R01 Money laundering and financial crime: free practice questions

1. Question 1 of 5

   What are the three stages of money laundering, in order?

   Option A: Placement, integration, layeringOption B: Integration, layering, placementOption C: Placement, layering, integrationOption D: Layering, placement, integration

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   The answer is C: Placement, layering, integration

   Placement puts illicit cash into the system; layering conceals its origins through a series of transactions; integration converts it into apparently legitimate assets.

   Why the other options are wrong

   A

   Layering comes before integration.

   B

   This is the reverse order.

   D

   Placement comes first.

2. Question 2 of 5

   In a regulated firm, to whom should an adviser report a suspicion of money laundering?

   Option A: To the FCA's contact centreOption B: To the client, to give them a chance to explainOption C: Directly to the National Crime AgencyOption D: To the firm's Money Laundering Reporting Officer

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   The answer is D: To the firm's Money Laundering Reporting Officer

   Staff report suspicions to the MLRO, who decides whether to make a report to the National Crime Agency. Staff shouldn't report to the NCA directly.

   Why the other options are wrong

   A

   Suspicion reports go to the NCA via the MLRO, not the FCA.

   B

   Alerting the client could be tipping off, an offence.

   C

   In a firm with an MLRO, the MLRO makes the disclosure.

3. Question 3 of 5

   When must customer due diligence be carried out? 1. When establishing a business relationship 2. When money laundering is suspected 3. When there are doubts about previously obtained identity information

   Option A: 1 onlyOption B: 2 and 3 onlyOption C: 1, 2 and 3Option D: 1 and 2 only

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   The answer is C: 1, 2 and 3

   CDD is required on establishing a business relationship, for occasional transactions, when money laundering or terrorist financing is suspected, and when there are doubts about earlier information.

   Why the other options are wrong

   A

   CDD is also needed on suspicion and on doubts about information.

   B

   CDD is also needed when the relationship begins.

   D

   Doubts about earlier information also trigger CDD.

4. Question 4 of 5

   How long must records of a client's identity verification be kept?

   Option A: For one year from the date the identity was verifiedOption B: Until the client dies, after which they can be destroyedOption C: For ten years from the date the identity was first verifiedOption D: Five years after the relationship ends or transaction completes

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   The answer is D: Five years after the relationship ends or transaction completes

   Identity verification records must be kept for five years after the end of the customer relationship, or five years from completion of the transaction.

   Why the other options are wrong

   A

   One year is too short.

   B

   The period runs from the end of the relationship or transaction.

   C

   Ten years isn't the requirement.

5. Question 5 of 5

   Who maintains the UK financial sanctions list that firms must check payments against?

   Option A: The National Crime AgencyOption B: The FCAOption C: HM TreasuryOption D: The Bank of England's MPC

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   The answer is C: HM Treasury

   It's a criminal offence to make payments to targets on the sanctions list maintained by HM Treasury, directly or through intermediaries. This applies to all regulated firms, not just banks.

   Why the other options are wrong

   A

   The NCA receives SARs; it doesn't maintain the sanctions list.

   B

   The FCA doesn't maintain the sanctions list.

   D

   The MPC sets interest rates.

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