Top 15 Advanced AML/KYC Questions & Answers
- What is FATF?
The Financial Action Task Force sets international standards to prevent money laundering and terrorist financing.
- False Positive vs. False Negative?
False Positive: Genuine transaction flagged incorrectly
False Negative: Suspicious transaction that goes undetected
- What is a Correspondent Banking Relationship?
When one bank provides cross-border services to another β considered high-risk due to lack of direct oversight.
- What is a Beneficial Owner in KYC?
A person who directly or indirectly owns β₯25% of a legal entity or exercises control over it.
- KYC vs. CDD?
KYC: Initial identity verification
CDD: Ongoing monitoring and risk assessment
- What is Smurfing?
Splitting large illicit funds into smaller transactions to evade detection.
- What is a Risk-Based Approach (RBA)?
Tailoring due diligence intensity to customer risk β focusing more on high-risk profiles.
- Structuring vs. Smurfing?
Structuring: Breaking up transactions to avoid thresholds
Smurfing: Using multiple people to do so on behalf of one party
- What is Trade-Based Money Laundering (TBML)?
Using trade (falsified invoices, mispriced goods) to conceal illicit funds.
- What is an Ultimate Beneficial Owner (UBO)?
The individual who ultimately benefits from or controls a company, even behind layers of ownership.
- What is Ongoing Monitoring?
Post-onboarding transaction and profile reviews to detect new risks.
- Purpose of Customer Risk Rating (CRR)?
To classify clients as Low, Medium, or High risk and apply appropriate controls.
- What is PEP Screening?
Identifying Politically Exposed Persons to mitigate corruption and reputational risk.
- What is a Watchlist in AML?
A list of entities or persons flagged for sanctions, criminal history, or financial risk.
- What is a Suspicious Activity Report (SAR)?
A confidential report filed with authorities to flag transactions that raise suspicion.
Save this guide if you're prepping for a role in AML, KYC, or Financial.
