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CKYCA
Certified Know Your Customer Associate Questions and Answers

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Questions # 1:

During the regular periodic review of a high-risk client, a KYC analyst performs EDD checks and detects the presence of a politically exposed person. The KYC analyst should escalate this issue to the:

Options:

onboarding team for the assessment of risk

management team for approval or denial of risk

head of the KYC team for approval or denial of risk.

privacy officer for the assessment of risk

Answer

Explanation

When a politically exposed person (PEP) is identified during enhanced due diligence, FATF requires that senior management approve the decision to continue or terminate the relationship due to the elevated financial crime risk.

Questions # 2:

An existing customer publicly states she is planning to run for public office, but changes her mind. Which action should a KYC analyst take?

Options:

Review the customer’s compliance file to fill in any gaps needed to complete her new EDD status.

Discuss the matter with the Money Laundering Reporting Officer to determine if more information is required for the due diligence file

Reach out to the customer to determine if she plans to run for public office in the future.

Designate the customer as a high-risk customer due to the attention caused by her public statement.

Answer

Explanation

A public statement about running for office raises potential PEP considerations. Even if the customer changes her mind, the KYC analyst should discuss the matter with the Money Laundering Reporting Officer to assess whether further information is needed to update the due diligence file.

Questions # 3:

During an EDD process for a business customer, which document is the best source to identify and obtain details on the source of funds?

Options:

Financial statements

Company's website

Utility bill

Articles of incorporation

Answer

Explanation

Financial statements provide verifiable details about a company’s income sources, profitability, and cash flow, making them the most reliable document for identifying and confirming the source of funds during EDD.

Questions # 4:

An Ultimate Beneficial Owner (UBO) with a control prong is an individual with:

Options:

indirect ownership greater than a certain percent value.

direct and indirect ownership greater than a certain percent value but who lacks management and operational control.

direct and indirect ownership less than a certain percent value who exercises management and operational control.

direct ownership greater than a certain percent value.

Answer

Explanation

Under the control prong, a UBO is identified as an individual who may not meet the ownership threshold but still exercises significant management or operational control over the entity, thereby having effective influence over its activities.

Questions # 5:

A KYC analyst is onboarding a client based in a known offshore jurisdiction. Based on the client’s incorporation documentation and statement, the purpose of the company is to hold the shares of its subsidiary. Public records and registers indicate that the registered address is also used by multiple other legal entities. Which CDD step should the KYC analyst take?

Options:

Ask for the clientэs utility bill confirming the registered address.

Perform EDD, as the client might be a shell company.

Follow the regular KYC requirements as per legal form of the client

Follow the KYC requirements for the holding companies

Answer

Explanation

The combination of being in an offshore jurisdiction, having a registered address shared by many entities, and acting only as a holding company raises a high risk of the client being a shell company, requiring Enhanced Due Diligence (EDD).

Questions # 6:

A foreign customer claims as source of wealth the sale of inherited real estate. Which would be an appropriate next step in the verification process?

Options:

Obtain a bank reference letter

Visit the inherited real estate to verity the existence.

No further evidence is required for inheritance.

Obtain the sale contract.

Answer

Explanation

Obtaining the sale contract provides documented evidence of the transaction, allowing verification of both the existence of the inherited property and the legitimacy of the proceeds as the customer’s source of wealth.

Questions # 7:

In which circumstance must a KYC analyst obtain source of wealth information on a client subject to CDD?

Options:

Information on source of wealth for CDD clients must always be collected.

The client is establishing a business relationship with a private company whose benefit surpasses 10 million USD.

The client's senior manager is deemed to be an ultimate beneficial owner.

The number of business relationships involving high-risk third countries or politically exposed persons increases.

Answer

Explanation

FATF requires obtaining and verifying source of wealth information in higher-risk situations, such as when there is increased involvement with high-risk jurisdictions or Politically Exposed Persons (PEPs), as part of enhanced due diligence.

Questions # 8:

A KYC analyst suspects a transaction is related to a sanctioned individual. How should the analyst respond?

Options:

Continue with the due diligence onboarding procedure, focusing on primary and secondary documentation.

Discuss the issue with the firm's compliance officer as it is of low priority.

Reach out to the customer to confirm their sanctions status during the onboarding process, and after that, once a year.

Report the issue immediately according to the defined procedures.

Answer

Explanation

Any suspicion of a link to a sanctioned individual must be reported immediately through the institution’s defined sanctions compliance procedures to ensure legal and regulatory obligations are met without tipping off the customer.

Questions # 9:

In regards to ongoing CDD, financial institutions should ensure:

Options:

they apply a risk-based approach on the frequency of customer profile reviews.

a yearly review of information they maintain on all customers for consistency and efficiency.

a thorough CDD process during customer onboarding so that periodic reviews are unnecessary.

the customer profile is reviewed prior to every transaction in order to make sure the information is unchanged or current.

Answer

Explanation

Ongoing CDD should follow a risk-based approach, meaning higher-risk customers are reviewed more frequently, while lower-risk customers are reviewed at longer intervals, optimizing resources and maintaining compliance.

Questions # 10:

A KYC analyst is onboarding a high-net-worth client and, during the screening process, notices that the prospective client is the parent of a government minister. After the analyst performs a source of wealth analysis, whose approval is needed before opening the account?

Options:

Relationship management

Senior management

Team management

Project management

Answer

Explanation

FATF requires that the decision to establish or continue a business relationship with a Politically Exposed Person (PEP), or their close family members, must be approved by senior management after appropriate enhanced due diligence has been completed.

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