AML/BSA Quiz
Last Updated: 2025-02-17 Status: Complete
Test your understanding of AML/BSA compliance with these self-assessment questions.
Money Laundering
Question 1: Three Stages
What are the three stages of money laundering, and how might a payment platform be exploited at each stage?
View Answer
The Three Stages:
| Stage | Goal | Payment Platform Risk |
|---|---|---|
| Placement | Get illicit cash into financial system | Processing fraudulent transactions, fake sales |
| Layering | Obscure the money's origin | Complex transaction patterns, refunds, transfers between merchants |
| Integration | Use cleaned funds in economy | Merchant payouts appearing as legitimate business revenue |
PayFac-Specific Exploitation:
Placement:
- Criminals obtain merchant accounts under false pretenses
- Process card transactions for non-existent sales
- Convert criminal proceeds to card network settlements
Layering:
- Transactions between related/colluding merchants
- Complex refund patterns to obscure origin
- Multiple sub-merchants used to create complexity
Integration:
- Merchant receives legitimate-looking settlement
- Funds appear as normal business revenue
- Integrated into legitimate economy
Detection Focus:
- Verify merchant legitimacy at onboarding
- Monitor for related party transactions
- Track unusual refund patterns
Question 2: Structuring
What is "structuring" and why is it a red flag?
View Answer
Definition: Structuring (also called "smurfing") is the practice of breaking large financial transactions into smaller ones to avoid regulatory reporting thresholds.
Example: Instead of depositing $50,000 (which triggers a CTR):
- Day 1: $9,500
- Day 2: $9,800
- Day 3: $9,200
- Day 4: $9,700
- Day 5: $9,300
Why It's a Red Flag:
| Reason | Explanation |
|---|---|
| Intent to evade | Specifically designed to avoid reporting |
| Illegal | Structuring itself is a federal crime |
| Indicates criminal activity | Why hide if funds are legitimate? |
| BSA violation | Violates Bank Secrecy Act |
Detection Signals:
- Transactions just under $10,000
- Round or near-round amounts
- Multiple transactions over short period
- Same person/account
- Pattern suggests awareness of threshold
Response:
- File SAR citing structuring
- Threshold: $5,000 (when suspicious)
- Document the pattern clearly
Question 3: SAR Thresholds
When must a SAR (Suspicious Activity Report) be filed? What's the threshold?
View Answer
SAR Filing Requirements:
| Situation | Threshold | Deadline |
|---|---|---|
| Known suspect identified | $5,000 | 30 days |
| No suspect identified | $25,000 | 30-60 days |
| Insider abuse | Any amount | 30 days |
| Money laundering suspected | $5,000 | 30 days |
| BSA violation | $5,000 | 30 days |
When to File: A SAR must be filed when the institution knows, suspects, or has reason to suspect:
- Transaction involves funds from illegal activity
- Transaction designed to evade reporting requirements
- Transaction has no business or lawful purpose
- Transaction facilitates criminal activity
Key Points:
- "Reason to suspect" is a low bar
- Don't need proof of crime
- File if in doubt
- Document decisions not to file
Deadline Calculation:
- Clock starts when suspicious activity is detected
- 30 days is standard deadline
- Can extend to 60 days only if actively investigating and no suspect identified
Question 4: Fraud vs. AML Monitoring
What's the difference between transaction monitoring for fraud versus AML? What patterns differ?
View Answer
Key Differences:
| Factor | Fraud Monitoring | AML Monitoring |
|---|---|---|
| Goal | Prevent financial loss | Detect criminal activity |
| Timing | Real-time blocking | Often batch analysis |
| Action | Decline transaction | File SAR, investigate |
| Outcome | Immediate prevention | Regulatory reporting |
Pattern Differences:
| Fraud Patterns | AML Patterns |
|---|---|
| Unusual purchase behavior | Structuring (under thresholds) |
| Velocity (many transactions fast) | Round amounts |
| Geographic anomalies | Rapid fund movement |
| Device fingerprint mismatch | Related party transactions |
| Card testing (small amounts) | Inconsistent business activity |
Overlap: Some patterns indicate both:
- Unusual velocity
- Geographic red flags
- Inconsistent with profile
Different Response:
| Pattern | Fraud Response | AML Response |
|---|---|---|
| Card testing | Block, alert | Investigate, possible SAR |
| Structuring | May not detect | SAR required |
| Velocity spike | Real-time block | SAR if suspicious |
| Round amounts | Low fraud signal | High AML signal |
Integration: Best practice is integrated monitoring that:
- Shares data between fraud and AML
- Routes alerts appropriately
- Avoids duplication
- Captures both fraud and AML patterns
Scenario Questions
Question 5: Transaction Pattern Analysis
Scenario: The platform detects a sub-merchant receiving many transactions just under $10,000, split across multiple days, always in round numbers. What might this indicate and what's the appropriate response?
View Answer
Pattern Analysis:
| Observation | Red Flag |
|---|---|
| Just under $10,000 | Possible structuring to avoid CTR |
| Multiple days | Deliberate splitting |
| Round numbers | Unusual in legitimate commerce |
| Consistent pattern | Not random, appears intentional |
This Pattern Indicates:
- Likely structuring - deliberate avoidance of CTR threshold
- Possible money laundering - placement stage
- Potential transaction laundering - processing for illegitimate purpose
Appropriate Response:
Immediate (24-48 hours):
- Flag account for enhanced monitoring
- Pull complete transaction history
- Review merchant onboarding documentation
- Assess if business type explains pattern
Investigation (1-2 weeks):
- Interview merchant (carefully, no tipping off)
- Verify legitimate business operations
- Document all findings
- Escalate to compliance officer
Decision: If pattern confirmed as suspicious:
- File SAR - Threshold met (> $5,000 suspicious)
- Consider account action - restriction or termination
- Document decision - complete investigation file
SAR Narrative Should Include:
- Total dollar amount
- Number of transactions
- Date range
- Pattern description
- Why activity lacks legitimate purpose
- Merchant information
Question 6: Investigation Workflow
What metrics should be monitored in real-time for AML compliance?
View Answer
Real-Time AML Monitoring Metrics:
| Category | Metrics |
|---|---|
| Transaction Level | Amount, velocity, geography, round amounts |
| Customer Level | Profile deviations, account activity |
| Merchant Level | Volume patterns, refund ratios |
| Network Level | Related party transactions, circular flows |
Specific Real-Time Checks:
| Check | Threshold | Action |
|---|---|---|
| Single transaction | > $10,000 | Generate alert |
| Daily aggregate | > $10,000 | CTR trigger |
| Velocity | > 10 tx / hour | Alert |
| Round amounts | Multiple $X,000 | Alert |
| High-risk country | Any amount | Enhanced review |
| Sanctions match | Any | Block + alert |
Dashboard Metrics:
| Metric | Purpose |
|---|---|
| Alert volume | Workload management |
| Alert aging | SLA compliance |
| SAR filing rate | Regulatory compliance |
| False positive rate | Rule tuning needs |
| High-risk customer count | Portfolio risk |
System Requirements:
- < 5 minute latency for critical alerts
- Real-time sanctions screening
- Velocity tracking across time windows
- Aggregation across accounts/merchants
Question 7: Compliance Program Design
Design a monitoring system that would catch potential money laundering through a PayFac platform. What rules and scenarios would you implement?
View Answer
Comprehensive AML Monitoring System:
Rule Categories:
1. Threshold Rules:
| Rule | Threshold | Alert Level |
|---|---|---|
| Large transaction | > $10,000 | Medium |
| Near-CTR | $9,000-$9,999 | High |
| Daily aggregate | > $10,000 | CTR + Alert |
2. Velocity Rules:
| Rule | Threshold | Alert Level |
|---|---|---|
| Transactions/hour | > 10 | Medium |
| Transactions/day | > 50 | High |
| New merchant spike | > 5x first month | High |
3. Pattern Rules:
| Rule | Pattern | Alert Level |
|---|---|---|
| Round amounts | 3+ round in day | Medium |
| Structuring | Multiple just-under-threshold | Critical |
| Rapid in/out | Funds move within 24h | High |
4. Geographic Rules:
| Rule | Trigger | Alert Level |
|---|---|---|
| High-risk country | Any transaction | High |
| Sanctioned country | Any transaction | Critical + Block |
| Location mismatch | Customer/merchant mismatch | Medium |
5. Relationship Rules:
| Rule | Pattern | Alert Level |
|---|---|---|
| Related merchants | Transactions between | High |
| Circular flows | Funds return to origin | Critical |
| Common owners | Multiple merchants same owner | Medium |
ML Models:
- Anomaly detection for unusual patterns
- Network analysis for hidden relationships
- Behavioral scoring for profile deviations
Alert Prioritization:
| Priority | Criteria | SLA |
|---|---|---|
| Critical | Sanctions, structuring | 24h |
| High | Multiple red flags | 48h |
| Medium | Single red flag | 5 days |
| Low | Minor deviation | 10 days |
Summary
After completing this quiz, you should understand:
- The three stages of money laundering
- How payment platforms are exploited for laundering
- What structuring is and why it's illegal
- SAR filing thresholds and deadlines
- Difference between fraud and AML monitoring
- How to design AML monitoring systems
- Appropriate response to suspicious patterns
Related Topics
- Money Laundering - Detailed patterns
- SAR Reporting - Filing requirements
- Transaction Monitoring - Detection systems
- Fraud Prevention - Complementary monitoring