Free ICA Specialist Certificate in Trade Based Money Laundering Practice Questions

Sample Practice Questions

Try these 10 sample questions from the ICA Specialist Certificate in Trade Based Money Laundering practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1An exporter receives the full purchase price before shipping. Which payment method is being used?

   1. A.Cash-in-advanceCorrect answer: A
   2. B.Documentary collection
   3. C.Open account
   4. D.Consignment

   Explanation: The source states: "payment is received before the goods are shipped". Payment precedes shipment under cash-in-advance. Collections use documents to collect payment, open account extends payment beyond delivery, and consignment depends on resale.

   Reference: International Trade Administration — Trade Finance Guide — Cash-in-Advance

2. 2What is the defining purpose of money laundering?

   1. A.To move every commercial payment outside the banking system
   2. B.To disguise the illegal origin of criminal proceedsCorrect answer: B
   3. C.To conceal the destination of funds that must be lawfully earned
   4. D.To defer payment for imported goods until after their resale

   Explanation: The source states: "Money laundering is the processing of these criminal proceeds to disguise their illegal origin.". Laundering disguises criminal proceeds. It need not avoid banks; lawful-source destination concealment relates more closely to terrorist financing; payment deferral is a commercial term.

   Reference: FATF — Frequently Asked Questions — What is Money Laundering?

3. 3Which role correctly describes FATF in the international AML/CFT framework?

   1. A.It prosecutes cross-border laundering cases on behalf of national courts
   2. B.It approves every suspicious transaction before a bank may settle it
   3. C.It develops international AML/CFT standards and policiesCorrect answer: C
   4. D.It issues documentary credits for banks in high-risk jurisdictions

   Explanation: The source states: "The FATF is a policy-making body and has no investigative authority.". FATF sets policy and standards. National authorities investigate and prosecute; FATF does not approve bank transactions or issue trade instruments.

   Reference: FATF — Frequently Asked Questions — Who can I contact if I suspect a case of money laundering?

4. 4A bank assesses one trade relationship as materially higher risk than another. Under the FATF risk-based approach, how should its mitigation respond?

   1. A.Apply proportionately enhanced measures to the higher-risk relationshipCorrect answer: A
   2. B.Use identical measures because varying controls is prohibited
   3. C.Reduce measures because high-risk customers provide more information
   4. D.Replace all customer checks with a higher commercial interest rate

   Explanation: The source states: "Where higher risks are identified financial institutions and DNFBPs should be required to take enhanced measures". Controls should respond to assessed risk. Identical treatment regardless of risk, reduced scrutiny and credit pricing alone do not meet that principle.

   Reference: FATF — International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation — Interpretive Note to Recommendation 1 — Higher risk

5. 5A seller invoices 500 units but deliberately ships only 200 units of the same product at the stated unit price. Which technique is illustrated?

   1. A.Short shippingCorrect answer: A
   2. B.Over shipping
   3. C.Multiple invoicing
   4. D.Export factoring

   Explanation: The source states: "The seller ships less than the invoiced quantity or quality of goods". Short shipping misrepresents quantity in the seller's favour. Over shipping reverses the mismatch, multiple invoicing repeats a billing demand, and factoring purchases receivables.

   Reference: Wolfsberg Group, ICC and BAFT — Trade Finance Principles — Core — 3.1(a)(iv), p. 12 — Short Shipping

6. 6Which financing falls within FATF Recommendation 5's criminalisation standard?

   1. A.Only financing linked to a completed terrorist attack
   2. B.Only financing linked to a specified future terrorist attack
   3. C.Only financing spent on weapons for a particular attack
   4. D.Financing a terrorist organisation without a specific attack linkCorrect answer: D

   Explanation: The source states: "even in the absence of a link to a specific terrorist act or acts". The standard extends beyond funding a particular attack to terrorist organisations and individuals. The proposed attack, date and weapons prerequisites narrow it incorrectly.

   Reference: FATF — International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation — Recommendation 5 — Terrorist financing offence

7. 7In the IMF background paper's basic description, what makes financial services 'offshore'?

   1. A.They are supplied only to residents of the service provider's country
   2. B.They are provided to non-residents by banks or other agentsCorrect answer: B
   3. C.They are confined to lending secured on ships at sea
   4. D.They are necessarily supplied without any legal registration

   Explanation: The source states: "the provision of financial services by banks and other agents to non-residents". The offshore distinction concerns non-resident provision, not a maritime asset or the absence of registration.

   Reference: IMF — Offshore Financial Centers: Background Paper — II.A — What It Is and Where It Is Done

8. 8A seller ships goods directly to a foreign buyer, with payment due 60 days after delivery. Which arrangement does this describe?

   1. A.Cash-in-advance
   2. B.Open accountCorrect answer: B
   3. C.Confirmed letter of credit
   4. D.Documents against payment

   Explanation: The source states: "An open account transaction is a sale where the goods are shipped and delivered before payment is due". The seller extends credit directly to the buyer. Advance payment reverses the timing; an LC requires a bank undertaking; documents against payment conditions release of documents on payment.

   Reference: International Trade Administration — Trade Finance Guide — Open Account

9. 9A criminal first deposits cash from drug sales into the financial system. Which conventional money-laundering stage is illustrated?

   1. A.Layering
   2. B.Integration
   3. C.PlacementCorrect answer: C
   4. D.Trade settlement

   Explanation: The source states: "the launderer introduces his illegal profits into the financial system". Placement introduces illicit proceeds into the financial system. Layering distances funds from their source, integration returns them to apparently legitimate use, and trade settlement is not the name of this stage.

   Reference: FATF — Frequently Asked Questions — How is money laundered?

10. 10How are countries expected to implement the FATF Recommendations?

    1. A.By replacing all domestic law with one identical global banking code
    2. B.By applying the standards only to transactions denominated in US dollars
    3. C.By limiting implementation to banks that conduct documentary trade
    4. D.By adapting implementation measures to their particular circumstancesCorrect answer: D

    Explanation: The source states: "an international standard, which countries should implement through measures adapted to their particular circumstances". FATF establishes a common standard that accommodates differing national systems. It does not demand one identical code or restrict application by currency or documentary product.

    Reference: FATF — The FATF Recommendations — The FATF Recommendations