CKYCA Sample Questions & Answers
Enhanced due diligence, digging into source of wealth and complex ownership structures, carries the biggest share, ahead of identifying and verifying customers, rating their risk and spotting red flags, sanctions screening, and writing up the final profile.
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- Question 1Intermediate
Customer Risk Rating · Evaluate customer risk based on core risk categories
A multinational bank uses a risk scoring model to rate new customers. The model assigns points based on Geography, Product, and Customer Type.
Based on the risk matrix logic below, how should a 'Non-Profit Organization' (High Risk) located in 'Switzerland' (Low Risk) using only 'Wire Transfers' (High Risk) be initially categorized before mitigation?
quadrantChart title Risk Assessment Matrix x-axis Low Geography Risk --> High Geography Risk y-axis Low Product Risk --> High Product Risk quadrant-1 High Overall Risk quadrant-2 High Overall Risk quadrant-3 Low Overall Risk quadrant-4 Medium Overall Risk Client: [0.2, 0.8]Show answer & explanation
Correct answer: C
Even though the geography (Switzerland) is low risk, the combination of Customer Type (Non-Profit Organization, often considered higher risk for terrorist financing) and Product (Wire Transfers, high velocity/volume) elevates the Inherent Risk. Most risk models default to the highest risk factor present (the 'High Water Mark' principle) or use a weighted average that would push this into the High category due to 2 out of 3 factors being high.
- Question 2Advanced
Customer Screening · Distinguish between material and immaterial hits
Which of the following scenarios describes a 'False Negative' in the context of customer screening, and why is it considered the most dangerous outcome?
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Correct answer: A
A False Negative occurs when the screening system misses a true match (e.g., due to poor fuzzy matching logic or data quality issues). This is the most dangerous outcome because the institution unwittingly processes transactions for a sanctioned entity, leading to potential regulatory fines, legal action, and severe reputational damage.
- Question 3IntermediateSelect 2
Enhanced Due Diligence (EDD) · Identify and obtain details of source of wealth
A KYC analyst is performing Enhanced Due Diligence (EDD) on a High Net Worth Individual (HNWI). The customer claims their wealth originates from 'early investments in cryptocurrency.' Which combination of documents would best corroborate this Source of Wealth (SoW)? (Select TWO)
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Correct answers: A, E
Official tax returns are strong independent verification that the wealth was declared to authorities, lending legitimacy to the claim.
Exchange records provide a clear audit trail of the investment lifecycle: the initial fiat entry (source of funds for investment) and the trading activity that generated the capital gain (source of wealth).
- Question 4Intermediate
Customer Profile Documentation and Presentation · Present effectively crafted profiles with objectivity and precision
When documenting a customer profile for a high-risk client, why is it critical to maintain an 'objective' tone rather than a 'subjective' one?
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Correct answer: D
Regulatory audits rely on facts. Subjective statements (e.g., 'The client seems suspicious') are not evidence. Objective statements (e.g., 'The client refused to provide UBO data') are actionable, defensible, and reduce the risk of unfair treatment or bias.
- Question 5Intermediate
Enhanced Due Diligence (EDD) · Perform account activity reviews
A compliance officer is configuring the transaction monitoring system. They need to set a rule to detect 'Structuring' (or Smurfing). Which of the following parameters is most effective for this specific typology?
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Correct answer: C
Structuring involves breaking down large sums of cash into smaller transactions to avoid regulatory reporting thresholds (typically $10,000). A rule targeting multiple deposits just below this threshold is specifically designed to catch this behavior.
- Question 6Advanced
Customer Screening · Screen for sanctions compliance
Case Study:
GlobalBank is reviewing a corporate customer, 'Oceanic Trade Ltd.', registered in Panama. The company deals in import/export of heavy machinery.
Paragraph 1: During the periodic review, the analyst notices a change in the UBO structure. The previous 100% owner has transferred their shares to a new entity, 'SeaShell Holdings', registered in the British Virgin Islands (BVI). No documentation regarding the new UBOs of SeaShell Holdings was provided.
Paragraph 2: Simultaneously, transaction monitoring reveals a spike in wire transfers to a manufacturing firm in a sanctioned country, although the invoices provided describe the goods as 'generic spare parts' with vague HS codes.
What is the most immediate and critical action the analyst must take regarding the sanctions risk?
Show answer & explanation
Correct answer: D
The vague goods description combined with payments to a sanctioned country suggests potential sanctions evasion or Dual-Use Goods trade. The immediate priority is to determine if the specific trade activity violates sanctions (Sectoral or comprehensive) before freezing, as some trade might be licensed or humanitarian. Incorrectly freezing without analysis can have legal repercussions, though blocking the specific transaction pending investigation is standard.
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