CFCS by ACFCS Valid Free Exam Practice Test

Question 1

Which two features of hawala make it particularly attractive to terrorist financing? Choose 2 answers

A. The nature of the hawala system is based on trust making formal records unnecessary B. The hawala system generates a great deal of profits often used for terrorist financing C. The value of the transaction can be transferred across jurisdictions without the need for a hard currency transfer D. Hawala utilizes wire transfers thereby making it harder for authorities to track

Correct Answer: A,C

Question 2

Mr. Johnson, a compliance officer at ABC Corporation, is conducting due diligence on a potential business partner based in a foreign country. During the due diligence process, Mr. Johnson discovers that the potential partner's principal shareholder is a politically exposed person (PEP) from a country subject to OFAC sanctions. What is the most appropriate action for Mr. Johnson to take?

A. Proceed with the business partnership but disclose the involvement of the PEP to OFAC. B. Seek guidance from OFAC on the permissibility of engaging with the potential partner. C. Proceed with the business partnership but conduct enhanced monitoring of transactions involving the PEP. D. Reject the business partnership due to the involvement of a PEP from a sanctioned country.

Correct Answer: B

Question 3

You are a law enforcement agent investigating an associate of Country X's former prime minister who is suspected of helping high-level government officials facilitate a scheme to misappropriate hundreds of millions of dollars in public funds. During your investigations, you uncovered a network of legal entities that you believe have been used to transfer and conceal the proceeds of this corruption scheme.
Through public record searches requests to law enforcement in other jurisdictions and subpoenas to financial institutions you have outlined the following arrangement.
* The associate contacted a relationship manager at a small private bank based in Country X to open a private bank account
* The associate's attorney created an offshore investment company Tropico, Ltd that holds the private banking account
* The associates attorney then appointed three shelf companies formed in Panama as Tropico's directors
* A fourth shelf company formed in the Cayman Islands was named as the primary shareholder You are now trying to determine the true owners behind the funds and assets concealed through this corporate structure Wh.ch is the MOST effect.ve next steptoidentify these individuals?

A. Obtain a subpoena that requires the relationship manager to provide testimony on the ownership structure of the legal entities B. Obtain transaction records from the private bank to determine who transferred funds into the account after it was established C. Obtain articles of incorporation for the shelf company formed in the Cayman Islands that was listed as primary shareholder D. Obtain articles of incorporation for the three shelf companies formed in Panama and listed as Tropics directors

Correct Answer: B

Question 4

You are asked to investigate a potential fraud at an automobile dealership. The president of Bank A provides inventory financing to the dealership and suspects that it may be providing fraudulent documentation to the bank to increase its funding.
Which documents would provide the MOST effective evidence of potential fraudulent activity?

A. Shipping invoices for cars sold at the dealership and then transported out of state B. A list of vehicle identification numbers (VINs) at the dealership and Ihe accompanying internal bank list of VINs C. Internal dealership records displaying names and contact information of all buyers of cars in the last two years D. Registrations of all cars sold by the dealership

Correct Answer: A

Question 5

You are part of a law enforcement learn reviewing remittances from global money service businesses (MSBs) over a several year period including a time of severe economic recession During this time period there was a regulatory change that drastically lowered the transaction amount al which ihe MSBs were required lo record identity documentation (e.g., driver's license passport) (or any wire transfers crossing international boundaries.
Which result suggests criminal actors have previously been using the system to transfer funds and avoid the reporting requirement?

A. There was an increase in the number of cross-border transmissions with an increased average value B. There was an increase in Suspicious Transaction Reports (SARs/STRs) filed to the Financial Intelligence Unit (FIU) C. The aggregate amount of money transferred from one country to another reduced sharply immediately prior to and after the new reporting requirements were enacted D. The aggregate amount of money transferred from one country to another decreased sharply immediately prior to and increased sharply after the new reporting requirements were enacted

Correct Answer: C

Question 6

Mr. Johnson, the compliance officer of XYZ Bank, is conducting an organizational overview of financial crime controls. During his review, he notices discrepancies in the transaction monitoring process. What is the most appropriate action for Mr. Johnson to take next?

A. Wait for the next compliance audit to address the discrepancies. B. Discuss the discrepancies with the employees responsible for transaction monitoring. C. Immediately report the discrepancies to senior management and the relevant authorities. D. Ignore the discrepancies as they might be insignificant.

Correct Answer: C

Question 7

You have been asked to investigate an anonymous tip that an executiveofa company has paid bribes to secure business with a foreign government-controlled company. Which would MOST fully support the allegation without any additional evidence?

A. The sales agent's commission is being paid to a bank account in a country outside of the agent's sales territory B. The executive approved an increase in the commissions paid to the sales agent dealing with the customer from 5% to 10% C. Records of funds transfers lo a company lor advertising services that is not on the approved vendor list D. The executive s files include duplicates of invoices for the customer that have sales prices 10% higher than the original

Correct Answer: A

Question 8

You are conducting a due diligence review of one of your firms' high-risk clients He runs an international import/export business and transacts in multiple currencies including Bitcoin. You notice a suspicious outgoing transaction Irom your firm and know your client often converts his currency to Bitcoin Since all transactions are public on the Bitcoin blockchain. you conduct research online and find the following string that coincides with the date, time and approximate amount of your client's transaction.

You want to contact Bitcoin to learn if this is, in fact your client.
Which part of the encrypted transaction can Bitcoin confirm for you?

A. Bitcoin cannot confirm any information B. The type of the currency converted to Bitcoin C. The ISP identifier D. If either party is a merchant and the purpose of the transaction

Correct Answer: A

Question 9

You work for a bank that is subject to U.S. sanctions overseen by the Office of Foreign Assets Control (OFAC). In the past your institution has had difficulty keeping the Specially Designated Nationals (SDN) lists up-to-date.
Which is the recommended course of action when dealing with transactions from a sanctioned country through your bank?

A. Submit blocking and reject reports to the OFAC in writing B. Call Ihe OFAC to submit the blocking and reject reports C. Ignore the SDN lists because they appear to be out-of-date again D. Open the account and then contact the OFAC about blocking transactions

Correct Answer: A

Question 10

You are a fraud investigator who is working lor a large hardware and construction supply retailer that believes it is losing revenue to internal theft and embezzlement. The company has many vendors and fraudulent invoicing is suspected as a source of lost funds.
You have gathered records on payments to vendors from the accounts payable department, and are now going vendor by vendor to analyze documents and look for sources of fraud. You are currently reviewing information on one vendor, Quality Goods, Inc.
* Twenty invoices were received and paid from Quality Goods in the past six months
* Sixteen invoices were for amounts of about S9,000 dollars each Two were just below S1,000 and the remaining two were for amounts of about $3,000
* Purchase orders for items from Quality Goods total about $130,000
* Descriptions of items purchased varies somewhat by invoice but they generally describe different types of plumbing supplies Given this information what would be the most likely red flag?

A. The amount invoiced by Quality Goods appears to exceed total purchase orders B. The number of invoices appear to exceed what would be reasonably expected in a six-month period C. The majority of the invoices from Quality Goods appear to be in amounts that would indicate structuring D. The descriptions of items purchased on the invoices do not appear to match the company's business

Correct Answer: A

Question 11

An individual wrote emails lo a local government posing as officials from companies with ongoing contracts with the government In the emails, he requested that wire transfers for payments owed be remitted to new bank accounts The emails appeared legitimate because they included valid but unlawfully obtained tax identification numbers for the companies In all the individual managed to steal nearly $2 million.
Which step would BEST address Ihe gap in the localgovernment'sfraud prevention program?

A. Conducting a fraud risk assessment of the controls used for funds transfer approvals B. Conducting thorough due diligence on all contractors and subcontractors C. Conducting analyses of contractor tax identification numbers and their approved bank accounts D. Conducting more frequent bank reconciliations to screen for fraudulent electronic transactions

Correct Answer: A

Question 12

You are an investigator for a U S -based financial institution and have identified suspicious wire activity in an account at your institution Over the last 16 months $18 million was sent from the main account into three linked accounts a bank account located in Germany an International Business Company (IBC) located in the Bahamas and a trust account in Panama During your investigation you noticed two major residential property purchases were made over the last 16 months by the IBC in the Bahamas.
Where should you start your investigation to identify the beneficial owners of the IBC?

A. Identity of the trustee lor the trust account in Panama B. Identity of persons residing in properties in Bahamas C. Signature card from the bank in Germany D. Letters of Incorporation for the IBC

Correct Answer: B

ACFCS Financial Crime Specialist - CFCS Exam Practice Test