are
conducted or attempted by, at, or through a broker-dealer and involve or aggregate at least
$5,000 in funds or other assets. Brokers and dealers in securities are required to report to
FinCEN transactions that fall into one of the four categories below:
• Transactions involving funds derived from illegal activity, or intended or conducted in order to
hide or disguise funds derived from illegal activity
• Transactions designed, whether through structuring or other means, to evade the
requirements of the Bank Secrecy Act
• Transactions that appear to serve no business or apparent lawful purpose or are not the sort
of transactions in which the pa - CORRECT ANSWERS 2
Businesses that deal in large amounts of cash sales have always been popular for money
laundering. Such businesses make accurate audits difficult. These types of businesses include
bars, restaurants, and nightclubs. These businesses charge relatively high prices, and customers
vary widely in their purchases. Sales are generally in cash, and it is notoriously difficult to match
the cost of providing food, liquor, and entertainment with the revenues they produce. -
CORRECT ANSWERS 3
,The Bank Secrecy Act (BSA), which went into effect in 1970, was the first major piece of
legislation aimed at detecting and preventing money laundering. The purpose of the law as
stated in Section 5311 is "to require certain reports or records where they have a high degree of
usefulness in criminal, tax, or regulatory investigations or proceedings."
The BSA sets forth a system of reporting and recordkeeping requirements designed to help track
large, unusual, and suspicious financial transactions. Title I contains provisions requiring that
financial institutions and securities brokers and dealers keep extensive records of the
transactions and accounts of their customers. Title II of the BSA (originally entitled Currency and
Foreign Transactions Reporting Act) requires banks, "financial institutions" (which include
casinos, securities brokers and dealers, and currency exchanges), and, in some cases, individuals
to rep - CORRECT ANSWERS
A money laundering scheme cannot be successful until the paper trail is eliminated or made so
complex that individual steps cannot be easily traced. The number of steps used depends on
how much distance the money launderer wishes to put between the illegally earned cash and
the laundered asset into which it is converted. A greater number of steps increases the
complexity of tracing the funds, but it also increases the length of the paper trail and the chance
that the transaction will be reported. - CORRECT ANSWERS
Money services businesses (MSBs) refer to non-depository financial service providers operating
in one or more of the following capacities:
• Currency exchangers
• Check cashers
• Issuers, sellers, or redeemers of traveler's checks, money orders, or stored value
• The United States Postal Service
• Money transmitters
• Prepaid access providers or sellers
,MSBs offer an alternative to depository institutions for both financial services and money
laundering. For this reason, an individual unable to transfer illegal funds into the U.S. banking
system might turn to MSBs. In addition, MSBs generally operate under less strict regulations
than traditional financial institutions. These overall less stringent requirements tend to raise the
money laundering risk in certain transactions involving users of MSBs. For example, an MSB
might not check a customer's credit report before opening an account, or it might require less
rigo - CORRECT ANSWERS
In addition to traditional financial institutions such as banks and credit unions, a number of
industries are also required to file Suspicious Activity Reports with FinCEN if they suspect that a
client or customer is attempting to launder funds or engage in other illegal activity. These
include securities broker-dealers; casinos and card clubs; insurance companies; and
unregistered investment firms. - CORRECT ANSWERS
Alternative remittance systems (also called parallel banking systems) are methods of
transferring funds from a party at one location to another party (whether domestic or foreign)
without the use of formal banking institutions. These systems are characterized by the lack of
direct physical or digital transfer of currency from the sender to the receiver. Instead, in the
typical alternative remittance system, the payer will transfer funds to a local broker who has a
connection in the region where the payee is located. The latter broker will then distribute the
funds to the payee.
Transferring funds in this manner is not necessarily illegal (although some jurisdictions require
brokers to register with the government). If available, using such systems can be beneficial
because the commission that the networked brokers take might be lower than a banking fee for
international transactions. Additionally, the payers and pay - CORRECT ANSWERS
Insurance policies are designed to protect assets (as well as life and health), but they are also
assets in their own right. As is the case with most assets, they can become part of a money
laundering scheme.
Launderers do not always need to keep or redeem the insurance policies they purchase. Many
policies have cancellation provisions that, for a certain amount of time, allow the launderer to
, cancel the policy and have any unused premiums returned. This technique can be used to
temporarily store illicit assets and confuse the money trail by having the cancellation paid out to
a different account. - CORRECT ANSWERS
Placement of funds into a financial institution is the initial step in the process. It is at this step
that legislation has been developed to prevent launderers from depositing or converting large
amounts of cash at financial institutions or taking cash out of the country. Money laundering
schemes are most often detected at this stage. - CORRECT ANSWERS
The USA PATRIOT Act defines the term "financial institution" broadly to include not only insured
and commercial banks, but also securities brokers and dealers, investment companies, currency
exchanges, issuers of cashier's checks and money orders, credit card companies, insurance
companies, travel agencies, and a host of other businesses. The complete list can be found at 31
U.S.C. Section 5312 (a)(2). - CORRECT ANSWERS
Money laundering is the disguising of the existence, nature, source, ownership, location, and
disposition of property derived from criminal activity. Businesses that are commonly used to
front money laundering operations include bars, restaurants, and nightclubs. These businesses
charge relatively high prices, and customers vary widely in their purchases. Sales are generally in
cash, and it is notoriously difficult to match the cost of providing food, liquor, and entertainment
with the revenues they produce. As a result, a red flag of front businesses is observing a low
amount of business, despite the business's books showing a relatively high income for that
period. - CORRECT ANSWERS
The Financial Action Task Force (FATF) is an intergovernmental body that was established at the
G-7 Economics Summit in 1989. Its purpose is to develop and promote standards and policies to
combat money laundering and terrorist financing at both the national and international levels.
The FATF's Recommendations, revised in 2012, created the most comprehensive standard with
which to measure a country's anti-money laundering, counterterrorism, and nuclear
proliferation laws and policies. They serve as a basic framework of laws that its members should
have. While the recommendations are not required by members and the FATF acknowledges
that following each rule might not be possible, members of the FATF often adopt them.
