100 AML & COMPLIANCE

INTERVIEW QUESTIONS
YOUR ULTIMATE GUIDE TO CRACK INTERVIEWS 🚀

1. What is Anti-Money Laundering (AML)?

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AML refers to laws, regulations, and procedures designed to prevent criminals from disguising

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illegally obtained funds as legitimate income.

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2. What are the three stages of money laundering?

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Placement – Introducing illegal funds into the nancial system.

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2. Layering – Moving funds through multiple transactions to obscure their origin.
3. Integration – Merging funds into the economy, making them appear legitimate.

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3. What is Customer Due Diligence (CDD)?

CDD is the process of verifying a customer’s identity and assessing their risk level to prevent
money laundering and fraud.

4. What are the types of CDD?

1. Standard Due Diligence (SDD) – Basic customer checks for low-risk customers.
2. Enhanced Due Diligence (EDD) – Additional checks for high-risk customers.
3. Simpli ed Due Diligence (SDD) – Limited checks for very low-risk customers.

5. What is Know Your Customer (KYC)?

KYC is the process of verifying a customer’s identity using documents like ID, proof of address,
and business registration to prevent fraud.

6. What is Politically Exposed Person (PEP) in AML?

A PEP is an individual with a high-pro le political or public position, posing a higher risk of money
laundering due to potential corruption.

7. What is a Suspicious Transaction Report (STR)?

An STR is a report submitted to regulatory authorities when a transaction appears unusual,

complex, or does not match a customer’s pro le.
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corruption, and tax evasion to gain nancial bene ts.

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10. What are common red ags in AML monitoring?

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Large cash deposits with no clear source.

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Transactions inconsistent with customer pro le.

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• Multiple small transactions (structuring).
• Frequent international transfers to high-risk countries.

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11. What is Enhanced Due Diligence (EDD)?

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EDD is a detailed customer veri cation process conducted for high-risk customers, including PEPs
and businesses from high-risk countries, to prevent money laundering.

12. What is Transaction Monitoring in AML?

Transaction monitoring is the process of reviewing customer transactions to detect unusual patterns
or suspicious activities that could indicate money laundering or fraud.

13. What is the difference between CDD and EDD?

• CDD: Basic customer checks for low and medium-risk customers.

• EDD: In-depth checks for high-risk customers, including source of funds and ongoing
monitoring.
14. What is the purpose of Sanctions Screening?

Sanctions screening is used to identify whether customers, transactions, or businesses are associated
with sanctioned individuals, countries, or entities.

15. What are the key KYC documents required for individuals?

• Government-issued ID (Passport, Aadhaar, or Driving License)

• Proof of Address (Utility bill or Bank statement)
• Photograph
• Income proof (if required)
16. What is Adverse Media Screening?

Adverse media screening is the process of checking if a customer or business is mentioned in

negative news articles related to nancial crime or illegal activities.
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ed by regulatory bodies like FATF due to weak AML laws, corruption, or high

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terrorism risks (e.g., Iran, North Korea).

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20. What is Periodic Review in CDD?

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Periodic review is the process of re-examining customer information and risk level at regular

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intervals to ensure records are updated and risks are managed.

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21. What is the FATF and its role in AML?

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The Financial Action Task Force (FATF) is an international organization that sets global standards
to prevent money laundering, terrorist nancing, and nancial crimes.

22. What is the difference between False Positive and False Negative in Transaction
Monitoring?

• False Positive: A genuine transaction agged as suspicious.

• False Negative: A suspicious transaction not detected by the system.
23. What is a Correspondent Banking Relationship in AML?

It is a relationship between two banks, where one bank provides services to another bank, usually
across borders, which is considered high-risk in AML.

24. What is a Bene cial Owner in KYC?

A bene cial owner is a person who ultimately owns or controls a business or entity, even if the
ownership is indirect (usually 25% or more).

25. What is the difference between KYC and CDD?

• KYC: Process of verifying the customer's identity at the time of onboarding.

• CDD: Continuous assessment of the customer's risk and transactions throughout the
relationship.

26. What is Smur ng in Money Laundering?

Smur ng is breaking large amounts of illegal money into smaller transactions to avoid detection by
regulatory authorities.
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 ed checks to low-risk customers.

28. What is the difference between Structuring and Smur ng?

• Structuring: Splitting a large transaction into smaller amounts to avoid reporting

thresholds.
• Smur ng: Multiple individuals making small transactions on behalf of one person.

29. What is Trade-Based Money Laundering (TBML)?

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TBML is disguising illegal money through trade transactions by manipulating invoices, pricing, or

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shipping documents.

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30. What is an Ultimate Bene cial Owner (UBO)?

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A UBO is the person who ultimately owns or controls a company, even if their name is not directly

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listed in the company documents.

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31. What is Ongoing Monitoring in AML?

Ongoing monitoring is the continuous review of customer transactions and risk pro les to detect
suspicious activities after customer onboarding.

32. What is the purpose of Customer Risk Rating (CRR)?

CRR helps classify customers into low, medium, or high-risk categories based on their pro le,
business activity, location, and transaction patterns.

33. What is Politically Exposed Person (PEP) Screening?

PEP screening identi es individuals with high-pro le political positions or family members who
pose a higher risk of money laundering or corruption.

34. What is a Watchlist in AML?

A watchlist is a database containing names of individuals, companies, or countries involved in

nancial crimes, sanctions, or terrorism.

35. What is the role of SAR (Suspicious Activity Report) in AML?

SAR is a report submitted to authorities when suspicious transactions or activities are detected that
could indicate money laundering or nancial crimes.

36. What is Money Muling in Financial Crime?

Money muling is when a person transfers or moves money on behalf of criminals, often without
knowing the funds are illegal.
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 ght nancial crime.

38. What is CDD Refresh?

CDD Refresh is the process of updating customer information and documents periodically based on
the customer’s risk level.

39. What is Geographic Risk in AML?

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Geographic risk is the risk associated with customers or transactions from high-risk countries with
weak AML regulations or high crime rates.

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40. What is Shell Company in Money Laundering?

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A shell company is a business that exists only on paper without real operations, used to hide the true
owner and launder money.

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41. What is Dual Use Goods in AML?

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Dual-use goods are products that can be used for both legitimate purposes and illegal activities,
such as chemicals or technology equipment.

42. What is the main purpose of FATCA in AML?

The Foreign Account Tax Compliance Act (FATCA) helps detect and prevent tax evasion by
requiring foreign banks to report U.S. customer accounts.

43. What is De-Risking in AML?

De-risking is when banks or nancial institutions close customer accounts to avoid high-risk
relationships instead of managing the risks.

44. What is a Nested Account?

A nested account is when a bank uses another bank’s account to process transactions without
revealing the original customer’s details, often used in money laundering.

45. What is CDD Questionnaire?

A CDD questionnaire is a form used to collect customer information like business activities,
ownership details, and source of funds for risk assessment.

46. What is the Travel Rule in AML?

The Travel Rule requires nancial institutions to share customer information when transferring
funds above a certain threshold between banks.

47. What is Negative News Screening?

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cking in Financial Crime?

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Human traf cking is the illegal trade of people for forced labor or exploitation, often funded
through money laundering activities.

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52. What is a Payment Transparency Account (PTA)?

A PTA ensures that the sender and receiver’s details are fully visible in cross-border payment
transactions to prevent money laundering.

53. What is KYC Gap Analysis?

KYC gap analysis is identifying missing or outdated customer information in existing customer
pro les to improve compliance standards.

54. What is the 3rd Line of Defense in AML?

It is the independent audit function that reviews the AML compliance program to ensure regulatory
requirements are followed.

55. What is Human Smuggling in Financial Crime?

Human smuggling is illegally transporting people across borders in exchange for payment, often
linked with money laundering activities.

56. What is a Financial Action Task Force (FATF) Blacklist?

The FATF blacklist lists countries with weak AML regulations that pose a high risk of nancial
crime.

57. What is a Private Banking Account in AML?

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 cking in AML?

Wildlife traf cking is the illegal trade of animals and plants, often linked with money laundering to
hide the pro ts.

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60. What is the 50% Rule in Sanctions Screening?

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If a sanctioned person owns 50% or more of a business, the entire business is considered
sanctioned, even if the person is not directly listed.

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61. What is the role of the Financial Action Task Force (FATF) in AML?

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Answer: FATF is an international body that sets global standards to prevent money laundering and
terrorism nancing by issuing recommendations and monitoring compliance.

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62. What is Perpetual KYC?

Answer: Perpetual KYC is a continuous monitoring process where customer information is

automatically updated based on risk factors or signi cant changes without waiting for periodic
reviews.

63. What is the concept of De-Risking in AML?

Answer: De-Risking is when nancial institutions terminate relationships with customers, sectors,
or countries considered high-risk to avoid regulatory scrutiny.

64. What is Money Laundering Reporting Of cer (MLRO)?

Answer: MLRO is a designated person responsible for overseeing AML compliance, reporting
suspicious activities, and ensuring regulatory requirements are met.

65. What is Hawala System in Money Laundering?

Answer: Hawala is an informal money transfer system where funds are transferred without physical
movement, often used for money laundering or terrorism nancing.

66. What is Structuring in Money Laundering?

Answer: Structuring is the process of breaking large amounts of money into smaller transactions to
avoid reporting thresholds.

67. What is Offshore Banking?

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 cial Owner (UBO)?

Answer: UBO is the person who ultimately owns or controls a legal entity, even if the ownership is
hidden behind layers of companies.

69. What is Trade Finance in AML?

Answer: Trade Finance involves nancial services related to international trade, which can be
misused for Trade-Based Money Laundering (TBML).

70. What is a Money Laundering Typology?

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Answer: Typologies are common methods used by criminals to launder money, such as cash

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smuggling, shell companies, or trade-based methods.

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71. What is Geographic Risk in CDD?

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Answer: Geographic Risk refers to the risk associated with customers or transactions from

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countries known for corruption, terrorism nancing, or weak AML regulations.

72. What is the importance of Transaction Monitoring in AML?

Answer: Transaction Monitoring helps nancial institutions detect unusual or suspicious

transactions that may indicate money laundering.

73. What is Third-Party Payment Risk?

Answer: Third-Party Payment Risk arises when payments are made by someone not directly
involved in the transaction, which could indicate money laundering.

74. What is Client Screening?

Answer: Client Screening involves checking customer information against watchlists, sanctions
lists, and PEP lists during onboarding and ongoing reviews.

75. What is the difference between AML and CFT?

Answer: AML (Anti-Money Laundering) focuses on preventing money laundering, while CFT
(Combating the Financing of Terrorism) targets the funding of terrorist activities.

76. What is Cross-Border Money Laundering?

Answer: Cross-Border Money Laundering involves transferring illicit funds across different
countries to evade detection and regulations.

77. What is a Trigger Event in KYC?

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 cance of 4-Eye Principle in AML?

Answer: The 4-Eye Principle means that at least two people must review and approve high-risk
transactions or customer onboarding to prevent errors or fraud.

79. What is Payment Service Provider (PSP) Risk in AML?

Answer: PSP Risk refers to the vulnerability of payment services like digital wallets and payment
gateways to money laundering due to high transaction volumes.

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80. What is the difference between Public and Private PEP?

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Answer: Public PEPs are government of cials or politicians, while Private PEPs are individuals

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linked to in uential private organizations or companies.

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81. What is Negative News Screening in AML?

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Answer: Negative News Screening is the process of checking if a customer or business is

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mentioned in adverse media reports related to nancial crime, fraud, or other illegal activities.

82. What is the difference between PEP and RCA?

Answer: PEP (Politically Exposed Person) is someone with a prominent public position, while
RCA (Relative or Close Associate) refers to family members or business partners of PEPs who may
pose similar risks.

83. What is Nested Account in AML?

Answer: A Nested Account is an indirect banking relationship where a smaller bank accesses
services from a larger bank through an intermediary, which can hide the true customer identity.

84. What is Batch Screening in AML?

Answer: Batch Screening is the process of screening multiple customer records at once against
sanctions lists or PEP databases.

85. What is High-Risk Jurisdiction?

Answer: High-Risk Jurisdictions are countries with weak AML regulations, corruption, or
involvement in terrorism nancing, as identi ed by FATF or regulators.

86. What is the role of Wolfsberg Group in AML?

Answer: The Wolfsberg Group is an association of banks that develops global AML standards and
best practices for customer due diligence and correspondent banking.

87. What is a Dual-Use Item in Trade-Based Money Laundering?

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 nancing.

88. What is Data Mining in AML?

Answer: Data Mining is the process of analyzing large data sets to identify hidden patterns, trends,
or suspicious activities in nancial transactions.

89. What is the role of the UN Sanctions List in AML?

Answer: The UN Sanctions List includes individuals, organizations, and countries subject to global
sanctions, which must be screened during customer onboarding and transactions.

90. What is a Non-Face-to-Face Customer?

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Answer: A Non-Face-to-Face Customer is a customer who opens an account or conducts

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transactions without physical presence, which poses a higher AML risk.

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91. What is the Travel Rule in AML?

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Answer: The Travel Rule requires nancial institutions to share customer information along with

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cross-border wire transfers to prevent money laundering.

92. What is a Red Flag Indicator?

Answer: Red Flag Indicators are warning signs that a customer or transaction may be linked to
money laundering, such as large cash deposits or inconsistent information.

93. What is Politically Exposed Person (PEP) Risk?

Answer: PEP Risk refers to the higher risk associated with customers holding political positions
due to their potential involvement in corruption or bribery.

94. What is a Bene ciary Owner?

Answer: A Bene ciary Owner is the person who ultimately owns or controls a company, even if the
ownership is hidden under multiple layers of entities.

95. What is Placement Risk in Money Laundering?

Answer: Placement Risk is the risk of introducing illicit funds into the nancial system, usually
through cash deposits or business accounts.

96. What is Source of Wealth (SOW)?

Answer: Source of Wealth refers to the origin of a customer’s overall wealth, such as inheritance,
investments, or business pro ts, to verify its legitimacy.

97. What is Threshold Transaction Reporting?

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 le, such as simpli ed due diligence for low-risk customers and enhanced due diligence for

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high-risk customers.

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100. What is EDD Trigger in CDD?

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Answer: An EDD Trigger is an event or factor that automatically requires Enhanced Due Diligence,

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such as dealing with PEPs, high-risk countries, or unusual transactions.

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