Foundations of Money Laundering and Financial Crime

Introduction and Context

Modern banking depends on trust. Customers must be able to move value, businesses must be able to receive and make payments, and financial institutions must be able to distinguish legitimate economic activity from transactions designed to conceal crime. The same infrastructure that enables commerce—accounts, payment systems, correspondent banking, digital platforms, trade finance and virtual-asset services—can also be exploited by criminals and terrorist organisations.

Anti-money laundering (AML) and know-your-customer (KYC) controls are therefore not merely compliance functions. They are part of the governance, risk-management and public-interest responsibilities of a bank. Effective controls protect the institution, preserve market integrity, support law enforcement and reduce the social harm generated by organised crime, corruption, fraud and terrorism.

Money laundering is often described as the process of making criminal proceeds appear legitimate. This description is useful but incomplete. Laundering may involve concealment, transformation, movement, conversion or use of assets. It may occur through a bank, a company, a professional intermediary, a cash-intensive business, a property transaction, a trade transaction or a digital asset platform. The underlying purpose is to obscure the criminal origin or control of property and to make it usable without attracting detection.

This chapter establishes the conceptual foundation for later study of customer due diligence, transaction monitoring, suspicious transaction reporting, sanctions controls, beneficial ownership and financial-crime risk management.

Learning Objectives

By the end of this chapter, a learner should be able to:

1. Define money laundering and distinguish it from related financial crimes.
2. Explain predicate offences and the relationship between the underlying crime and laundering.
3. Describe terrorist financing and proliferation financing, including their important differences from money laundering.
4. Explain the placement–layering–integration model and its limitations.
5. Assess the economic, institutional and social consequences of financial crime.
6. Use essential AML and KYC terminology accurately.
7. Explain why banks are central to financial-crime prevention and identify the governance responsibilities involved.

1. The Meaning and Scope of Money Laundering

A practical definition of money laundering is the processing of proceeds derived from unlawful activity in a manner intended to conceal their illicit origin, ownership, location, movement or control, or to make those proceeds appear legitimate. The term “money” should not be interpreted narrowly. Laundered property may include cash, bank balances, securities, real estate, vehicles, goods, digital assets, business interests or any other asset of value.

Three features commonly appear in a laundering arrangement:

• An unlawful source: value originates from a crime or other unlawful conduct.
• A concealment or conversion process: transactions or structures obscure the source, ownership or movement of the value.
• A purpose or effect of legitimisation: the criminal seeks to use, invest or enjoy the proceeds while reducing the risk of detection or seizure.

The exact legal definition varies by jurisdiction. Some legal systems require proof that the accused knew the property was criminally derived; others use objective or constructive knowledge standards in particular circumstances. Some systems criminalise self-laundering, while others distinguish laundering by the offender who committed the underlying crime from laundering by a third party. Banks must therefore apply the law of the relevant jurisdiction and not rely solely on a generic textbook definition.

Money laundering is not restricted to sophisticated international networks. A local fraudster depositing cash into an account, a corrupt official purchasing property through a nominee, and an organised criminal using cross-border companies may all be engaging in laundering, although the methods differ in scale and complexity.

2. Predicate Offences

A predicate offence is the underlying criminal conduct that generates the proceeds subsequently laundered. It is sometimes called a “specified unlawful activity” or “designated offence.” Common predicate offences include:

• fraud and cyber-enabled fraud;
• corruption, bribery and embezzlement;
• drug trafficking;
• human trafficking and migrant smuggling;
• robbery, extortion and kidnapping;
• tax crimes, where recognised by national law;
• environmental crime and illegal resource extraction;
• counterfeiting and intellectual-property crime;
• market abuse and insider dealing; and
• terrorism-related offences.

The predicate offence and the laundering offence are conceptually distinct. The first generates the proceeds; the second concerns what is done with those proceeds. A person may be prosecuted for laundering even when the person who committed the predicate offence is unknown or has not been convicted, depending on the law of the jurisdiction. This is important because complex investigations frequently identify suspicious assets before they establish every detail of the underlying crime.

A proceeds-of-crime approach focuses on property obtained directly or indirectly from criminal conduct. Direct proceeds might be cash received in a drug sale. Indirect proceeds might be a house purchased with that cash, rental income from the house, or shares acquired after several conversions. The concept of traceability is therefore central to asset-recovery investigations.

3. The Placement–Layering–Integration Model

The traditional three-stage model explains a common laundering process:

3.1 Placement

Placement is the introduction of illicit value into the financial or economic system. Examples include depositing cash into bank accounts, purchasing monetary instruments, using cash to buy goods, or mixing criminal cash with revenue from a legitimate business.

Placement is often considered the stage at which the criminal is most exposed because large amounts of physical cash, unusual deposits or transactions inconsistent with a customer’s profile may be visible to the institution receiving the funds. However, placement is not always a separate event. Criminal proceeds may already be in electronic form—for example, proceeds of online fraud transferred directly into accounts—so no physical cash placement is required.

3.2 Layering

Layering involves transactions intended to distance the property from its source. Techniques may include multiple transfers between accounts, movement through several jurisdictions, use of shell companies, conversion between currencies or assets, circular payments, false invoicing, trade-based manipulation, securities transactions and transfers through intermediaries.

The objective is not necessarily to make every transaction appear ordinary in isolation. Rather, the objective may be to make the overall trail difficult, expensive or time-consuming to reconstruct. Layering can exploit differences in national laws, delays in information exchange, complex ownership structures and high transaction volumes.

3.3 Integration

Integration occurs when laundered value re-enters the legitimate economy and is presented as apparently lawful wealth. Examples include investment in property, businesses, securities, luxury goods or loans to associated companies. Once integrated, the funds may be used for consumption, further investment or the financing of additional criminal activity.

Integration does not mean that the money has become legally legitimate. It describes the appearance and economic use of the funds, not a legal transformation of criminal property into lawful property.

3.4 Limits of the three-stage model

The model is pedagogically useful, but it is not a universal sequence. Stages may overlap, occur in a different order or be absent. A cybercriminal may receive proceeds electronically, move them through digital assets and spend them directly. A corrupt official may purchase property immediately through a nominee. A cash-intensive business may combine placement and integration in one operation.

The model should therefore be treated as a conceptual lens rather than an investigative rule. Contemporary risk assessment focuses on the behaviour, context, source of wealth, source of funds, ownership, purpose and economic rationale of activity—not merely on whether a transaction fits one of three stages.

4. Related Forms of Financial Crime

Financial crime is a broad category covering unlawful conduct involving money, financial services, property or financial markets. Money laundering is one component of this wider field.

Fraud

Fraud involves intentional deception for unlawful gain or to cause unlawful loss. It may involve false representations, abuse of position, manipulation of systems or unauthorised access. Fraud proceeds are often laundered through personal accounts, money mules, merchant accounts, payment platforms or shell businesses.

Corruption

Corruption includes bribery, abuse of public office, kickbacks, influence-peddling and related misconduct. It may generate complex ownership structures and payments disguised as consulting fees, commissions, loans or investments. Corruption is particularly damaging because it diverts public resources and weakens confidence in institutions.

Market abuse

Market abuse includes insider dealing, market manipulation and misleading conduct in securities markets. The proceeds may be moved through brokerage accounts, related parties or investment vehicles. AML controls and market-conduct controls overlap but are not identical: an institution must address both illicit proceeds and manipulation of market integrity.

Tax crimes and illicit financial flows

Tax evasion and other tax crimes may generate proceeds that require laundering. Illicit financial flows also include the cross-border movement of value associated with corruption, trade misinvoicing, smuggling and other unlawful conduct. Legitimate cross-border transactions should not be treated as suspicious merely because they are international; the assessment must consider purpose, documentation, counterparties and economic rationale.

Organised crime

Organised criminal groups often combine predicate offences, laundering and intimidation. Their use of professional facilitators, front companies and legitimate businesses can make detection difficult. Banks must understand that risk may arise not only from an individual customer but also from a network of connected persons and entities.

5. Terrorist Financing

Terrorist financing (TF) is the provision, collection, movement or use of funds or other assets with the intention or knowledge that they will support terrorist acts, terrorists or terrorist organisations, subject to applicable law.

The critical distinction from money laundering is the direction of the analysis. Money laundering generally focuses on the illicit origin of assets. Terrorist financing focuses on the intended destination or use of assets. Funds used for terrorism may come from crime, but they may also come from lawful salaries, donations, charities, businesses or personal savings. Consequently, a transaction may present terrorist-financing risk even when the source of funds appears legitimate.

TF can involve relatively small amounts. Low-value transactions, informal value-transfer systems, online fundraising, prepaid instruments, cash couriers, donations and digital platforms may all be relevant. Banks should therefore avoid assuming that a transaction is low risk solely because its value is modest.

Controls addressing TF commonly include customer identification, sanctions and terrorist-list screening, transaction monitoring, geographic and network analysis, scrutiny of charitable or non-profit activity where risk warrants it, and rapid escalation of credible concerns. Measures must be risk-based and proportionate; legitimate humanitarian and charitable activity should not be unnecessarily obstructed.

6. Proliferation Financing

Proliferation financing (PF) concerns the provision of funds or financial services connected with the development, acquisition, manufacture, possession, transport or use of nuclear, chemical or biological weapons and their means of delivery, where prohibited by applicable law or sanctions regimes.

PF may involve apparently ordinary trade in dual-use goods, front companies, deceptive shipping documentation, trans-shipment points, brokers and complex payment routes. Unlike conventional laundering, the principal concern may not be the criminal origin of the funds. The funds may be lawful, but the transaction supports prohibited procurement or proliferation activity.

The distinction can be summarised as follows:

These categories can overlap. For example, an organised group may launder drug proceeds and use part of them to support terrorism. A bank must therefore avoid treating financial-crime risks as isolated silos.

7. Economic and Social Consequences

Financial crime imposes costs beyond the immediate victim. Important consequences include:

1. Resource misallocation. Criminal investment may inflate property prices, distort competition and direct capital toward unproductive or speculative activity.
2. Loss of public revenue. Tax crimes, corruption and illicit trade reduce funds available for public services.
3. Institutional damage. Corruption and laundering weaken courts, regulators, public procurement and political accountability.
4. Financial-sector risk. Banks may face fines, licence restrictions, litigation, remediation costs, loss of correspondent relationships and reputational damage.
5. Economic exclusion. Excessively blunt controls may cause de-risking, in which entire categories of customers, regions or non-profit organisations lose access to financial services.
6. Social harm. The underlying crimes may involve violence, exploitation, addiction, trafficking and threats to human security.
7. Macro-financial instability. Large illicit flows may affect exchange rates, asset prices and perceptions of market integrity, although the magnitude varies by economy and circumstance.

A sound AML framework must balance two risks: the risk of allowing criminal finance to enter the system and the risk of excluding legitimate customers through indiscriminate controls. Proportionality, evidence and review are therefore essential.

8. Essential Terminology

Customer and account concepts

A customer is a person or entity that establishes or maintains a relationship with a financial institution. A business relationship is an ongoing relationship established for financial services. An occasional transaction may occur without an ongoing account relationship, depending on local law.

Customer due diligence (CDD) is the process of identifying and verifying the customer, identifying the beneficial owner, understanding the purpose and intended nature of the relationship, and conducting ongoing monitoring where required.

Enhanced due diligence (EDD) involves additional measures for higher-risk relationships. These may include obtaining more information about source of wealth and source of funds, senior management approval, enhanced monitoring and corroboration through reliable independent sources.

Simplified due diligence may be permitted for lower-risk situations under applicable law and must not be used where suspicion exists or where law prohibits it.

Ownership and control

A beneficial owner is the natural person or persons who ultimately own or control a customer or on whose behalf a transaction is conducted. Legal ownership may be held by a company, trustee or nominee, but beneficial ownership seeks to identify the real human controller or beneficiary.

A shell company is an entity with little or no genuine business activity, although not every shell company is illegal. A front company is an apparently legitimate business used to conceal or support unlawful activity. A nominee acts in name for another person, potentially concealing ownership or control.

Wealth and funds

Source of funds (SoF) refers to the origin of the particular money or assets involved in a transaction. Source of wealth (SoW) refers to how a customer accumulated total wealth over time. A bank may need both: a customer could have legitimate wealth but receive a particular suspicious payment, or explain one payment while the broader wealth profile remains unexplained.

Risk and reporting

A risk-based approach (RBA) allocates greater preventive effort to higher-risk situations and proportionate effort to lower-risk situations. It does not mean that high-risk customers are automatically rejected or that low-risk customers are ignored.

A suspicious transaction report (STR), also called a suspicious activity report in some jurisdictions, is a report submitted to the competent authority when a financial institution has the legally required level of suspicion. The institution must follow local rules on reporting, confidentiality and tipping-off.

Tipping-off is improperly informing a customer or another person that a report or investigation has been made or is contemplated. It can compromise investigations and may itself be an offence.

A politically exposed person (PEP) is an individual entrusted with a prominent public function, together with relevant family members and close associates as defined by applicable law. PEP status is a risk factor, not proof of criminality.

A sanctions evasion arrangement seeks to avoid restrictions imposed on designated persons, entities, countries, goods or activities. Sanctions compliance overlaps with AML but has distinct legal obligations and control requirements.

9. The Role of Banks in Financial-Crime Prevention

Banks occupy a central position because they provide access to payment systems, maintain customer records, observe transaction flows and connect domestic and international markets. Their role is not to conduct criminal trials. It is to apply lawful preventive controls, identify unusual or suspicious activity, preserve relevant records, escalate concerns and cooperate with competent authorities.

An effective bank-wide framework normally includes:

• board and senior-management accountability;
• a documented financial-crime risk assessment;
• customer identification and verification;
• beneficial-ownership procedures;
• customer risk classification;
• ongoing transaction and relationship monitoring;
• sanctions and adverse-information screening;
• investigation and escalation procedures;
• suspicious-transaction reporting;
• record retention and data governance;
• employee training and a speak-up culture;
• independent testing or internal audit; and
• corrective action, quality assurance and regulatory engagement.

The three-lines model is useful. The first line—business and operations—owns customer and transaction risk in day-to-day activity. The second line—compliance and risk—sets standards, provides challenge and monitors adherence. The third line—internal audit—provides independent assurance. The board remains responsible for oversight and for ensuring that the control framework is adequately resourced.

Technology can improve screening, network analysis, identity verification and alert prioritisation. Artificial-intelligence systems may identify patterns that rules-based systems miss, but they also create risks of bias, opaque decisions, data-quality failure, excessive false positives and model drift. Human accountability, explainability appropriate to the use case, validation, documented thresholds and effective challenge remain necessary. Automation should support—not replace—sound judgment.

10. Applied Case: The Trading Company with Unexplained Growth

The following is an illustrative case, not a report of a specific institution.

Background

A newly incorporated trading company opens a business account. It states that it imports household goods from several countries and expects annual turnover equivalent to €2 million. The beneficial owner is a resident individual with limited documented experience in international trade.

During the first six months, the account receives €8 million from unrelated companies in three jurisdictions. Funds are rapidly transferred to suppliers in a fourth jurisdiction, while a substantial portion is withdrawn in cash by persons who are not employees. Several invoices describe generic goods, and shipping documents contain inconsistent quantities. The company has no visible warehouse, website or staff proportionate to its stated activity.

Problem

The bank must determine whether the activity is consistent with the customer’s stated business, whether the named parties are genuine counterparties, and whether the account may be facilitating laundering, trade-based money laundering, fraud or sanctions evasion. The bank must avoid assuming that international trade or rapid payments are inherently suspicious.

Analysis

Relevant indicators include:

• turnover far exceeding the expected profile;
• unexplained payments from unrelated third parties;
• rapid movement of funds with limited apparent business purpose;
• cash withdrawals by non-employees;
• generic invoices and inconsistent shipping information;
• weak commercial presence; and
• possible network connections among counterparties.

No single indicator proves criminal conduct. Together, however, they create a materially elevated risk and justify enhanced review.

Approach and solution

The bank should conduct EDD proportionate to the risk. This may include verifying the beneficial owner, obtaining contracts, invoices, bills of lading and customs records, understanding counterparties and expected payment flows, reviewing source of funds, checking sanctions and adverse information, and analysing linked accounts and devices where lawful. The bank should document the rationale for each decision.

If the explanation and evidence are inadequate, the matter should be escalated under internal procedures. The bank may restrict or decline transactions where legally permitted, consider whether an STR is required, preserve records and ensure that staff do not disclose a report improperly. It should also assess whether other customers or accounts are connected to the same network.

Outcome

For purposes of this illustration, the bank concludes that the activity cannot be reasonably reconciled with the customer’s stated business. It submits a report to the competent authority, exits the relationship in accordance with law and contract, and conducts a retrospective review of connected accounts. The case demonstrates that effective detection depends on combining customer information, transaction behaviour, documentary analysis and network context.

Learning points

• A customer’s expected activity is a baseline for ongoing monitoring.
• Unusual activity is assessed cumulatively, not through isolated red flags.
• Trade documents must be tested for commercial coherence, not merely collected.
• Beneficial ownership and connected-party analysis are essential.
• A bank’s decision must be risk-based, documented and legally compliant.

11. Challenges and Limitations

AML and KYC controls face several enduring challenges. Criminals adapt quickly, exploit new technologies and use legitimate professionals and businesses. Beneficial ownership information may be incomplete or deliberately falsified. Different jurisdictions define offences, reporting thresholds, privacy rules and evidentiary standards differently. Information-sharing may be slow or legally constrained.

Banks also face the false-positive problem. A monitoring system that generates too many alerts can overwhelm investigators, delay meaningful escalation and create customer frustration. A system that generates too few alerts may miss important activity. Effectiveness should therefore be assessed not simply by the number of alerts or reports, but by the quality of risk identification, investigation, reporting, remediation and prevention.

Ethical concerns are equally important. Customer data must be collected and used lawfully. Decisions should not rely on nationality, race, religion or other protected characteristics as crude proxies for risk. Geographic or sectoral risk assessments must be evidence-based. Financial inclusion should be protected, and customers should not be treated as criminals merely because they fall into a higher-risk category.

12. Contemporary Developments and Good Practice

Digital banking, instant payments, virtual assets, decentralised technologies and online marketplaces increase speed and connectivity. They may also reduce the time available for review and complicate identification of counterparties and beneficial owners. Criminal use of synthetic identities, account takeover, mule networks and automated social engineering requires cooperation among banks, technology providers, telecommunications firms and public authorities.

Good practice includes:

1. maintaining a current enterprise-wide risk assessment;
2. designing controls around actual threats rather than copying generic checklists;
3. combining rules, analytics, investigator judgment and intelligence;
4. validating models and monitoring data quality;
5. strengthening beneficial-ownership verification;
6. using feedback from law enforcement and regulatory examinations;
7. measuring outcomes and remediation, not only activity volumes;
8. documenting decisions and preserving an audit trail; and
9. reviewing controls when products, channels, markets or technologies change.

International standards, including those developed by the Financial Action Task Force, provide a widely used framework, but implementation remains national. Professionals must therefore understand both global principles and the detailed requirements of the jurisdictions in which their institutions operate.

Chapter Summary

Money laundering is the concealment, conversion, movement or use of criminally derived property so that it can appear legitimate or be used with reduced detection risk. Predicate offences generate the proceeds, while laundering concerns subsequent handling of those proceeds. The placement–layering–integration model explains a common pattern but is not a mandatory sequence.

Terrorist financing focuses primarily on the intended use or beneficiary of funds and may involve lawful or unlawful sources. Proliferation financing concerns financial support connected with prohibited weapons programmes and may also involve legitimate funds. These risks overlap with, but are not identical to, money laundering.

Financial crime damages victims, markets, public finances, institutions and social welfare. Banks are central gatekeepers because they identify customers, observe payment flows, maintain records and report concerns. Effective prevention requires governance, risk assessment, CDD, beneficial-ownership analysis, monitoring, reporting, technology oversight, staff judgment and respect for privacy, proportionality and financial inclusion.

Key Terms

Money laundering: Processing property to conceal or disguise its illicit origin, ownership, movement or control.

Predicate offence: The underlying unlawful conduct that generates proceeds.

Proceeds of crime: Property obtained directly or indirectly from criminal conduct.

Placement: Introducing illicit value into the financial or economic system.

Layering: Conducting transactions to distance value from its unlawful source.

Integration: Reintroducing apparently legitimised value into the lawful economy.

Terrorist financing: Providing or collecting assets to support terrorism, terrorists or terrorist organisations.

Proliferation financing: Financing or facilitating prohibited proliferation-related activity.

Customer due diligence: Identifying and verifying customers, beneficial owners and the purpose of relationships, with appropriate monitoring.

Enhanced due diligence: Additional measures applied to higher-risk relationships.

Beneficial owner: The natural person who ultimately owns or controls a customer or transaction.

Source of funds: Origin of the particular money or assets involved.

Source of wealth: The way a person accumulated total wealth.

Risk-based approach: Allocating controls according to assessed risk and proportionality.

Suspicious transaction report: A report made to the competent authority concerning legally reportable suspicion.

Tipping-off: Improperly disclosing that a report or investigation exists or is contemplated.

Politically exposed person: A person entrusted with a prominent public function, including relevant family and associates under applicable law.

Shell company: An entity with little or no genuine business activity, which may be legitimate or abusive.

Sanctions evasion: Attempts to circumvent restrictions imposed on designated persons, places, goods or activities.

Financial crime: Broad unlawful conduct involving money, financial services, property or financial markets.

Review Questions

Short Answer Questions

1. What is a predicate offence, and how does it differ from money laundering?
2. Define placement, layering and integration.
3. Why can terrorist financing involve apparently lawful funds?
4. What is the difference between source of funds and source of wealth?
5. Why is beneficial-ownership identification important?

Long Answer Questions

1. Explain the placement–layering–integration model and critically evaluate its limitations.
2. Compare money laundering, terrorist financing and proliferation financing.
3. Analyse the economic and institutional consequences of financial crime.
4. Discuss the role of a bank’s board, business units, compliance function and internal audit in financial-crime prevention.
5. Explain how a risk-based approach can protect both financial integrity and financial inclusion.

Analytical / Application Questions

1. A customer receives many payments from unrelated foreign companies and immediately transfers most funds to another jurisdiction. Identify the information and evidence the bank should obtain before deciding how to proceed.
2. A charity receives small donations from many countries and sends funds to a conflict-affected region. Develop a proportionate risk-assessment approach that distinguishes legitimate humanitarian activity from terrorist-financing risk.
3. A monitoring system produces thousands of alerts but very few well-supported reports. Analyse possible causes and recommend governance, data, model-validation and investigative improvements.

Multiple Choice Questions with Answers

Question 1

Which statement best defines money laundering?

A. Any international transfer of money between banks

B. Processing criminally derived property to conceal its origin or make it appear legitimate

C. The lawful investment of savings in securities

D. The reporting of every cash transaction to a regulator

Correct Answer: B. Processing criminally derived property to conceal its origin or make it appear legitimate

Question 2

What is a predicate offence?

A. A transaction-monitoring rule

B. A bank’s internal audit procedure

C. The underlying unlawful conduct that generates proceeds

D. A customer identification document

Correct Answer: C. The underlying unlawful conduct that generates proceeds

Question 3

Which activity most clearly illustrates layering?

A. Receiving wages into a personal account

B. Depositing criminal cash into the financial system

C. Moving value through multiple accounts and jurisdictions to obscure its trail

D. Reporting a suspicious transaction

Correct Answer: C. Moving value through multiple accounts and jurisdictions to obscure its trail

Question 4

What is the principal analytical distinction between money laundering and terrorist financing?

A. Money laundering always involves cash, while terrorist financing never does

B. Money laundering focuses on illicit origin, while terrorist financing focuses on intended use or beneficiary

C. Terrorist financing is always larger in value

D. Money laundering is never an offence when the source is unknown

Correct Answer: B. Money laundering focuses on illicit origin, while terrorist financing focuses on intended use or beneficiary

Question 5

Which statement about proliferation financing is most accurate?

A. It concerns only the laundering of drug proceeds

B. It may involve lawful funds used to support prohibited proliferation activity

C. It is identical to ordinary credit risk

D. It applies only to domestic transactions

Correct Answer: B. It may involve lawful funds used to support prohibited proliferation activity

Question 6

A beneficial owner is generally:

A. The employee who opens a bank account

B. The natural person who ultimately owns or controls a customer or transaction

C. The external auditor of a bank

D. The regulator supervising a financial institution

Correct Answer: B. The natural person who ultimately owns or controls a customer or transaction

Question 7

Which action is most consistent with a risk-based approach?

A. Applying identical controls to every customer regardless of risk

B. Rejecting every customer with international transactions

C. Allocating enhanced measures to higher-risk relationships and proportionate measures to lower-risk situations

D. Ignoring low-value transactions in all circumstances

Correct Answer: C. Allocating enhanced measures to higher-risk relationships and proportionate measures to lower-risk situations

Question 8

Why may a bank request both source of funds and source of wealth information?

A. They always mean exactly the same thing

B. One concerns a particular payment, while the other concerns how total wealth was accumulated

C. Neither is relevant to customer due diligence

D. Source of wealth applies only to corporations

Correct Answer: B. One concerns a particular payment, while the other concerns how total wealth was accumulated

Question 9

Which is a limitation of the placement–layering–integration model?

A. It cannot describe any financial crime

B. The stages may overlap, occur in another order or be absent

C. It applies only to terrorist financing

D. It proves criminal liability whenever a stage is observed

Correct Answer: B. The stages may overlap, occur in another order or be absent

Question 10

Which function is part of the third line in the three-lines model?

A. Relationship management

B. Transaction processing

C. Compliance monitoring

D. Internal audit

Correct Answer: D. Internal audit