Free CISI Combating Financial Crime practice questions

Not quite. The answer is D.

FSMA casts financial crime in three limbs — offences involving fraud or dishonesty, misconduct in or misuse of information relating to a financial market, and handling the proceeds of crime. A sanctions breach is plainly financial crime in the ordinary sense, and the syllabus treats it as such, but it is not one of the statutory limbs. The distinction matters because a firm's sanctions obligations arise from a separate legislative regime rather than from the FSMA definition.

Not quite. The answer is A.

Criminal property is any benefit, in money or otherwise, that has arisen from criminal conduct, but the Act qualifies that definition — property is criminal property only if the alleged offender knows or suspects that it is. Recklessness or negligence is the closest distractor because it feels like the right kind of fault standard, yet POCA fixes on knowledge or suspicion; the wider reasonable-grounds test appears only in the separate failure-to-disclose offence and does not alter what counts as criminal property. Requiring certainty would make the definition unusable, since a firm never has proof of the underlying crime.

Not quite. The answer is A.

Two differences are usually drawn out. Terrorist financing tends to involve small amounts, which makes identification and tracking harder, and the source of the funds may be entirely lawful, so the moment at which money becomes terrorist money is hard to pin down. Timing separates them too — laundering deals with proceeds that a crime has already produced, whereas terrorist funds are gathered to enable acts still to come. Cross-border movement is the one feature the two share, and it is precisely because both are international that states coordinate their legislation and enforcement.

Not quite. The answer is C.

Bribery is one species within the wider genus of corruption — it is the giving of money or another benefit intended to influence how the recipient behaves, while corruption describes the abuse of power generally and reaches far beyond payments. Fraud is the closest wrong answer, because both involve dishonest gain, but fraud turns on deception rather than on influencing someone who holds a position of trust or public duty. Market abuse and sanctions breaches are separate heads of financial crime altogether.

Not quite. The answer is A.

Section 1 creates one offence of fraud committed in three ways — by false representation, by failing to disclose information, and by abuse of position. False accounting is a separate offence, and it is easily mistaken for a fourth class because it sits alongside the section 1 classes on the list of underlying fraud offences that can expose an organisation to corporate liability. Falsifying the books is fraudulent conduct, but it is not one of the three classes.

Not quite. The answer is D.

General anti-avoidance rules exist in most developed countries to deter tax-aggressive arrangements, they reach cross-border structures, and they carry safeguards so that a taxpayer making a reasonable choice is not targeted. What they do not do is ban particular products or services, because the object of attack is the purpose of the arrangement rather than the instrument used. That is why a firm can go on offering perfectly lawful tax-efficient wrappers.

Not quite. The answer is A.

The Office of Foreign Assets Control, part of the US Department of the Treasury, administers the specially designated nationals list, which names those that US persons may not transact or do business with. OFSI is the closest distractor because it is the United Kingdom's financial sanctions body rather than a United States one, and the SDN list is a US instrument. The FATF sets standards and assesses compliance with them but designates nobody, and FinCEN does not maintain this list either.

Not quite. The answer is A.

Internal fraud is committed from inside the business — an employee turning their position to their own advantage at the cost of the firm or its staff — and quality control checks and segregation of duties are the controls aimed squarely at it. External fraud is the mirror image, committed by someone outside, and it is the runner-up only if you read the client rather than the firm as the victim; the test is who carried out the act, and a cashier is an employee. An operational error is a mistake rather than dishonesty.

Not quite. The answer is A.

The second FSMA limb catches misconduct in, or misuse of information relating to, a financial market, and dealing on the strength of a client's own order is squarely within it. Fraud or dishonesty is the tempting runner-up, since the conduct is certainly dishonest, but the FSMA definition deliberately treats market misconduct as its own category rather than folding it into general dishonesty. Read the limb that fits the facts most exactly.

Not quite. The answer is C.

The five offences are concealing, arrangements, acquisition use and possession, failure to disclose, and tipping off. Prejudicing an investigation is also a POCA offence, but it sits in Part 7, which deals with investigations rather than with laundering itself, and it applies to anyone rather than being confined to the regulated sector. Candidates who have simply memorised a list of POCA offences without noticing where each one sits will pick one of the genuine five.