OSHA 10-Hour Construction (OSHA 10)

Correct: In the rehabilitation and healthcare sector, a primary money laundering risk involves ‘patient brokering’ and insurance fraud. The receipt of funds from numerous unrelated third parties (rather than insurance companies or verified family members), followed by the immediate diversion of those funds to personal accounts or offshore entities under the guise of vague ‘consulting’ fees, is a classic red flag for laundering the proceeds of healthcare kickbacks and fraudulent billing.

Incorrect: Exceeding projected revenue is a general AML red flag but is less specific to the unique typologies of rehabilitation fraud than the nature of the fund flow. Geographic diversity of patients is actually common for specialized or luxury recovery centers and is not inherently suspicious. Suggesting that using personal brokerage accounts for business funds is a standard or acceptable practice is incorrect, as it represents a significant failure in commingling and internal controls, but it is the lack of medical context for the payments that is the primary indicator of the specific fraud typology.

Takeaway: AML risks in the rehabilitation sector often manifest as ‘patient brokering’ schemes where illicit kickbacks are disguised as consulting fees and moved through personal or offshore accounts.

Correct: In high-value asset sectors like yachting, the use of shell companies and third-party payments are primary typologies for obscuring the trail of illicit funds. According to FATF and CAMS standards, when high-risk factors are present—such as secrecy jurisdictions and complex payment structures—Enhanced Due Diligence (EDD) is mandatory. This must include identifying the Ultimate Beneficial Owner (UBO) and conducting a thorough Source of Wealth (SoW) and Source of Funds (SoF) check to ensure the money is not derived from criminal activity.

Incorrect: Filing a Suspicious Activity Report immediately is premature without first conducting an investigation to understand the context of the transaction. Prohibiting all third-party payments is a business decision rather than an investigative step and does not address the specific risk of the current transaction. Relying solely on a legal affidavit is insufficient for AML compliance, as it does not constitute independent verification of the source of wealth or beneficial ownership.

Takeaway: Transactions involving high-value assets and shell companies require rigorous identification of beneficial owners and independent verification of the source of wealth to mitigate money laundering risks.

Correct: In pari-mutuel betting, ‘ten-percenting’ involves money launderers purchasing winning tickets from legitimate bettors (often at a premium) to create a documented ‘legal’ source of funds. By tracking ticket serial numbers and requiring identification at lower internal thresholds, the operator can identify discrepancies between the person who placed the bet (especially if using a player tracking card) and the person redeeming it, which is a primary control against ticket-cleansing.

Incorrect: Filing CTRs for amounts under $10,000 is a violation of standard reporting procedures; instead, a Suspicious Activity Report (SAR) should be filed if the activity is deemed suspicious. Restricting redemption to a specific window is operationally impractical in large venues and does not prevent the exchange of tickets between patrons. While electronic transfers reduce cash risks, they do not address the underlying issue of the ‘straw’ redeemer claiming ownership of a winning ticket they did not purchase.

Takeaway: Effective AML controls in pari-mutuel environments require linking the identity of the ticket purchaser to the redeemer to prevent the laundering of illicit funds through the purchase of winning tickets.

Correct: The scenario describes a classic money laundering typology known as ‘minimal play’ or ‘refining,’ where illicit cash is converted into a casino check to appear as legitimate winnings. The request for a third-party payment adds a layer of complexity often associated with layering. Under FATF and regional guidelines, such suspicious behavior requires the filing of a Suspicious Activity Report (SAR) and the performance of Enhanced Due Diligence (EDD) to determine the source of wealth and the legitimacy of the third-party connection.

Incorrect: Immediately terminating a membership without an investigation may constitute ‘tipping off’ and does not fulfill the regulatory requirement to report suspicious activity. Filing a Currency Transaction Report (CTR) is a mandatory requirement for cash transactions over a certain threshold (e.g., $10,000 in the US), but it does not address the suspicious nature of the minimal play or the third-party check request. Relying only on internal watch lists is insufficient because AML compliance requires proactive monitoring of current behavior, not just historical records.

Takeaway: Minimal play combined with a request for third-party disbursements is a high-risk indicator in the gaming sector that necessitates both suspicious activity reporting and enhanced due diligence.

Correct: Accountants and auditors are considered ‘gatekeepers’ under FATF standards. When they provide services such as tax planning or creating legal entities, they must be subject to risk-based due diligence. FATF Recommendation 22 specifically applies AML/CFT requirements to accountants in certain situations, including the creation of legal persons or arrangements. The firm must assess the risk posed by these intermediaries and ensure they have adequate controls in place.

Incorrect: Relying solely on professional licensing is insufficient because licensing does not guarantee that the firm has implemented specific AML/CFT controls required for high-risk activities. Filing a SAR is premature as an audit finding regarding missing documentation does not, by itself, constitute a suspicion of money laundering. Suspending all transactions and demanding a written guarantee is not a risk-based approach and does not address the underlying failure to perform proper due diligence and risk assessment.

Takeaway: Accountants acting as gatekeepers in high-risk activities like entity formation must be subject to risk-based due diligence and integrated into the institutional risk assessment.

Correct: Discrepancies between the bill of lading and the actual market value, weight, or quantity of goods are classic indicators of trade-based money laundering (TBML). These techniques, such as over-invoicing or under-invoicing, allow criminals to move value across borders by misrepresenting the trade transaction to justify the transfer of funds.

Incorrect: Using the same vessel for repeat routes is a standard and efficient logistical practice in the shipping industry. Opting for standard insurance rather than specialized insurance is a business cost decision and does not inherently suggest money laundering. The use of a reputable third-party logistics provider is a common industry practice to ensure regulatory compliance and operational efficiency, rather than a red flag for illicit activity.

Correct: The presence of round-dollar transactions, unusual timing, and immediate transfers to an unrelated offshore entity are classic indicators of potential money laundering or shell company activity. Under a risk-based approach, the compliance officer must perform Enhanced Due Diligence (EDD) to understand the business relationship, the legitimacy of the offshore entity, and the source of funds before determining if the activity is truly suspicious and warrants a SAR.

Incorrect: Immediately freezing an account without a court order or internal investigation may tip off the customer and disrupt legitimate business if the activity is explainable. Adjusting monitoring parameters to ignore these transactions would be a failure of the compliance program and could lead to regulatory penalties for missing obvious red flags. Simply checking food safety certifications is insufficient as it does not address the suspicious financial flows or the relationship with the offshore logistics firm.

Takeaway: When high-volume merchants exhibit unusual transaction patterns and offshore fund transfers, compliance must prioritize investigating the economic reality and beneficial ownership of all parties involved.

Correct: According to FATF Recommendations 22 and 23, accountants are considered gatekeepers and must apply AML/CFT measures when they carry out certain activities, such as managing client money or real estate transactions. When dealing with high-risk factors like shell companies and jurisdictions with strategic deficiencies, Enhanced Due Diligence (EDD) is mandatory to identify the ultimate beneficial owner. If the suspicion remains after EDD, a Suspicious Transaction Report (STR) must be filed with the relevant Financial Intelligence Unit (FIU).

Incorrect: Relying solely on a third party’s due diligence is insufficient for high-risk scenarios and does not absolve the auditor of their own regulatory obligations. Terminating the relationship without considering reporting obligations may result in a failure to comply with mandatory suspicious activity reporting requirements. A management representation letter is a standard audit procedure for financial statements but is not a valid substitute for AML/CFT due diligence or the verification of the source of funds.

Takeaway: Accountants acting as gatekeepers must perform enhanced due diligence and report suspicious activities when managing client transactions involving high-risk structures or jurisdictions.

Correct: The scenario describes several classic red flags for money laundering: structuring (cash deposits just below thresholds), round-sum transfers which are atypical for legitimate trade, and a lack of standard industry documentation (veterinary certificates and ID numbers). In the presence of these indicators and an unsatisfactory explanation from the client, the MLRO must conduct Enhanced Due Diligence (EDD) and file a Suspicious Activity Report (SAR) or Suspicious Transaction Report (STR) as required by FATF and local regulations.

Incorrect: Adjusting monitoring parameters to ignore red flags is a failure of the compliance function. Relying on a client’s self-certification or affidavit is insufficient when objective documentation for high-risk transactions is missing. Directly contacting law enforcement to freeze funds is generally not the first step for an MLRO; the standard procedure is to report the suspicion to the Financial Intelligence Unit (FIU) and follow internal protocols to avoid ‘tipping off’ or legal liability for unauthorized freezing of assets.

Takeaway: Livestock trading is highly vulnerable to trade-based money laundering and structuring, necessitating the verification of specific trade documents and the reporting of patterns that lack a clear economic purpose.

Correct: The most significant red flag is the use of the travel agency to facilitate layering through cancellations and third-party refunds. By depositing cash and then requesting refunds to be sent to unrelated third parties (especially in offshore jurisdictions), the illicit actor effectively converts ‘dirty’ cash into ‘clean’ corporate wire transfers, obscuring the audit trail and the original source of funds.

Incorrect: While high volumes of cash (option b) are a risk factor, they are less definitive of a laundering scheme than the specific movement of funds to third parties. The lack of individual traveler documentation (option c) is a CDD/KYC deficiency but does not directly indicate a laundering typology as clearly as the refund pattern. International wire transfers to hospitality providers (option d) are a standard and legitimate business practice for travel agencies and do not inherently suggest suspicious activity without the context of the refund redirection.

Takeaway: The primary AML risk in the travel industry involves the manipulation of booking cancellations to redirect funds to third parties, effectively laundering money through legitimate business refund mechanisms.