Questions for the CKYCA were updated on : Dec 01 ,2025
The owner of a local flower shop makes cash deposits on a regular basis to the shop’s business
account. Following the deposits, the owner wires the money to a high-risk country. Which action
should a KYC analyst perform when conducting the periodic CDD review?
A
Explanation:
During a periodic CDD review, the analyst should assess whether the account activity, including cash
deposits and transfers to high-risk countries, aligns with the customer’s stated transaction profile.
This step determines if further escalation or reporting is necessary.
Which customer type represents the highest risk of money laundering to a financial institution?
A
Explanation:
Payment service providers pose higher money laundering risk because they handle high volumes of
transactions, often across multiple jurisdictions, and may process funds on behalf of third parties,
increasing the potential for illicit activity.
A compliance officer is tasked with building a financial institution’s annual risk assessment. Which
data attributes should be used to understand inherent risk?
A
Explanation:
Inherent risk is the level of risk present before controls are applied and is influenced by factors such
as the types of customers served and the products or services offered, both of which directly affect
the institution’s exposure to financial crime risks.
An alert is generated by a negative media search system that an existing client is accused of money
laundering and is arrested. A KYC analyst assigned to investigate finds no records of a court order or
subpoen
a. Which is the next action the analyst should take?
C
Explanation:
An arrest for alleged money laundering is a serious adverse media finding that must be escalated to
the compliance officer for further assessment and potential action, regardless of whether there is a
conviction.
According to a reputable financial news source, a client is being taken over by one of its competitors.
The public registry has not yet reflected the ownership change. Which step should the KYC analyst
take?
A
Explanation:
Until the ownership change is officially recorded in a public registry, the KYC analyst should obtain
legal documents directly from the client to verify the current ownership structure and maintain
accurate CDD records.
A KYC analyst notices frequent use of letters of credit as a method of trade finance. It further appears
that trades covered by letters of credit are not consistent with the customer’s usual business. What
should be the next action taken by the KYC analyst?
B
Explanation:
Unusual trade finance activity, such as letters of credit inconsistent with the customer’s normal
business, is a potential red flag for trade-based money laundering. The appropriate step is to make
an internal referral for review and possible filing of a suspicious transaction report (STR).
A corporate client changes directors and the address of its registered office. Which documentation
would be sufficient to verify these changes?
A
Explanation:
Government-issued documents, such as updated company registry extracts, provide authoritative
and verifiable proof of changes to directors and registered office details, ensuring compliance with
CDD requirements.
During an EDD process for a business customer, which document is the best source to identify and
obtain details on the source of funds?
A
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.
Company A is owned by Company B (80%) and Individual W (20%). Company B is owned equally by
Company C and Individual X. Company C is owned by Individual Y (60%), Individual W (10%) and
Individual Z (30%). Who should be considered as a beneficial owner of Company A with more than
25% shares?
B
Explanation:
Individual Y owns 60% of Company C, which owns 50% of Company B, which owns 80% of Company
A.
Y’s indirect ownership in Company A = 60% × 50% × 80% = 24%.
Additionally, Company B’s other owner, Individual X, has 50% of Company B, giving X an indirect
stake of 40% in Company A, but X has no further upstream ownership through C.
FATF guidance states that indirect and direct holdings should be combined where applicable. Y’s 24%
does not meet the 25% threshold alone, so none of the others qualify - except if local regulation
treats control via majority in an intermediate entity as passing through. In that case, Y controls
Company C, which controls 50% of Company B, giving effective control over 40% of Company A -
meeting the threshold.
When performing EDD on a new high-risk customer, which question best informs the decision to
move forward with onboarding?
D
Explanation:
The key question in deciding whether to onboard a high-risk customer is whether their risk profile
exceeds the institution’s defined risk tolerance, as this determines alignment with regulatory
requirements and internal compliance policy.
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?
B
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).
An Ultimate Beneficial Owner (UBO) with a control prong is an individual with:
C
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.
Which risk assessment factor is most essential for a customer risk evaluation?
C
Explanation:
The customer’s country or jurisdiction of establishment is a key risk assessment factor because it
determines the applicable legal framework, AML/CFT risk level, and potential exposure to high-risk
or sanctioned regions.
From 2010 to 2018, a company had an average turnover of 1 million USD. In 2019, the turnover
increased to 8 million USD. When asked for the reason of the increase, the company claims that
business increased and refuses to give any further explanation despite several attempts at
requesting information. Which is the best next step?
C
Explanation:
A sudden, unexplained, and significant increase in turnover, combined with the customer’s refusal to
provide supporting information, is a strong money laundering red flag and should trigger the
immediate filing of a suspicious activity report.
In relation to account activity, which is an example of tipping off?
D
Explanation:
Tipping off occurs when a customer is informed that a suspicious transaction report (STR) has been
filed about them, which could compromise investigations and is prohibited under AML laws.