KYC-AML- MODULE 1

1. Our Paharganj branch remains heavily crowded during afternoon hours. One fine day five
customers arrived together in the branch in strange outfits, which was noticed by the security
guard on duty. He further noticed that initially when they had entered the premises, they were
continuously talking to each other, but thereafter, they got dispersed and started pretending to
ignore each other. The security guard raised the issue to the branch head. When he enquired he
noted that all the five persons were having bearer cheques in their hands for encashment. All
the cheques had been drawn by a single drawer. They were not aware of any details regarding
the drawer. The branch decided to report this incident through a Suspicious Transaction Report
(STR)/ Suspicious Activity Report (SAR). What is the category of source of such an offline Red
Flag Indicator (RFI)/ alert ?

Ans: Employee Initiated (EI)-Employee raised alert- Multiple customers working as a group

2. A customer, namely, Mr T entered your branch. He tendered three cheques of Rs 500000, Rs

400000 and Rs 350000 for transferring funds from his personal account to the account of Mr U.
Three cheques of the same amount drawn by Mr U were tendered along with pay-in-slips for
transferring the funds to the account of Ms V. Through a single cheque of Rs 1250000 from the
account of Ms V the funds were transferred again to the Home Loan account of Mr T. The
service manager asked Mr T the rational and purpose of these transactions but Mr T replied
rudely to avoid further queries. The branch head decides to report these transactions as
Suspicious Transactions through a Suspicious Transaction Report. What is the category of source
of such an STR/SAR?

Ans: Typology (TY) related- Routing of funds through multiple accounts -transactions of value of
greater than INR 10 lacs between more than 3 accounts aggregating to more than INR 30 lacs on the
same day.

3. Which of the following is NOT a category of source of system generated STR (Suspicious
Transaction Report) ?

Ans: Customer Verification (CV)-Detected during customer acceptance, identification or verification

4. A customer of a branch in Secunderabad, did not complete transaction after queries were made
by the dealing staff, regarding source of the funds and left the branch in feigned anger, the
branch diligently decided to report it as a Suspicious Activity through Suspicious Activity Report/
STR. Under which category the source of the offline Red Flag Indicator (RFI)/ alert will fall?

Ans: Employee Initiated (EI)-Employee raised alert- customer did not complete transaction
 5. A customer of a branch in Hyderabad, was not able to answer the queries made by the service
manager, regarding the drawer of the cheque, which had been drawn for a large amount.
Customer was nervous and over cautious in explaining genuineness of the transaction and
frequently changing his statements. This made the official as well as the branch head suspicious
and they decided to report the incidence as a Suspicious Activity through Suspicious Activity
Report/ STR. Under which category the source of the offline Red Flag Indicator (RFI)/ alert will
fall?

Ans: Employee Initiated (EI)-Employee raised alert- customer did not complete transaction

6. Mr Y visited a bank branch to open account of a Pvt Ltd company. It was difficult to identify
beneficial owner due to complex legal structure and complex holdings in the company as well as
non cooperation by the directors. The branch got suspicious and decided to file a Suspicious
Transaction Report (STR)/ Suspicious Activity Report (SAR) in this case. What is the source of
such an offline Red Flag Indicator (RFI)/ alert?

Ans: Customer Verification (CV)-Detected during customer acceptance, identification or verification

7. Mr A is customer of a RUSU branch. Mr A owns a small grocery shop and his gross monthly
turnover of the trade is around thirty thousand rupees only. He has two accounts at the branch,
one in his individual name and another in the name of the proprietorship concern. For the past
few days he has been depositing thirty to forty nine thousand rupees in cash in his individual
account almost every day. This is very abnormal looking to the past pattern of the transactions
in the account, as well as looking to the profile of the customer. The service manager has
noticed this and one day he called and asked regarding source of funds. Mr A became nervous
and could not explain the source of funds to the satisfaction of the service manager who
reported it to the branch head. The branch head has decided to report it as a Suspicious
Transaction /Suspicious Activity through a Suspicious Transaction Report/Suspicious Activity
Report. What is the category of source of such an STR/SAR?

Ans: Employee Initiated (EI)-Employee raised alert- Customer could not explain source of funds

8. The dedicated AML-CFT department of our Bank is situated in ______city?

Ans: Jaipur

9. To facilitate proper monitoring of transactions by Money Laundering Reporting Officers

(MLROs), as per reporting structure that has been put in place, who is designated as Assistant
MLRO?

Ans: All Branch Heads Region Heads and CPC Heads

 10. Mr X opened an account but the letter of thanks as well as customised cheque book got
returned with the remark "Customer not staying at the provided address'. The branch officials
also confirmed the fact by visiting in person and decided to report this through a Suspicious
Transaction Report (STR)/ Suspicious Activity Report (SAR). What is the category of source of
such an offline Red Flag Indicator (RFI)/ alert ?

Ans: Customer Verification (CV)-Detected during customer acceptance, identification or verification

14. Who is designated as PRINCIPAL OFFICER as per the 'AML/CFT STRUCTURE in our BANK' for the
purpose of Section 12 of PMLA, 2002?

Ans: G.M. (AML-CFT)

15. Address provided by the customer Mr F was found to be non existent and an STR (Suspicious
Transaction Report) was raised by the branch. What is the source of such an offline Red Flag Indicator
(RFI)/ alert ?

Ans: Customer Verification (CV)-Detected during customer acceptance, identification or verification

16. To facilitate proper monitoring of transactions by Money Laundering Reporting Officers (MLROs), as
per reporting structure that has been put in place, who is designated as Dy MLRO?

Ans: Dy. General Manager (Business & Operations)

17. Which of the following is NOT a category of source of Subjective STR (Suspicious Transaction
Report)/ SAR (Suspicious Activity Report)?

Ans: Watch List (WL) related: Matching the customer details by system, with the specified negative
lists such as UN list, OFAC

18. On one fine day a customer approached the frontline staff of a bank branch and asked if he could
deposit Rs 25 lac in cash in his account on five different dates within a month and whether the branch
will report these transactions in Cash Transaction Report. When replied in affirmation he tried to
convince the staff to avoid reporting as each transaction is below the threshold level. He deposited Rs 5
lac in cash and asked the way outs, to avoid reporting further cash transactions in his account. One of
the associates reported this suspicious behaviour of the customer to the branch head. The branch head
decided to report it as a Suspicious Transaction /Suspicious Activity through a Suspicious Transaction
Report/Suspicious Activity Report. What is the category of source of such an offline Red Flag Indicator
(RFI)/ alert?

Ans: Employee Initiated (EI)-Employee raised alert- Customer wants to avoid reporting
19. Mr X is a small shopkeeper with very limited clientele which is based locally in and around the
vicinity of the shop. He is having his personal account in your branch. The service manager has noted
sudden spurt in transactions in the account. There are frequent cash deposits in the account from
different locations across pan India. The amounts or frequency or the stated reason of the transactions
does not make sense for the particular customer. It was decided to report these transactions as
Suspicious Transactions through a Suspicious Transaction Report/Suspicious Activity Report. What is the
category of source of such an STR/SAR?

Ans: Employee Initiated (EI)-Employee raised alert- transaction has no economic rationale

20. What is the periodicity of Customer Risk Categorisation (CRC) for Low risk individuals and entities?

Ans: Every 10 Years

24. Mr A, Branch head of a branch situated in a metro city, came across a news article in the local daily
newspaper. The details of the person reported in the newspaper for money laundering offences was
matching with an eminent customer of the branch. The branch head prepared a Suspicious Transaction
Report (STR) and sent to the controller of the branch. What is the category of source of such an offline
Red Flag Indicator (RFI)/ alert ?

Ans: Media Reports (MR)-Adverse Media Reports about customer, being investigated for criminal
offences

25. Which of the following is NOT a category of source of Subjective STR (Suspicious Transaction
Report)/ SAR (Suspicious Activity Report)?

Ans: Watch List (WL) related: Matching the customer details by system, with the specified negative
lists such as UN list, OFAC etc.

26. One customer approached a bank branch to open an account and deposit a cheque of large amount
in the newly opened account. The customer seemed to be in hurry and was not able to explain why he
had travelled unexplained distances from his own place to open an account and conduct transactions in
a far off situated branch. This made the branch officials suspicious and the branch decided to report this
incident through a Suspicious Transaction Report (STR)/ Suspicious Activity Report (SAR) as a CDD
measure. What is the category of source of such an offline Red Flag Indicator (RFI)/ alert?

Ans: Employee Initiated (EI)-Employee raised alert -Customer avoiding nearer branches

27. How many types of STRs are there?

Ans: System Generated STRs and Subjective STRs

28. Each Business Group/Circle/SBU designates an official to ensures proper implementation of
KYC/AML/CFT Policy in the Group/Circle/SBU and to report to the Principal Officer (AML-CFT). What is
the designation of such designated official?

Ans: Money Laundering Reporting Officer (MLRO)

29. Mr B, Branch head of a branch situated in Mumbai city, came across a news article in the local daily
newspaper. The details of the person reported in the newspaper for terror financing offences was
matching with a customer of the branch. The branch head prepared a Suspicious Transaction Report
(STR) and sent to the controller of the branch. What is the category of source of such an offline Red Flag
Indicator (RFI)/ alert?

Ans: Media Reports (MR)-Adverse Media Reports about customer, being investigated for TF offences

30. A customer entered the main branch of a bank in Agra city. The behaviour of the customer made the
service manager suspicious when the customer failed to answer few questions asked by the service
manager as part of customer due diligence. Customer had vague knowledge about amount of money
involved in the transaction. Customer was nervously calling someone else and taking instructions for
conducting transactions and answering queries of branch officials. His behavioural pattern put the
branch officials on alert, and it was decided by branch to report the incidence as a Suspicious
Transaction /Suspicious Activity through a Suspicious Transaction Report/Suspicious Activity Report.
What is the category of source of such an offline Red Flag Indicator (RFI)/ alert?

Ans: Employee Initiated (EI)-Employee raised alert

1. Which of the following is NOT a category of source of system generated STR (Suspicious
Transaction Report) ?

Ans: Risk Management System (RM) related

2. You as a branch head received complaint from public in general for abuse of account for
committing fraud by Sh Haughty. This you verified by going through the transactions in the
account. Sh Haughty is non cooperative and does not enjoy good reputation. You decided to
report this matter as Suspicious Transactions / Suspicious Activity through a Suspicious
Transaction Report/Suspicious Activity Report. What is the category of source of such an
STR/SAR?

Ans: PC- Complaint received from public

3. A Branch received queries from NSA regarding Mr Z, who is a customer of the branch. It was
evident from the query that the customer was under investigation in regards to terror financing
offences/ terrorist activities. The branch decided to report this incident through a Suspicious
Transaction Report (STR)/ Suspicious Activity Report (SAR). What is the category of source of
such an offline Red Flag Indicator (RFI)/ alert ?
 Ans: Law enforcement agency query (LQ)

4. Mr S is a student studying in AMU and having an account with your branch. One fine day you
received a letter from nearby branch of another nationalised bank, regarding unusual pattern of
transactions noticed in the account of Mr S, held with them. Some of the transactions had
originated through your branch. When you verified the transactions in the account with your
branch, you also found transactions, which were inconsistent with the profile of the account
holder. You immediately decided to report these transactions as Suspicious Transactions
through a Suspicious Transaction Report. What is the category of source of such an STR?

Ans: Business Associates (BA)- information received from other institutions, subsidiaries or associates.

5. The dedicated AML-CFT department of our Bank is situated in ______city?

Ans: Jaipur

6. Each Business Group/Circle/SBU designates an official to ensures proper implementation of

KYC/AML/CFT Policy in the Group/Circle/SBU and to report to the Principal Officer (AML-CFT).
What is the designation of such designated official?

Ans: Money Laundering reporting officer (MLRO)

7. As per Prevention of Money Laundering (Maintenance of Records) Rules-2005 what does a

“Suspicious Transaction” mean?

Ans: All of the above

8. Through which set up Suspicious Transaction Reports are sent to Financial Intelligence Unit-India
(FIU- IND)?

Ans: STRs to be reported through prinicipal officer, AML-CFT cell to FIU-IND

9. Who are nominated as MLROs at Circle level as per the 'AML/CFT STRUCTURE in our BANK' ?

Ans: DGMs & CFOs

10. Which of the following is NOT a category of source of system generated STR (Suspicious
Transaction Report) ?

Ans: Business Associates (BA)

11. Sunshine Kids' an NPO, has been maintaining a savings bank account with your branch. A
foreign remittance received by NPO is not approved by FCRA. The management of the NPO is
requesting to credit the amount without insisting for FCRA approval. The service manager
brought this issue to the notice of the branch head who in turn decided to report this instance
as Suspicious Transactions / Suspicious Activity through a Suspicious Transaction
Report/Suspicious Activity Report. What is the category of source of such an STR/SAR?
Ans: Employee initiated (EI)- Employee raised alert- unapproved inward remittance in the account of
NPO

12. AGM Regions/Branch Heads / Heads of the CPCs- are responsible for reporting of suspicious
transactions passing through their units. What is the designated role of AGM Regions/Branch
Heads / Heads of the CPCs as per the 'AML/CFT STRUCTURE in our BANK'?

Ans: Assistant MLROs

13. Address provided by the customer Mr F was found to be non existent and an STR (Suspicious
Transaction Report) was raised by the branch. What is the source of such an offline Red Flag
Indicator (RFI)/ alert ?

Ans: Customer Verification (CV)

16. Mr X is a small shopkeeper with very limited clientele which is based locally in and around the
vicinity of the shop. He is having his personal account in your branch. The service manager has noted
sudden spurt in transactions in the account. There are frequent cash deposits in the account from
different locations across pan India. The amounts or frequency or the stated reason of the
transactions does not make sense for the particular customer. It was decided to report these
transactions as Suspicious Transactions through a Suspicious Transaction Report/Suspicious Activity
Report. What is the category of source of such an STR/SAR?

Ans: Employee Initiated- EI –employee raised alert- transaction has no economic raionale

17. Our Paharganj branch remains heavily crowded during afternoon hours. One fine day five
customers arrived together in the branch in strange outfits, which was noticed by the security guard
on duty. He further noticed that initially when they had entered the premises, they were continuously
talking to each other, but thereafter, they got dispersed and started pretending to ignore each other.
The security guard raised the issue to the branch head. When he enquired he noted that all the five
persons were having bearer cheques in their hands for encashment. All the cheques had been drawn
by a single drawer. They were not aware of any details regarding the drawer. The branch decided to
report this incident through a Suspicious Transaction Report (STR)/ Suspicious Activity Report (SAR).
What is the category of source of such an offline Red Flag Indicator (RFI)/ alert?

Ans: Employee Initiated- EI –employee raised alert- multiple customers working as a group
18. Mr X opened an account but the letter of thanks as well as customised cheque book got returned
with the remark "Customer not staying at the provided address'. The branch officials also confirmed
the fact by visiting in person and decided to report this through a Suspicious Transaction Report (STR)/
Suspicious Activity Report (SAR). What is the category of source of such an offline Red Flag Indicator
(RFI)/ alert?

Ans: Customer Verification (CV)

19. What is meant by 'Placement' process in Money Laundering Process?

Ans: Physical disposal of illegal cash or property by infusing them into financial system.

20. You being the Beneficiary Bank, have received a wire-transfer from Ordering Bank in favour of Al
Faraz & Co. The detailed information on the fund remitter is missing with the message. Despite
repeated requests the ordering bank has failed to furnish information on the remitter, Being a
beneficiary Bank what will be your action and view regarding the ordering Bank?

Ans: The beneficiary bank should consider restricting or even terminating its business relationship
with the ordering bank

21. What is True about 'System generated STRs'?

Ans: System Generated STRs are escalated based on alerts triggered by AML software system

22. What is the periodicity of undertaking exercise of Customer Risk categorization (CRC) by AML-CFT
Department?

Ans: Half yearly intervals typically as on 31st March and 30th September every year or in between if the
need arises

23. Which of the following is NOT a category of source of Subjective STR (Suspicious Transaction
Report)/ SAR (Suspicious Activity Report)?

Ans: Watch List (WL) related

24. Mr A, Branch head of a branch situated in a metro city, came across a news article in the local daily
newspaper. The details of the person reported in the newspaper for money laundering offences was
matching with an eminent customer of the branch. The branch head prepared a Suspicious
Transaction Report (STR) and sent to the controller of the branch. What is the category of source of
such an offline Red Flag Indicator (RFI)/ alert?

Ans: Media Reports (MR)

25. What is the act of 'Tipping Off'?

Ans: The act of letting the customer know, that their transactions/accounts are under suspicion and
maybe subject to reporting
26. What is meant by 'Layering' process in Money Laundering Process?

Ans: Separation of illicit proceeds from their original sources and beyond the grasp of local law
enforcement agencies by layering of financial transactions with the intention to conceal the origin of
the proceeds.

27. In one of our branches an FDR was created of a large amount through the, so called investment
advisor, of an institution. Fraudsters handed over counterfeit FDR to the real investor and
subsequently within a span of few days approached the branch to avail a loan/OD facility against
original FDR and other forged documents. Due to the due diligence on the part of the branch officials
the fraud was averted. Should the branch report this incident as suspicious Transaction/ Suspicious
Activity through a Suspicious Transaction Report?

Ans: Yes, this should be necessarily reported as attempted suspicious transaction

28. Suspicious Transactions Reports (STRs) can be classified into two following broad categories that
is_______________, based on the source of the alert which resulted in escalating such STRs

Ans: System Generated and Subjective STRs

29. On one fine day a customer approached the frontline staff of a bank branch and asked if he could
deposit Rs 25 lac in cash in his account on five different dates within a month and whether the branch
will report these transactions in Cash Transaction Report. When replied in affirmation he tried to
convince the staff to avoid reporting as each transaction is below the threshold level. He deposited Rs
5 lac in cash and asked the way outs, to avoid reporting further cash transactions in his account. One
of the associates reported this suspicious behaviour of the customer to the branch head. The branch
head decided to report it as a Suspicious Transaction /Suspicious Activity through a Suspicious
Transaction Report/Suspicious Activity Report. What is the category of source of such an offline Red
Flag Indicator (RFI)/ alert?

Ans: Employee Initiated (EI)

30. Mr A is customer of a RUSU branch. Mr A owns a small grocery shop and his gross monthly
turnover of the trade is around thirty thousand rupees only. He has two accounts at the branch, one
in his individual name and another in the name of the proprietorship concern. For the past few days
he has been depositing thirty to forty nine thousand rupees in cash in his individual account almost
every day. This is very abnormal looking to the past pattern of the transactions in the account, as well
as looking to the profile of the customer. The service manager has noticed this and one day he called
and asked regarding source of funds. Mr A became nervous and could not explain the source of funds
to the satisfaction of the service manager who reported it to the branch head. The branch head has
decided to report it as a Suspicious Transaction /Suspicious Activity through a Suspicious Transaction
Report/Suspicious Activity Report. What is the category of source of such an STR/SAR?

Ans: Employee Initiated (EI)

 1. In case a customer offers different identifications on different occasions with an apparent
attempt to avoid linkage of multiple transactions, and the frontline staff reports this incident to
you, in the capacity of a branch head. You should report this incident through a Suspicious
Transaction Report (STR)/ Suspicious Activity Report (SAR) as a CDD measure. The source of this
type of offline Red Flag Indicator (RFI)/ alert, will fall under ________ Category.

Ans: Employee Initiated (EI)-Employee raised alert- Customer offers different identifications on
different occasions

2. A customer entered the main branch of a bank in Agra city. The behaviour of the customer
made the service manager suspicious when the customer failed to answer few questions asked
by the service manager as part of customer due diligence. Customer had vague knowledge
about amount of money involved in the transaction. Customer was nervously calling someone
else and taking instructions for conducting transactions and answering queries of branch
officials. His behavioural pattern put the branch officials on alert, and it was decided by branch
to report the incidence as a Suspicious Transaction /Suspicious Activity through a Suspicious
Transaction Report/Suspicious Activity Report. What is the category of source of such an offline
Red Flag Indicator (RFI)/ alert?

Ans: Employee Initiated (EI)-Employee raised alert- Customer probably acting on behalf of a third
party.

3. Which of the following is NOT a category of source of system generated STR (Suspicious
Transaction Report) ?

Ans: Media Report (MR) - Adverse media report about criminal activities of customer

4. On one fine day a customer approached the frontline staff of a bank branch and asked if he
could deposit Rs 25 lac in cash in his account on five different dates within a month and
whether the branch will report these transactions in Cash Transaction Report. When replied in
affirmation he tried to convince the staff to avoid reporting as each transaction is below the
threshold level. He deposited Rs 5 lac in cash and asked the way outs, to avoid reporting
further cash transactions in his account. One of the associates reported this suspicious
behaviour of the customer to the branch head. The branch head decided to report it as a
Suspicious Transaction /Suspicious Activity through a Suspicious Transaction
Report/Suspicious Activity Report. What is the category of source of such an offline Red Flag
Indicator (RFI)/ alert?

Ans: Employee Initiated (EI)-Employee raised alert- Customer wants to avoid reporting
 5. The service manager of a branch has brought to the notice of the branch head that Sh Blacky
has been visiting branch quite often with frequent requests to access his locker. He has
already operated the locker for 18 times during past 30 days. When contacted he could not
provide satisfactory reply and rather abused the staff for not cooperating. As a branch head,
you decided to report this incident as Suspicious Transactions / Suspicious Activity through a
Suspicious Transaction Report/Suspicious Activity Report. What is the category of source of
such an STR/SAR?

Ans: Employee Initiated (EI)-Employee raised alert- Frequent locker operations

6. Suspicious Transactions Reports (STRs) can be classified into two following broad categories
that is_______________, based on the source of the alert which resulted in escalating such
STRs

Ans: System Generated STRs & Subjective STRs

7. Mr A has deposited Rupees forty nine thousand in cash in ten different accounts on the same
day and then transferred the so deposited amount from all the ten accounts to his own
personal account. Then he issued a cheque for effecting an RTGS in favour of an educational
institute. Mr A stated that he wanted to pay the money to the institute for undertaking some
course, while replying to query raised by the service manager. The service manager is not
convinced as the transactions are unnecessarily complex for the stated purpose. He reported
the incident to the branch head. The branch head decides to report it as a Suspicious
Transaction /Suspicious Activity through a Suspicious Transaction Report/Suspicious Activity
Report. What is the category of source of such an STR/SAR?

Ans: Employee Initiated (EI)-Employee raised alert- transaction is unnecessarily complex

8. In a bizarre case same Directors/authorized signatories of a company requested to open

different accounts in the same branch under various sub-heads, which put the branch officials
on alert. The branch head contemplated reporting this incidence through a Suspicious
Transaction Report (STR)/ Suspicious Activity Report (SAR). What is the category of source of
such an offline Red Flag Indicator (RFI)/ alert ?

Ans: Employee Initiated (EI)-Employee raised alert

9. Whenever non home/ home branches are putting hold on the account for suspicious reasons,
should they report such cases to AML-CFT dept.?
Ans: Yes, if the hold is due to suspicious reasons/alerts.
10. Mr X provided false identification/address documents that appeared to be counterfeited,
altered, and inaccurate at the time of onboarding, the dealing officer and branch head
decided to raise a Suspicious Transaction Report (STR)/ Suspicious Activity Report (SAR). The
source of such an offline Red Flag Indicator (RFI) / alert falls under______category?
Ans: Customer Verification (CV)-Detected during customer acceptance, identification or
verification

11. What is the third Stage of Money Laundering after first two stages of Placement and Layering?
Ans: Integration

12. Each Business Group/Circle/SBU designates an official to ensures proper implementation of

KYC/AML/CFT Policy in the Group/Circle/SBU and to report to the Principal Officer (AML-CFT).
What is the designation of such designated official?
Ans: Money Laundering Reporting Officer (MLRO)

13. Address provided by the customer Mr F was found to be non existent and an STR (Suspicious
Transaction Report) was raised by the branch. What is the source of such an offline Red Flag
Indicator (RFI)/ alert ?
Ans: Customer Verification (CV)-Detected during customer acceptance, identification or
verification

14. What is full form of FATF?

Ans: Financial Action Task Force