1. Which of the following is NOT a stage of Money Laundering?
A. Placement
B. Layering
C. Consolidation
D. Integration
The three recognized stages of money laundering are Placement, Layering, and Integration. Consolidation is not part of the process.
2. Under the Prevention of Money Laundering Act (PMLA), 2002, which authority is responsible for receiving Suspicious Transaction Reports (STRs)?
A. Financial Intelligence Unit - India (FIU-IND)
B. Reserve Bank of India (RBI)
C. Ministry of Finance
D. Enforcement Directorate
STRs are filed with the Financial Intelligence Unit - India (FIU-IND), the central national agency for receiving and analyzing financial information.
3. Which of the following is a key element of a bank’s KYC policy?
A. Customer Grievance Redressal
B. Internal Audit Reporting
C. Profit Maximization
D. Customer Due Diligence
The four key elements of KYC policy are: Customer Acceptance Policy, Customer Identification Procedures, Monitoring of Transactions, and Risk Management. Customer Due Diligence is central to this policy.
4. A customer deposits ₹12 lakh in cash in a single day. As per AML rules, this transaction should be reported as:
A. Suspicious Transaction Report (STR)
B. Cash Transaction Report (CTR)
C. Foreign Exchange Transaction Report
D. Large Value Transaction Report
As per PMLA, cash transactions of ₹10 lakh and above in one day must be reported as a Cash Transaction Report (CTR) to FIU-IND.
5. Which type of Customer Due Diligence (CDD) is required when a high-risk customer opens a new account?
A. Simplified Due Diligence
B. Basic Due Diligence
C. Enhanced Due Diligence
D. Interim Due Diligence
Enhanced Due Diligence (EDD) is mandatory for high-risk customers such as PEPs (Politically Exposed Persons), NRIs with complex structures, or accounts with suspicious patterns.
6. Which of the following committees recommended the establishment of FIU-IND in India?
A. Narasimham Committee
B. Kelkar Committee
C. Damodaran Committee
D. Rangarajan Committee
The Kelkar Committee on fiscal reforms recommended creating a centralized financial intelligence unit in India, which later became FIU-IND under the Ministry of Finance.
7. Who is designated as the Principal Officer in a bank under the AML framework?
A. Any branch manager
B. The RBI appointed officer
C. Statutory Auditor
D. A senior management officer nominated by the bank
Every bank must appoint a Principal Officer (usually at senior management level) to oversee AML compliance and report transactions to FIU-IND.
8. Under PMLA, within how many days should banks furnish Suspicious Transaction Reports (STR) to FIU-IND after the transaction is deemed suspicious?
A. 7 days
B. 30 days
C. 15 days
D. 45 days
As per PMLA, STR must be submitted to FIU-IND within 7 days of arriving at a conclusion that the transaction is suspicious.
9. As per obligations under PMLA, records of all transactions are to be maintained for at least:
A. 2 years
B. 3 years
C. 5 years
D. 10 years
Banks are required to maintain records of all transactions, both domestic and international, for a period of 5 years as per Section 12 of PMLA.
10. Which of the following is NOT an obligation of banks under PMLA, 2002?
A. Maintain records of prescribed transactions
B. Provide minimum interest on savings accounts
C. Furnish information to FIU-IND
D. Verify the identity of customers through KYC
PMLA obligations include record keeping, KYC, and reporting to FIU-IND. Interest on savings accounts is governed by RBI, not PMLA.
11. Which of the following is the most common risk-based approach in AML compliance?
A. Applying the same level of scrutiny to all customers
B. Ignoring low-value transactions
C. Enhanced Due Diligence for high-risk customers
D. Waiving KYC for long-term customers
AML follows a risk-based approach, meaning higher-risk customers (like PEPs, NRIs with complex structures) require Enhanced Due Diligence, while normal customers undergo standard checks.
12. In risk management for AML, 'Transaction Monitoring' is primarily aimed at:
A. Identifying unusual or suspicious patterns
B. Marketing new bank products
C. Calculating interest on deposits
D. Checking credit rating of borrowers
Transaction monitoring helps banks detect patterns like structuring, layering, or frequent cross-border transfers that may indicate money laundering or terrorism financing.
13. India is a member of which global body that sets standards for combating money laundering and terrorist financing?
A. World Trade Organization (WTO)
B. Financial Action Task Force (FATF)
C. Basel Committee
D. IMF
The Financial Action Task Force (FATF) is the global standard-setting body for AML/CFT. India became a full member in 2010.
14. Which international agreement obligates member countries to criminalize money laundering linked to drug trafficking?
A. Vienna Convention, 1988
B. Basel Accord, 1988
C. Kyoto Protocol, 1997
D. Hague Convention, 1954
The Vienna Convention (1988) is the first international treaty that required countries to criminalize money laundering connected with drug trafficking.
15. Under international obligations, India must regularly submit AML/CFT compliance reports to:
A. FATF and Asia/Pacific Group on Money Laundering (APG)
B. WTO and IMF
C. World Bank and Basel Committee
D. United Nations General Assembly
India, being a member of FATF and APG, is obligated to submit periodic reports on AML/CFT measures and undergo mutual evaluations.
16. FATF publishes a list of “High-Risk and Other Monitored Jurisdictions.” These are commonly referred to as:
A. Black List and Blue List
B. Black List and Grey List
C. Red List and Green List
D. Watch List and Exit List
FATF maintains two lists – Black List (high-risk jurisdictions subject to call for action) and Grey List (jurisdictions under increased monitoring).
17. Why are transactions with banks in FATF blacklisted countries considered high-risk?
A. Because of higher currency fluctuations
B. Because they attract more profit margins
C. Because RBI mandates currency hedging
D. Because such countries have weak AML/CFT frameworks
FATF blacklisted countries are considered high-risk since they have significant deficiencies in their AML/CFT frameworks, raising risks of money laundering and terrorism financing.
18. What is a Correspondent Banking relationship?
A. A loan given by one bank to another
B. An agreement to share ATM networks
C. A relationship between two banks where one provides services to the customers of the other
D. A merger between two banks of different countries
Correspondent banking is when one bank provides services (like clearing, transfers, trade finance) to another bank, usually across borders, on behalf of its customers.
19. Which due diligence is mandatory before establishing a correspondent banking relationship?
A. Enhanced Due Diligence (EDD)
B. Simplified Due Diligence
C. No Due Diligence required
D. Peer Review by FATF
Before entering into a correspondent banking arrangement, banks must conduct Enhanced Due Diligence to prevent misuse for money laundering or terrorism financing.
20. FATCA primarily requires banks in India to report information related to:
A. Indian residents with multiple bank accounts
B. Cash deposits above ₹10 lakh
C. NRE account transactions
D. US persons having financial accounts in India
FATCA (Foreign Account Tax Compliance Act) requires Indian banks to report details of financial accounts held by US persons to prevent offshore tax evasion.
21. CRS (Common Reporting Standard) developed by OECD is applicable for:
A. Only US-based financial institutions
B. Automatic exchange of financial account information among participating countries
C. Only credit card transactions
D. Currency derivatives reporting
CRS is a global framework for the automatic exchange of financial account information between tax authorities of participating countries to combat tax evasion.
22. Under PMLA, which authority is primarily responsible for receiving suspicious transaction reports (STRs) from banks?
A. Reserve Bank of India
B. SEBI
C. Financial Intelligence Unit - India (FIU-IND)
D. Ministry of Finance
FIU-IND, under the Ministry of Finance, is the central agency for receiving, processing, analyzing, and disseminating information related to suspicious financial transactions.
23. What is the timeline for reporting a Suspicious Transaction Report (STR) to FIU-IND once a transaction is classified as suspicious?
A. Within 7 days
B. Within 24 hours
C. Within 15 days
D. Immediately without any time limit
As per PMLA guidelines, STR must be submitted to FIU-IND within 7 working days of the transaction being classified as suspicious.
24. What is one of the major implications for banks if they fail to comply with PMLA reporting obligations?
A. RBI may revoke CRR facility
B. Employees may lose pension benefits
C. Customers may close accounts
D. Penalties, prosecution, and reputational damage
Non-compliance with PMLA can lead to heavy penalties, criminal liability, and significant reputational damage for the bank and its officials.
25. Under PMLA, which of the following statements regarding "secrecy obligations" is correct?
A. Banks must always inform customers when their transactions are reported to FIU-IND
B. Banks are prohibited from tipping off customers about STR or CTR filing
C. Banks may disclose STR details to customers on written request
D. STR must be shared with account nominees
PMLA prohibits banks from "tipping off" customers about STR or CTR filings. Such secrecy is essential to ensure the integrity of AML reporting.
26. Which of the following reports is NOT mandated under PMLA for reporting to FIU-IND?
A. Suspicious Transaction Report (STR)
B. Cash Transaction Report (CTR)
C. Annual Tax Deducted at Source Report (TDS Report)
D. Non-Profit Organisation Transaction Report (NTR)
STR, CTR, and NTR are mandatory reports under PMLA to FIU-IND. However, TDS reporting is an income tax requirement, not part of AML reporting.
27. A customer deposits ₹12,50,000 in cash in a single day in his savings account. What is the reporting requirement for the bank under PMLA?
A. File a Cash Transaction Report (CTR) with FIU-IND
B. File only a Suspicious Transaction Report (STR)
C. Inform RBI directly
D. No reporting required
Cash deposits of more than ₹10 lakhs in a single day must be reported as CTR to FIU-IND by the 15th of the following month.
28. A customer makes five cash deposits of ₹2,50,000 each on consecutive days in the same account. What should the bank do?
A. Report only the largest deposit
B. No reporting as each deposit is below ₹10 lakh
C. Club them only if the customer is a high-risk account
D. Aggregate and report under CTR as structured transactions
Structured transactions (breaking large deposits into smaller amounts) must be aggregated and reported in CTR. This is known as "structuring" or "smurfing".
29. A customer requests a ₹50 lakh outward remittance to a high-risk country without any clear business justification. What should the bank do?
A. Refuse the transaction and close the account
B. File a Suspicious Transaction Report (STR)
C. Report it as a CTR
D. Only seek RBI approval
Large foreign remittances to high-risk jurisdictions without valid justification must be reported as STR to FIU-IND. Bank should not tip-off the customer.
30. A non-profit organisation (NPO) receives multiple donations of ₹15 lakhs each from overseas. What report must the bank file?
A. STR only
B. CTR only
C. Non-Profit Organisation Transaction Report (NTR)
D. No reporting required
Transactions involving NPOs above prescribed thresholds must be reported as NTR to FIU-IND, in addition to other reports if suspicious.
31. A branch manager suspects that a politically exposed person (PEP) is using multiple accounts to route illegal funds. What is the correct step?
A. Inform the customer about suspicions
B. Only file CTR if cash is involved
C. Do nothing until confirmed by police
D. File a Suspicious Transaction Report (STR) with FIU-IND
Banks must file STR if they suspect money laundering, especially for politically exposed persons (PEPs). No customer disclosure is allowed ("no tipping-off").
