On Line Training

Lesson 1

Questions:

A Bank's commitment to pay under a Letter of Credit is based solely on documents presented to
the bank and not on the underlying transaction?

 True

 False

Are ISP98 and URDG 758 intended to be dependent on the underlying transaction?

 Yes

 No

The Current edition of the Uniform Customs and Practice for Documentary Credits (UCP) is

 UCP 500
 UCP 600

 UCP 700

If a problem arises in a trade transaction regarding for example, non-delivery of Goods or

delivery of faulty or damaged goods. Whose responsibility is it to address the issue?

 The Bank

 The Parties to the transaction

The core principle of Letters of Credit is?

 The Independence Principle

 The Dependence Principle

 The Unified Principle

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 The current edition of UCP is:

 UCP700
 UCP600

 UCP500

The Independence Principle is included in which article of UCP 600?

 Article 5
 Article 7

 Article 10

 Correct.

The Independence Principle is included in Article 5 of UCP 600.

UCP600 Article 5 (Documents v. Goods, Services or Performance) provides:

“Banks deal with documents and not with goods, services or performance to which the documents
may relate”

A bank is faced with a presentation of documents that complies on its face with the terms and
conditions of a letter of credit. It can be however be proven that the documents are forged or
falsified or the goods are of no value. In this case, payment under the Letter of Credit may be
stopped or delayed pending determination of the ultimate facts. This exception to the
Independence Principle is referred to as:

 ‘The Fraud Exception’

 ‘The Override Exception’

 ‘The Crime Exception’

 Correct.

This exception to the Independence Principle is commonly referred to as ‘The Fraud Exception’.

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 The Compliance System within a Bank is another exception to the Independence Principle where
payment under a trade product can be stopped or delayed. Is the statement True or False?

 True

 False

 Correct

The Compliance System within a Bank is an exception to the Independence Principle where
payment under a trade product can be stopped or delayed.

Lessons 2

QUESTION 1 OF 12

In a Trade transaction the seller will be concerned about the delivery and quality of the Goods
and the buyer will be concerned about payment for the Goods. Is this statement true or false?

 True

 False

 Correct.

The Buyer will be concerned about the delivery and quality of the Goods and the Seller will be
concerned about payment for the Goods.

QUESTION 2 OF 12

Which payment option would a buyer typically favour?

 “Open account”

 “Payment in advance”

 Correct.

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 The buyer would typically favour the payment option “open account” because that enables the
buyer to order and receive the goods without having to part with its money until later, presumably
after it has resold the goods and been paid itself. In a sense, open account is form of trade finance
by the seller.

QUESTION 3 OF 12

In a documentary collection, the bank makes ____________________________.

 no undertaking to pay

 an undertaking to pay

 Correct.

UCP 600

In a collection, the bank makes no undertaking to pay. Its role is to follow the instructions
contained on the collection or transmittal letter, and to forward or present the accompanying
documents. Apart from counting the documents and ensuring that all the documents listed are
present, the bank disregards the content of the documents including any instructions that they
contain. It is only liable for negligence for failure to release the documents accompanying the
collection letter in the manner indicated.

QUESTION 4 OF 12

The trade or commercial terms used in domestic and international Trade contracts/agreements
for assignment of costs and responsibilities between the buyer and the seller are commonly
known as:

 Introterms
 Incoterms

 Intercom

 Correct.

The Incoterms® rules are an internationally recognised standard and are used worldwide in
international and domestic contracts for the sale of goods. The advantage of INCOTERMS is that
each term includes various allocations of responsibility.

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 QUESTION 5 OF 12

What entities and third party intermediaries are typically involved in international trade, the
transport of goods, and facilitation and financing thereof? Select all that apply.

 Warehousemen.
 Public office of the insurance ombudsman.

 Freight forwarder.

 A retail consumer.

 Customs brokers.

 Correct.

Typically, there are a variety of additional parties who intermediate the delivery of and payment of
goods. Third parties can also include a variety of intermediaries who transport goods as carriers,
hold goods as warehousemen, import or export facilitators such as freight forwarders and
customs brokers, or inspectors. They also include those who provide financial services, including
banks, other financial institutions, and insurers. In addition, government agencies play a variety of
roles with respect to financing, delivery, payment, and insurance. While insurance plays an
important role in trade, insurance ombudsmen typically assist consumers with their difficulties
with insurers and not companies engaged in trade. Likewise, retail consumers benefit from trade
but do not play a role in the process.

QUESTION 6 OF 12

The INCOTERM option “Ex Works / EXW” is always most advantageous for the buyer, because it
makes the seller responsible for delivery of the goods. True or false?

 True

 False

 Correct.

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 This INCOTERM option (EX WORKS) only requires the seller to make available the goods at its own
place of business, and the buyer must arrange for transport itself.

QUESTION 7 OF 12

The guarantor / issuer of an independent guarantee must honour the undertaking upon the
presentation of complying documents. True or false?

 True

 False

 Correct.

The issuer / guarantor is obligated to honour its promise under the independent guarantee when
complying documents are presented by the beneficiary regardless of accusations from the
applicant that there has been a breach of warranty or some other contractual breach by the
seller/beneficiary or whether the applicant is able to reimburse the issuer/guarantor.

QUESTION 8 OF 12

What abbreviation stands for international rules and practices relating specifically to
independent undertakings?

 URC 522
 INCOTERMS

 ISP98

 Ex Works / EXW

 None of the above

 Correct

ISP98, which stands for the International Standby Practices (ICC Publication No. 590) is intended
for independent undertakings such as standbys or independent guarantees.

URC 522 stands for the Uniform Rules for Collections which is not for independent undertakings
but bank collections.

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 INCOTERMS, is a collection of payment and delivery terms intended for in the underlying contract
Ex Works / EXW is an example of an INCOTERM.

QUESTION 9 OF 12

International banking consists not just of individual banks but, more importantly, of the
network of banks that maintain __________________ relations with one another.

 Correspondent
 Interbank

 Account holder

 Correct.

Banks depend on ‘correspondent’ relationships with other Banks to enable their customers to
conduct business with entities in other countries. Correspondent Banking is a relationship
between banks to receive or provide banking services for each other in their local area of
operations.

QUESTION 10 OF 12

A commercial letter of credit will almost always be issued subject to:

 UCP 600

 URC 522

 Correct.

A commercial letter of credit will almost always be issued subject to the Uniform Customs and
Practice for Documentary Credits (UCP 600).

QUESTION 11 OF 12

As Adviser, a bank (advising Bank) does not itself make any undertaking. True or false?

 True

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 False

 Correct.

True, an Advising Bank does not itself make any undertaking as adviser. The bank may be asked to
add its confirmation or to negotiate or pay.

If it does so, it will have a dual role in the transaction as Advising Bank and Nominated Bank
(either Confirming Bank or Negotiating/Paying Bank).

QUESTION 12 OF 12

A Suretyship Undertaking is an undertaking by a third party to answer for the debt of another
person. These third party undertaking to pay are not independent of the underlying transaction.
True or False?

 True

 False

 Correct.

These are financial products that are linked to the performance of the underlying transaction and
are subject to various defences that arise from the underlying transaction and from the
undertaking to pay on behalf of the buyer.

Lesson 3

QUESTION 1 OF 8

Which of the following is not a financial crime? Select all that apply.

 anti money laundering

 terrorism financing

 violation of prohibited boycotts

 commercial fraud

 all of the above

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 Correct.

Anti money laundering is not a financial crime. Money laundering, however, is a financial crime.

QUESTION 2 OF 8

Which of the following is not a United Nations agency involved in the fight against trade based
financial crimes? Select all that apply.

 UN Security Council.
 UN Internationals Children’s Emergency Fund.

 UN Office of Drugs and Crime.

 UN Commission on International Trade Law.

 UN Population Fund.

 Correct.

Neither the UN Internationals Children’s Emergency Fund nor the UN Population Fund are
involved in the fight against trade based financial crimes. (See Subsection 3.5.2.1).

QUESTION 3 OF 8

Financial crime is a specific crime in most jurisdictions. True or False?

 True

 False

 Correct.

Financial crime is not a specific crime in most jurisdictions, but is made up of a group of criminal
and fraudulent activities.

QUESTION 4 OF 8

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 There are a number of ways in which Trade Based Financial Crime could occur through the
misuse of a common financial product, such as a Letter of Credit (LC).

 Misconduct by the Seller/Beneficiary

 Misconduct by the Buyer/Applicant

 Collusion between the Seller/Beneficiary and the Buyer/Applicant

 All of the above

 Correct.

Misconduct by the Seller/Beneficiary could occur under a Letter of Credit where the
Seller/Beneficiary:

o presents forged or fraudulent documents, or

o ships Goods of less value than indicated on the documents (over invoicing), or

o presents documents where Goods have not been shipped (phantom shipping)

Commercial fraud could also be committed by the Buyer/Applicant where the Buyer/Applicant:

o submits a forged or fraudulent letter of credit or other financial assurances to the

Seller/Beneficiary, or
o induces the Seller/Beneficiary to ship goods on the basis of an LC undertaking on
which the Seller/Beneficiary cannot possibly make a complying presentation

Abuse of a common financial product could also be committed by collusion, in which the
Seller/Beneficiary and the Buyer/Applicant act together to defraud the issuer of the letter of credit.
Another form of commercial fraud could include the forging of multiple sets of documents to
defraud other banks, insurers, and additional third parties.

QUESTION 5 OF 8

The U.S. government has been very active in combating Trade Based Financial Crime, as it has
with the entire field of financial crime. It operates through a number of agencies, some of these
agencies include:

 FinCEN (Financial Crimes Enforcement Network)

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 Financial Conduct Authority (FCA)

 OFAC (the Office of Foreign Assets Control)

 Prudential Regulation Authority (PRA)

 BaFin (Federal Financial Supervisory Authority)

 Correct.

The U.S. operates through a number of agencies to combat Trade Based Financial Crime,
including:

o FinCEN (Financial Crimes Enforcement Network)

o OFAC (the Office of Foreign Assets Control)

o US bank regulators including the Federal Reserve Bank, to name a few.

QUESTION 6 OF 8

The Federal Financial Supervisory Authority is the primary supervisory body in Germany and is
recognised by the acronym:

 FFSA
 BAFA

 BaFin

 Zoll

 Correct.

The Federal Financial Supervisory Authority (BaFin) is the primary supervisory body in Germany,
and is charged with overseeing:

o Banks
o Financial service providers

o Insurance companies

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 BaFin reports to the German Federal Ministry of Finance.

BaFin has broad powers to investigate:

o the solvency of banks and financial institutions

o the transparency of stock exchange trading in respect of insider trading and
manipulations

o oversees company mergers

and it may issue authoritative guidance papers and interpretations relating to the financial
market.

QUESTION 7 OF 8

The financial regulating system of Hong Kong is made up of four bodies. They include:

 Hong Kong Trade Monitoring Authority

 The Securities and Futures Commission

 Hong Kong Monetary Authority

 Mandatory Provident Fund Schemes Authority

 Office of the Commissioner of Insurance

 Office of the attorney General

 Correct

The financial regulating system of Hong Kong is made up of four bodies. They include:

The Securities and Futures Commission.

o Regulates public investment offerings.

o Supervises and regulates brokers, advisers, and other such intermediaries.

o Regulates mergers and takeovers of companies that are publicly listed.

o Overseas exchanges which themselves regulate publicly listed companies.

Hong Kong Monetary Authority.

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o Supervises and regulates banks and institutions that take deposits.
o Regulates banks and their staff who are registered with the Securities and Futures
Commission.

Mandatory Provident Fund Schemes Authority.

o Regulates and supervises Mandatory Provident Funds (MPF) and their trustees.
o Registers certain Mandatory Provident Fund intermediaries who conduct banking,
insurance, and securities business.

Office of the Commissioner of Insurance.

o Authorises and supervises insurance companies.

o Regulates insurance agents and brokers, and other intermediaries.

o Supervises and enforces the Anti Money Laundering (AML) regulatory regime for the
insurance sector.

QUESTION 8 OF 8

Which Authority in the United Kingdom operates independent of the UK government and is
financed by collecting fees from the institutions it regulates?

 The Financial Conduct Authority (FCA)

 The Prudential Regulation Authority (PRA)

 Correct.

The FCA operates independent of the UK government and is financed by collecting fees from the
institutions it regulates, while the PRA is a limited company wholly owned by the Bank of England.

Lesson 4

QUESTION 1 OF 5

Risk assessment is a once-off process? True or false?

 False

 True

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 Correct.

Risk assessment is not a once-off process. A bank must continually assess the risks inherent in its
business and customer base as well as its own staff and the exposure of its services to financial
crime.

QUESTION 2 OF 5

Is it important to record/document all decisions taken in a compliance context, even those

decisions that resulted with no action been taken by the Bank?

 Yes

 No

 Correct.

It is important to document decisions and their rationale as they occur and to have a formal plan
to preserve these records so that in they can be accessed and retrieved upon the request of the
bank regulators.

This policy applies to every decision, whether it results in action or a decision not to act. In fact, it
is just as important to record a decision not to act as it is to record a decision to act.

QUESTION 3 OF 5

Identify departments or units of a bank that should be included in a Compliance Programme.

 Extension of credit unit

 Trade products unit

 Back office

 Risk management

 General management

 Compliance department

 all of the above

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 Correct.

All departments of the bank should be aware of and participate in the Bank’s compliance
programme.

QUESTION 4 OF 5

Who must undergo training regarding a bank’s Compliance Programme?

 All employees
 Staff

 New staff hires

 Management

 Correct.

Staff and management (and not just new employees) should undergo routine training on a regular
cycle to stay current with the latest trends, information, and advances in the field.

QUESTION 5 OF 5

Who is the senior person who is designated by the bank to fulfil its legal obligations to
international regulators who govern the prevention and reporting of financial crimes?

 Managing Director
 Trade Operations Manager

 Compliance Officer

 Relationship Manager

 Correct.

The Compliance Officer is the senior person who is designated by the bank to fulfil its legal
obligations to international regulators who govern the prevention and reporting of financial
crimes.

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 The Compliance Officer should be properly qualified and have sufficient resources to fulfil
responsibilities including an adequate budget, having direct access to the Board of Director (or to
an appropriate committee and to Senior Management) and is supported by sufficient staff to
perform mandated tasks.

Lesson Five

QUESTION 1 OF 7

The extent of diligence required for any customer/transaction should be determined on the
basis of risk. True or false?

 True

 False

 Correct.

The extent of diligence required for any customer/transaction should be determined on the basis
of risk.

These risks must be properly identified and the measures taken must be appropriate to the level
of risk identified.

The amount and extent of diligence conducted will not be the same for all customers, transactions
or correspondent relationships.

QUESTION 2 OF 7

Which of the following applies to Due diligence?

 Due Diligence is Risk Based

 Due Diligence is Customer oriented

 Due Diligence is On-Going

 Due Diligence extends to 3rd Parties

 All of the above

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 Correct.

Due Diligence is Risk Based, Customer Oriented, On-Going and extends to 3rd Parties

QUESTION 3 OF 7

The process of establishing the customer relationship is known as _______________?

 ‘front end loading’

 ‘on boarding’

 ‘up loading’

 Correct.

The process of establishing the customer relationship is known as ‘on boarding’

Ongoing scrutiny and Enhanced Due Diligence are the same thing? True or false?

 True

 False

 Correct.

Ongoing scrutiny is where Banks conduct automated and manual checks of customers and
transactions in response to changes to the customer’s business activities.

Enhanced Due Diligence is where Banks conduct further scrutiny of a transaction where the initial
Due Diligence has uncovered the existence of Indicators of Financial Crime or other risk factors.

QUESTION 5 OF 7

Does an FI need to do due diligence on the customer of a customer?

 Yes
 No

 Maybe

 Correct.

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 While FIs are not expected to do due diligence on the customer of a customer, there are situations
where they must undertake a degree of due diligence regarding a party that is neither the FI’s
customer nor a customer of a correspondent bank but is the customer of the correspondent
bank’s customer.

The amount of due diligence that is required to be exercised on a customer’s customer will vary
depending on the role the Bank is taking.

QUESTION 6 OF 7

Will an FI’s Compliance Programme contain details pertaining to a correspondent Bank?

 Yes

 No

 Correct.

It is important that an FI’s Compliance Programme contain policies and procedures for
correspondent banking relationships and responsibilities under the Programme should be clearly
allocated.

Since correspondent banks are effectively a Banks ‘customers’ they are also subject to due
diligence under the Bank’s Compliance Programme.

QUESTION 7 OF 7

A financial institution can rely on an affiliate or another financial institution to perform some of
the elements of KYC on boarding? True or false?

 True

 False

 Correct.

Where it is reasonable to do so, a financial institution can rely on an affiliate or another financial
institution to perform some of the elements of KYC on boarding. Such reliance should be part of
the financial institution’s compliance plan and it should comply with local requirements. Factors in
determining the reasonableness of risk or delegation include whether the institution is subject to
the same or an acceptable compliance regime, whether such reliance is reasonable, and whether

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 there is an agreement or, in the US, a formal contract covering the delegation, and annual
certification regarding maintenance of the compliance programme.

Lesson 6

QUESTION 1 OF 6

An indicator of trade based financial crimes is commonly known as a:

 Amber Flag
 Green Flag

 Red Flag

 Correct.

An indicator of trade based financial crimes is commonly known as a red flag.

QUESTION 2 OF 6

For a trade transaction to be suspicious, there should only be one distinct Indicator of trade
based financial crime found. Any overlap of Indicators is unusual. True or false?

 True

 False

 Correct.

When it comes to suspicions of financial crime, the more the merrier. While the presence of one
Indicator suggests that further scrutiny is warranted, the presence of multiple Indicators
reinforces this suspicion and increases the possibility that there is a financial crime.

QUESTION 3 OF 6

The Presence of an Indicator in a transaction requires issuance of a suspicious activity report.

True or False?

 True

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 False

 Correct.

The presence of an Indicator is a signal that further scrutiny is warranted. Even if the investigation
reveals the serious possibility of financial crime, a suspicious activity report may not be
appropriate. What response is appropriate depends on the financial crime.

QUESTION 4 OF 6

Indicators of financial crime can be used prospectively as well as retrospectively?

 True

 False

 Correct.

Indicators can be used prospectively to warn that a financial crime may be or is being committed
as well as retrospectively where the Indicator can be used to determine if/when a financial crime
has been committed.

QUESTION 5 OF 6

Does the way a bank links Indicators of financial crime to certain types of financial crime
matter?

 True

 False

 Correct.

How the bank links Indicators to certain types of financial crime matters because which type of
financial crime is suspected will impact how a bank responds. The response to suspected money
laundering, for instance, reporting of suspicious conduct, differs significantly from the response to
suspected terrorism financing freezing the funds and reporting the activity.

QUESTION 6 OF 6

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 Which Indicator or Indicators relate to transactions that are conducted in high risk jurisdictions?

 Indicator No. 5: Geographical or Jurisdiction Concerns

 Indicator No. 6: Transactions in High Risk or High Value Goods

 Indicator No. 8: Dual Use Goods

 Indicator No. 10: Trade Structure Concerns

 Indicator No. 12: Suspicious Actions

 All of the above

 Correct.

Indicator No. 5: Geographical / Jurisdictional Concerns. Conducting business in, with, or through
jurisdictions that are at a higher risk for money laundering, terrorism financing or other financial
crimes. Other Indicators such as No. 10 (Trade Structure Concerns) or No. 12 (Suspicious Actions)
are possible answers but less precise than No. 5.

PART 2

Lesson 1

QUESTION 1 OF 10

The criminal practice of processing illegally obtained money by placing it into legitimate finance
to make it appear to be derived from legitimate activities is called Money Laundering. True or
False?

 True

 False

 Correct.

Money laundering is the criminal practice of processing illegally obtained money by placing it into
legitimate finance to make it appear to be derived from legitimate activities.

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 QUESTION 2 OF 10

In the layering stage of money laundering the launder has to:

 Introduce the illegitimate funds into the legitimate economy

 Distance themselves from the funds (i.e. the criminal proceeds) by obscuring the

money trail

 Re-introduce the apparently legitimate funds into the financial system.

 Correct.

Layering enables the launderer to cut the link between the crime and its proceeds. Layering
consists of a series of transactions to create a complex and confusing paper trail to disguise the
origin of the money.

QUESTION 3 OF 10

Each country may have its own statutes and regulations to combat money laundering. True or
False?

 True

 False

 Correct.

Each country will have anti money laundering statutes and regulations that vary in specifics from
country to country.

QUESTION 4 OF 10

To combat trade based money laundering you should:

 Use Indicators of trade based financial crime

 Know Your Customer (KYC)

 Apply a Risk Based Approach to the business

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 Exercise Enhanced Due Diligence

 All of the above

 Correct.

There is no single approach to combating trade based money laundering.

Which of the below are methods used to disguise money laundering

 Over and Under Invoicing

 Multiple Invoicing

 Over and Under Shipment

 Phantom Shipments

 Falsely Described Goods and Services

 All of the above

 Correct.

Over and Under Invoicing, Multiple Invoicing, Over and Under Shipment, Phantom Shipments and
Falsely Described Goods and Services are all methods used to disguise money laundering.

QUESTION 6 OF 10

A seller invoices a buyer for a price that is above the market value of the goods being sold. This
is an example of

 Over-Invoicing

 Under-Invoicing

 Correct.

Over-Invoicing is when a seller invoices a buyer for a price that is above the market value of the
goods being sold.

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 QUESTION 7 OF 10

When a seller invoices a buyer for goods at a price below the market value this is called?

 Over-Invoicing

 Under-Invoicing

 Correct.

Under-Invoicing is when a seller invoices a buyer for goods at a price below the market value of
the goods being sold.

QUESTION 8 OF 10

The technique used in money laundering where a seller invoices a buyer multiple times for the
same transaction is called:

 Over and Under Invoicing

 Multiple Invoicing

 Over and Under Shipment

 Phantom Shipments

 Falsely Described Goods and Services

 Correct.

The payments made under the additional invoices allows the transfer of funds between the Buyer
and Seller under the pretence that the Buyer is paying for Goods.

Since there is no exchange of Goods after the original transaction, subsequent invoices help to
give the appearance of legitimacy.

QUESTION 9 OF 10

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 In the context of trade based money laundering, if a seller issues an invoice for an amount less
than the actual shipment, this is commonly known as:

 Over-shipment

 Under-shipment

 Correct

The buyer will receive a greater quantity of goods than it paid.

QUESTION 10 OF 10

Phantom shipments are when the Seller invoices the buyer for goods that are not sent. The
Buyer, working in collusion with the Seller, will make payment on the goods as if they had been
shipped and received. True or False?

 True

 False

 Correct.

Phantom shipments can be achieved through creating and sending false transport documents
and invoices which further enhance the illusion that goods were actually shipped. This allows
money to be exchanged as though a legitimate trade transaction had occurred.

Lesson 2

QUESTION 1 OF 7

In countering terrorism financing, banks can do which of the following:

 Use automated and human resources to vet customers

 Allow suspicious transactions to proceed without scrutiny

 Utilise current lists of designated organisations and person to check customers

against

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 None of the above

 Correct.

It is imperative that banks vet their customers as part of their Compliance Programme using
automated and manual screening. Banks must also use the most updated lists to check their
customers against lists of countries that are sanctioned, PEPs, etc.

QUESTION 2 OF 7

Financial institutions are important in the battle against terrorism because of their ability to

 Investigate terrorist organisations

 Punish terrorists

 Stop the flow of money to terrorists

 Determine who are terrorist organisations

 None of the above

 Correct.

While financial institutions are not equipped to investigate, punish, or even determine who is a
terrorist, they can stop the flow of funds to known terrorists.

QUESTION 3 OF 7

Can terrorist financing can come both from legitimate and illegitimate sources?

 No

 Yes

 Correct.

Terrorist financing can come both from legitimate and illegitimate sources.

Legal sources of Terrorism Financing can include legitimate businesses and investments made by
the terrorist organisation and grants or payments from governments.

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 There can also be donations from:

o sympathetic individuals
o organisations

o charities, or

o governments

Terrorists also engage in self-funding through legitimate sources of income through their wages,
social welfare payments, or savings themselves, their families, or friends.

QUESTION 4 OF 7

As well as funding the terrorist acts themselves, terrorist organisations can also maintain
networks of social services for the general public in areas where they have a significant
presence. True or False?

 True

 False

 Correct.

These services can undermine the credibility of the national and/or local government and
reinforce local sympathy and loyalty to the organisation and its cause.

These activities can consist of a proper infrastructure of legitimate activities such as Health,
Education and Social services

Terrorist organisations also own land and property directly, or indirectly, to provide for training
camps and safe houses.

QUESTION 5 OF 7

There are a variety of methods of combating Terrorism Financing ranging from which of the
following:

 Criminalisation of terrorist acts and organisations

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 Criminalisation of financing them

 Targeted sanctions

 The use of lists

 Economic penalties

 Freezing of funds intended to support terrorism

 Correct.

All of the above are methods of combating Terrorism Financing.

QUESTION 6 OF 7

The UN Security Council resolutions regarding Terrorism Financing and weapons proliferation
are binding on all members. True or False?

 True

 False

 Correct.

The UN Security Council has adopted various resolutions regarding Terrorism Financing and
weapons proliferation that are binding on all members pursuant to its powers under Chapter VII
of the UN Charter.

QUESTION 7 OF 7

What does FATF stand for?

 Financial Authority on Terrorist Financing

 Financial Action Task Force

 Correct.

FATF stands for the Financial Action Task Force.

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 Lesson 3

QUESTION 1 OF 9

An Economic sanction that place embargoes on certain goods, services, and travel is called a
__________________

 Financial sanction
 Commercial/trade based restrictions sanction

 Embargo sanction

 Correct.

Economic sanctions can be divided into two subsets: financial or commercial/trade based
restrictions.

Financial sanctions restrict the availability of funds flowing in and out of specified jurisdictions or
to specified people through the financial system.

Trade based restrictions place embargoes on certain goods, services, and travel.

QUESTION 2 OF 9

Goods that pass through a sanctioned nation’s territorial waters, or merely stop at a port in a
sanctioned nation, are not likely to be subject to sanctions. True or false?

 True

 False

 Correct.

True. Goods that pass through a sanctioned nation’s territorial waters, or merely stop at a port in
a sanctioned nation, are not likely to be considered goods originating in that nation, and not to be
seen as goods that can be classified as transhipment, and not as having transited through that
nation. Therefore, those goods will probably not be subject to sanctions. However, if there is
actual transhipment, that is the goods are transferred from one vessel to another in a sanctioned
port, then it is more likely that those goods will be subject to sanctions. In such a case, the bank
must take appropriate steps.

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 QUESTION 3 OF 9

Under most sanctions programmes, what should be done with the funds meant for a sanctioned
party?

 Any funds meant for a sanctioned party must go into a blocked account
 Transaction must be reported to the relevant governing body for that jurisdiction

 Documents received must also be retained and not returned to the sanctioned

party

 Correct.

Any funds meant for a sanctioned party must go into blocked accounts and the transaction must
be subsequently reported to the relevant governing body for that jurisdiction. In addition, only
under certain sanctions programmes, any documents received must also be retained and not
returned to the sanctioned party. These measures help with the effort of freezing and blocking of
assets belonging to, or destined for, sanctioned parties.

QUESTION 4 OF 9

The United Nations, through the Security Council, has the power to implement sanctions
through which article of the United Nations Charter?

 Article 40 of the United Nations Charter

 Article 41 of the United Nations Charter

 Article 42 of the United Nations Charter

 Correct.

The United Nations, through the Security Council, has the power to implement sanctions through
Article 41 of the United Nations Charter.

QUESTION 5 OF 9

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 Which US. Department administers sanctions compliance by limiting the prohibited export of
certain goods, pursuant to the Export Administration Act and focuses more on the proper
execution of export licenses?

 United States Department of the Treasury’s Office of Foreign Asset Controls

(OFAC)
 U.S. Department of Commerce’s Bureau of Industry and Security (BIS)

 Correct.

In the U.S. sanctions are administered by the United States Department of the Treasury’s Office of
Foreign Asset Controls (OFAC). OFAC administers numerous distinct sanctions programmes, with
varying degrees of comprehensiveness.

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) also administers and
enforces sanctions compliance, by limiting the prohibited export of certain goods, pursuant to the
Export Administration Act. While this overlaps with sanctions compliance, it focuses more on the
proper execution of export licenses.

QUESTION 6 OF 9

In the US a sanction directed at a specific individual or organisation is called?

 A targeted sanction
 A country sanction

 A secondary sanction

 Correct.

A Targeted sanctions is a sanction directed at a specific individual or organisation.

A Country based sanctions is a sanction that is directed at a nation.

A Secondary Sanctions prohibit non U.S. persons from engaging in certain activities. These
secondary sanctions are relatively rare, but have been used against non U.S. financial institutions
to limit their dealings with Iran.

QUESTION 7 OF 9

27
 The European Union’s view what they call ‘Restrictive Measures’ as one of the primary foreign
policy tools of the EU and the enforcement of restrictive measures is delegated to the various EU
member states.

 True

 False

 Correct.

It is important to know that EU member states may also impose autonomous sanctions within
their own national jurisdiction.

FIs looking to execute a transaction in the jurisdiction of an EU member state should inquire into
any additional restrictions on trade.

EU states are also permitted to issue exemptions consistent with the Guidelines made available by
the European Council as document number 15579/2003.

QUESTION 8 OF 9

In the UK, which department keeps a searchable list of sanctions targets that is updated within
one to three working days of new listings?

 Office of Foreign Asset Controls (OFAC)

 Office of Financial Sanctions Implementation (OFSI)

 The Commerce, Industry and Tourism Branch of the Commerce and Economic

Development Bureau

 Correct.

The Office of Financial Sanctions Implementation (OFSI) in the UK keeps a searchable list of
sanctions targets that is updated within one to three working days of new listings. This includes a
consolidated list of all targets as well as a list of individuals and entities subject to specific capital
market restrictions.

In the US, OFAC retains a list of thousands of individuals, business entities, or other organisations,
qualifying as Specially Designated Nationals (SDNs).

In Hong Kong, The Commerce, Industry and Tourism Branch of the Commerce and Economic
Development Bureau maintains lists of nations and persons sanctioned by the UN.

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 QUESTION 9 OF 9

A financial institution cannot allow a transaction to proceed when a sanctioned party is

involved?

 True

 False

 Correct.

A common misconception is that a financial institution cannot allow a transaction to proceed

when a sanctioned party is involved. For example, under a letter of credit or independent
guarantee transaction, a bank will make payment upon a complying presentation of documents.
However, the payment will be made into a blocked account and not into the beneficiary’s account.
This process allows the bank to honour the letter of credit or guarantee without violation of the
sanctions programme.

Lessons

QUESTION 1 OF 7

The principal means of limiting WMD proliferation is through which of the following?

 boycotts imposed by governments

 sanctions imposed by governments

 limitations imposed by financial institutions

 restrictions imposed by ECAs

 Correct.

The principal means of limiting their proliferation is through sanctions imposed by governments
and limitations imposed by financial institutions.

QUESTION 2 OF 7

27
 Weapons of mass destruction are usually classified as including Chemical, Biological and
Technological and Radio graphical weapons and the systems that deliver them. True or false?

 True

 False

 Correct.

Weapons of mass destruction are usually classified as including Chemical, Biological, Nuclear and
Radiological weapons and the systems that deliver them.

QUESTION 3 OF 7

The definition of Chemical Weapons can be found under?

 the Chemical Weapons Convention (CWC)

 the Chemical Weapons Conference (CWC)

 the Chemical Weapons Consortium (CWC)

 Correct.

Definition of Chemical Weapons can be found under the Chemical Weapons Convention (CWC) on
the ORGANISATION FOR THE PROHIBITION OF CHEMICAL WEAPONS (OPCW) website.

QUESTION 4 OF 7

Which if the following countries does not have membership of the OPCW?

 Egypt
 Israel

 United Kingdom

 Russia

 Correct.

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 Membership of the OPCW is global; only Egypt, Israel, North Korea, Sudan, and South Sudan are
not members.

QUESTION 5 OF 7

The CWC classifies three schedules of chemicals. Which Schedule of Chemicals is the most
serious category of chemicals?

 Schedule 1
 Schedule 2

 Schedule 3

 Correct.

Schedule 1 - This is the most serious category of chemicals. These chemicals have virtually no
practical use other than as a weapon.

QUESTION 6 OF 7

What is the name of the convention that prohibits the development, production, and acquisition
of biological and toxin weapons and the delivery systems that are specifically designed for their
dispersal?

 The Biological Weapons Agreement Convention (BWAC)

 The Biological Weapons Convention (BWC)

 The Biological Weapons Convention Accord (BWCA)

 Correct.

The 1972 Biological Weapons Convention (BWC) prohibits the development, production, and
acquisition of biological and toxin weapons and the delivery systems that are specifically designed
for their dispersal.

QUESTION 7 OF 7

27
 A radiological dispersal device (RDD) is also known as a _______________?

 dirty bomb
 clean bomb

 muddy bomb

 Correct.

A radiological dispersal device (RDD) also known as a ‘dirty bomb’ is a radiological weapon that
spreads radiation by combining radioactive material with conventional explosives.

Lesson

QUESTION 1 OF 9

Bribery can be defined as improper, illegal, or unethical conduct in breach of trust by a person in
authority.

 True

 False

 Correct.

It is corruption that can be defined as improper, illegal, or unethical conduct in breach of trust by a
person in authority.

QUESTION 2 OF 9

Corruption or bribery is typically divided into 2 broad categories. These categories are:

 Private and Public/commercial

 Public and Private/commercial

 Correct.

27
 Corruption or bribery typically divided into 2 broad categories, Public Bribery and
Private/Commercial Bribery.

QUESTION 3 OF 9

Self regulation occurs through codes of conduct for:

 Employees
 Customers

 third parties

 all of the above

 Correct.

Self regulation occurs through codes of conduct for employees, customers, and third parties.

Self regulated organisations often establish systems to detect corrupt actions.

QUESTION 4 OF 9

Which International organisation produced the “Anti bribery management systems -

Requirements with guidance for use”.

 International Standards Organisation (ISO)

 Financial Action Task Force (FATF)

 United Nations (UN)

 International Chamber of Commerce (ICC)

 Correct.

The International Standards Organisation’s ISO37001:2016, Anti bribery management systems

-Requirements with guidance for use, can serve as a model for financial institutions in
implementing their own anti bribery policies, allowing them to standardise their training and
certification, and ensuring consistency in the financial institutions’ compliance rules.

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 QUESTION 5 OF 9

The UK law against Bribery is the:

 UK Corruption Act 2010

 UK Bribery Act 2010

 UK Anti Bribery Act 2013

 U.S. Foreign Corrupt Practices Act

 Correct.

UK Bribery Act 2010

QUESTION 6 OF 9

There are also a number of international conventions focused on anti bribery, such as:

 The OECD Anti-Bribery Convention

 The Criminal Law Convention on Corruption

 The African Union (AU) Convention on Preventing and Combatting Corruption

 The Global Alliance Anti Bribery and Corruption

 Correct

These conventions encourage signatory nations to put in place domestic laws that implement the
conventions and supplement them.

QUESTION 7 OF 9

Anti bribery laws address the incentive to bribe and to be bribed. Anti bribery laws carry
penalties of:

 monetary fines

 imprisonment

27
 Correct.

Anti bribery laws typically carry penalties of monetary fines and, in severe instances, potential
imprisonment for violation of the laws.

QUESTION 8 OF 9

Does a Bank have to have policies and procedures in place to prevent and monitor bribery and
corruption?

 Yes

 No

 Correct.

Regulation requires that banks have policies and procedures in place to prevent and monitor
bribery and corruption. They must also report conduct that signals suspicion of the use of funds to
commit bribery.

QUESTION 9 OF 9

A trade transaction could be used to mask a bribe or corruption. True or false?

 True

 False

 Correct.

True. Virtually any trade transaction could be used to mask a bribe or corruption.

Lesson

QUESTION 1 OF 4

The scheme by which the fraudster returns funds from the same victim or other victims as if
they were the proceeds of the touted investment, encouraging the victim to reinvest or promote
the scheme to others is called?

 Ponzi/Pyramid scheme

27
 Kiting scheme

 Correct.

A Ponzi scheme is one whereby a fraudster returns funds from the same or other victims as if
they were the proceeds of the hyped investment.

QUESTION 2 OF 4

All of the following are examples of commercial fraud except

 Securities Fraud
 Production Fraud

 Procurement Fraud

 Transport Fraud

 Correct.

While Production Fraud may exist outside of Trade Based Finance Crime, it is not part of the
financial crime industry. All other frauds listed are common types of commercial fraud.

QUESTION 3 OF 4

Since prevention is of limited effect in combating commercial fraud, the best prevention
strategy is legal action. True or false?

 True

 False

 Correct.

Since legal action is of limited effect in combating commercial fraud, the best strategy is one of
prevention. Prevention entails a wide variety of actions, including having in place institutional
policies that are designed to discourage commercial fraud and limit opportunities to commit it,
regular audits, adequate education and training, and publicity.

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 QUESTION 4 OF 4

Letter of Credit Related Concerns that appear to signal odd or unusual activity would include
which of the following?

 The LC contains non-standard clauses or phrases or has unusual characteristics

(such as an incorrect use of seal)

 The LC is frequently and / or significantly amended for extensions, changes to the

beneficiary and / or changes to payment location that make no apparent commercial sense

 The trade related documentation under a LC or documentary collection appears

illogical, altered, fraudulent, or certain documentation is absent that would be expected

given the nature of the transaction (such as a missing application for a LC)

 All of the above

 Correct.

All of the above.

Lesson

QUESTION 1 OF 7

A boycott directed at a target whose actions or inactions are desired to be changed is called a

 Primary boycott
 Secondary boycott

 Tertiary boycott

 Correct.

A primary boycott is a boycott directed at a target whose actions or inactions are desired to be
changed. An example in the private sector would be the boycott of a store that has offensive
hiring policies. An example of a governmental boycott would have been the boycott of South
Africa during the apartheid regime. A current example is the Arab League boycott of Israel,
adopted in the post-World War II era, in connection with the establishment of the State of Israel.

27
 QUESTION 2 OF 7

A secondary boycott is ________________________________?

 an indirect attempt to influence the actions of a target by seeking to discourage

third parties from dealing with the target of the boycott.

 one that involves use of a “blacklist” of businesses or companies

 Correct.

An example of a secondary boycott is a boycott of a company that does business with the target
against which the primary boycott is directed. With respect to the Arab League boycott of Israel,
member states prohibit companies that have done business with or invested in Israel from doing
business in their countries.

QUESTION 3 OF 7

Is adherence with a boycott or violation of anti-boycott provisions a concern for financial

institutions?

 Yes

 No

 Correct.

Adherence with a boycott or violation of anti-boycott provisions is a serious concern for financial
institutions to whom such boycotts or anti-boycott provisions apply.

QUESTION 4 OF 7

The voluntary abstention from social or economic dealings with a person, entity, or country,
designed to force them to alter objectionable behaviour is called a

 Boycott

 Anti-Boycott

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 Correct.

A boycott is a voluntary abstention from social or economic dealings with a person, entity, or
country, designed to force them to alter objectionable behaviour.

QUESTION 5 OF 7

A boycott is an action designed to achieve the social or economic isolation of:

 a person
 an organisation

 a country

 all of above

 none of the above

 Correct.

A boycott is an action designed to achieve the social or economic isolation of a person, an

organisation or a country.

QUESTION 6 OF 7

Laws prohibiting compliance with a boycott are generally called referred to as:

 Anti-Boycott provisions
 Boycott provisions

 Anti-Embargo provisions

 Correct.

A law prohibiting compliance with the boycott are known as anti-boycott provisions. Anti-boycott
provisions have been most rigorously enforced in the U.S under the U.S. Anti-boycott regulations.

QUESTION 7 OF 7

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 Do U.S. anti-boycott regulations apply to activities by any U.S. person, including individuals and
permanent affiliates of non U.S. corporations resident in the U.S.?

 Yes

 No

 Correct.

U.S. anti-boycott regulations apply to activities by any U.S. person, including individuals and
permanent affiliates of non U.S. corporations resident in the U.S .

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