The IIBF AML KYC Exam 2026 is the cornerstone topic for aspirants. In this guide, we cover the 105 most important questions. This Positive mock test is specifically designed for IIBF Certificate Exam to help you master the concepts quickly.
Why This IIBF AML KYC Exam 2026 Test Matters?
The IIBF AML KYC Exam 2026 is a core certification for banking and financial sector professionals dealing with regulatory compliance, customer due diligence, and financial crime prevention. This paper directly tests your understanding of RBI-mandated AML/KYC norms, PMLA provisions, and practical compliance scenarios faced in day-to-day banking operations.
Important Topics: The IIBF AML KYC Exam 2026 covers:
- Anti Money Laundering (AML) framework
- Know Your Customer (KYC) guidelines
- Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD)
- Reporting obligations under PMLA and FIU-IND
Practice IIBF AML KYC Exam 2026 (Live Mock Test)
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IIBF AML KYC Exam 2026 – 105 Most Expected Questions
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When a branch or majority-owned subsidiary of a bank located abroad faces a variance between the KYC/AML standards prescribed by the RBI and the host country regulator, which standard must it adopt?
Explanation
Correct: C
In case there is a variance in KYC / AML standards prescribed by the RBI and the host country regulators, branches / subsidiaries of the bank shall adopt the more stringent regulation of the two. This is a fundamental concept for the IIBF AML KYC Exam 2026.
In case there is a variance in KYC / AML standards prescribed by the RBI and the host country regulators, branches / subsidiaries of the bank shall adopt the more stringent regulation of the two. This is a fundamental concept for the IIBF AML KYC Exam 2026.
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Which of the following statements correctly describe the “Controlling Ownership Interest” or entitlement thresholds for determining the Beneficial Owner (BO) of various legal entities?
1. For a company, it is ownership of more than 10 percent of the shares, capital, or profits.
2. For a partnership firm, it is ownership of more than 10 percent of the capital or profits.
3. For an unincorporated association, it is ownership of more than 15 percent of the property, capital, or profits.
4. For a trust, it includes beneficiaries with 10 percent or more interest in the trust.
1. For a company, it is ownership of more than 10 percent of the shares, capital, or profits.
2. For a partnership firm, it is ownership of more than 10 percent of the capital or profits.
3. For an unincorporated association, it is ownership of more than 15 percent of the property, capital, or profits.
4. For a trust, it includes beneficiaries with 10 percent or more interest in the trust.
Explanation
Correct: D
For a company, controlling ownership interest means ownership of more than 10 percent. For a partnership firm, it is ownership of more than 10 percent. For an unincorporated association, it is ownership of more than 15 percent. For a trust, it includes beneficiaries with 10 percent or more interest. Mastering these thresholds is vital for the IIBF AML KYC Exam 2026.
For a company, controlling ownership interest means ownership of more than 10 percent. For a partnership firm, it is ownership of more than 10 percent. For an unincorporated association, it is ownership of more than 15 percent. For a trust, it includes beneficiaries with 10 percent or more interest. Mastering these thresholds is vital for the IIBF AML KYC Exam 2026.
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Which of the following documents is NOT included in the specific definition of “Officially Valid Document” (OVD) for the purpose of verifying identity and address?
Explanation
Correct: C
“Officially Valid Document (OVD)” means the passport, the driving licence, proof of possession of Aadhaar number, the Voter’s Identity Card, the job card issued by NREGA, and the letter issued by the National Population Register. The PAN Card is not listed in this specific definition of OVDs. This distinction is often tested in the IIBF AML KYC Exam 2026. LSI INJECTION: It is crucial to consult the RBI Master Direction for the exact list of OVDs.
“Officially Valid Document (OVD)” means the passport, the driving licence, proof of possession of Aadhaar number, the Voter’s Identity Card, the job card issued by NREGA, and the letter issued by the National Population Register. The PAN Card is not listed in this specific definition of OVDs. This distinction is often tested in the IIBF AML KYC Exam 2026. LSI INJECTION: It is crucial to consult the RBI Master Direction for the exact list of OVDs.
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For Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs), the bank may utilize a “Certified Copy” of an OVD. Which of the following officials is authorized to certify such a copy abroad?
Explanation
Correct: B
In case of NRIs and PIOs, the bank may alternatively obtain the original certified copy, certified by authorized officials of overseas branches of Scheduled Commercial Banks, branches of overseas banks with whom Indian banks have relationships, Notary Public abroad, Court Magistrate, Judge, or Indian Embassy/Consulate General. This procedure is a key topic in the IIBF AML KYC Exam 2026.
In case of NRIs and PIOs, the bank may alternatively obtain the original certified copy, certified by authorized officials of overseas branches of Scheduled Commercial Banks, branches of overseas banks with whom Indian banks have relationships, Notary Public abroad, Court Magistrate, Judge, or Indian Embassy/Consulate General. This procedure is a key topic in the IIBF AML KYC Exam 2026.
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Consider the following statements regarding “Deemed Officially Valid Documents” (OVDs) submitted when an OVD does not have an updated address:
1. A utility bill provided as a deemed OVD must not be more than two months old.
2. A pension payment order (PPO) issued to retired employees by Government Departments is a valid deemed OVD if it contains the address.
3. The customer must submit an OVD with the current address, within a period of three months of submitting the deemed OVD.
4. A property or Municipal tax receipt is considered a deemed OVD.
1. A utility bill provided as a deemed OVD must not be more than two months old.
2. A pension payment order (PPO) issued to retired employees by Government Departments is a valid deemed OVD if it contains the address.
3. The customer must submit an OVD with the current address, within a period of three months of submitting the deemed OVD.
4. A property or Municipal tax receipt is considered a deemed OVD.
Explanation
Correct: D
Deemed OVDs include utility bills not more than two months old, property or Municipal tax receipts, and PPOs. The customer shall submit an OVD with current address within a period of three months of submitting the deemed OVDs. Understanding deemed OVDs is essential for the IIBF AML KYC Exam 2026.
Deemed OVDs include utility bills not more than two months old, property or Municipal tax receipts, and PPOs. The customer shall submit an OVD with current address within a period of three months of submitting the deemed OVDs. Understanding deemed OVDs is essential for the IIBF AML KYC Exam 2026.
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Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with …… interest in the trust, and any other natural person exercising ultimate effective control.
Explanation
Correct: C
Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 10 percent or more interest in the trust. Beneficial ownership rules are frequently asked in the IIBF AML KYC Exam 2026. LSI INJECTION: This aligns with strict PMLA Compliance standards regarding trust transparency.
Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 10 percent or more interest in the trust. Beneficial ownership rules are frequently asked in the IIBF AML KYC Exam 2026. LSI INJECTION: This aligns with strict PMLA Compliance standards regarding trust transparency.
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If an Officially Valid Document (OVD) presented by a foreign national does not contain address details, which specific combination of documents is accepted as proof of address?
Explanation
Correct: B
If the OVD that a foreign national presents does not contain the details of address, the bank shall accept documents that Government departments of foreign jurisdictions issue, and a letter that the Foreign Embassy or Mission in India issues, as proof of address. This is a specific scenario covered in the IIBF AML KYC Exam 2026.
If the OVD that a foreign national presents does not contain the details of address, the bank shall accept documents that Government departments of foreign jurisdictions issue, and a letter that the Foreign Embassy or Mission in India issues, as proof of address. This is a specific scenario covered in the IIBF AML KYC Exam 2026.
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Which of the following circumstances constitute a “Suspicious Transaction”?
1. It gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act.
2. It appears to be made in circumstances of unusual or unjustified complexity.
3. It appears to have no economic rationale or bona fide purpose.
4. It gives rise to a reasonable ground of suspicion that it may involve financing of terrorism.
1. It gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act.
2. It appears to be made in circumstances of unusual or unjustified complexity.
3. It appears to have no economic rationale or bona fide purpose.
4. It gives rise to a reasonable ground of suspicion that it may involve financing of terrorism.
Explanation
Correct: D
A ‘Suspicious transaction’ includes transactions that (a) involve proceeds of an offence, (b) appear to have unusual or unjustified complexity, (c) have no economic rationale or bona fide purpose, or (d) involve financing of activities relating to terrorism. Defining suspicious transactions is core to the IIBF AML KYC Exam 2026.
A ‘Suspicious transaction’ includes transactions that (a) involve proceeds of an offence, (b) appear to have unusual or unjustified complexity, (c) have no economic rationale or bona fide purpose, or (d) involve financing of activities relating to terrorism. Defining suspicious transactions is core to the IIBF AML KYC Exam 2026.
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Customer Due Diligence (CDD) is mandatory when carrying out an occasional transaction of an amount equal to or exceeding ……, whether conducted as a single transaction, or several transactions that appear to be connected.
Explanation
Correct: C
Customer Due Diligence (CDD) includes identifying and verifying the customer when carrying out occasional transactions of an amount equal to or exceeding ₹50,000, whether conducted as a single transaction or several transactions that appear to be connected. This threshold is a standard question in the IIBF AML KYC Exam 2026. LSI INJECTION: Proper CDD is the first defense in maintaining high Anti-Money Laundering Standards.
Customer Due Diligence (CDD) includes identifying and verifying the customer when carrying out occasional transactions of an amount equal to or exceeding ₹50,000, whether conducted as a single transaction or several transactions that appear to be connected. This threshold is a standard question in the IIBF AML KYC Exam 2026. LSI INJECTION: Proper CDD is the first defense in maintaining high Anti-Money Laundering Standards.
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The term “Payable-through accounts” specifically refers to which of the following?
Explanation
Correct: B
The term “payable-through accounts” refers to correspondent accounts that third parties use directly to transact business on their own behalf. Understanding these accounts is critical for the IIBF AML KYC Exam 2026.
The term “payable-through accounts” refers to correspondent accounts that third parties use directly to transact business on their own behalf. Understanding these accounts is critical for the IIBF AML KYC Exam 2026.
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Consider the following statements regarding “Shell Banks”:
Assertion (A):
The existence of a local agent or low-level staff in a country constitutes “physical presence” for a bank incorporated in that country.Reason (R):
A Shell Bank is defined as a bank that has no physical presence in the country of incorporation and is unaffiliated with a regulated financial group.
Explanation
Correct: D
Assertion A is false because “Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low-level staff does not constitute physical presence.” Reason R is the correct definition of a Shell Bank. Shell bank definitions are often part of the IIBF AML KYC Exam 2026.
Assertion A is false because “Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low-level staff does not constitute physical presence.” Reason R is the correct definition of a Shell Bank. Shell bank definitions are often part of the IIBF AML KYC Exam 2026.
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In the context of wire transfers, what is a “Cover Payment”?
Explanation
Correct: C
Cover Payment refers to a wire transfer that combines a payment message which the ordering financial institution sends directly to the beneficiary financial institution with the routing of the funding instruction (the cover) from the ordering financial institution to the beneficiary financial institution through one or more intermediary financial institutions. This is a technical topic in the IIBF AML KYC Exam 2026. LSI INJECTION: Such mechanisms must comply with Banking KYC Guidelines for transparency.
Cover Payment refers to a wire transfer that combines a payment message which the ordering financial institution sends directly to the beneficiary financial institution with the routing of the funding instruction (the cover) from the ordering financial institution to the beneficiary financial institution through one or more intermediary financial institutions. This is a technical topic in the IIBF AML KYC Exam 2026. LSI INJECTION: Such mechanisms must comply with Banking KYC Guidelines for transparency.
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A “Domestic wire transfer” can involve a payment message transfer system located outside of India, provided the ordering and beneficiary financial institutions are both located in India.
Explanation
Correct: A
Domestic wire transfer refers to any wire transfer where the ordering financial institution and beneficiary financial institution are located in India. This term refers to any chain of wire transfers that takes place entirely within the borders of India, even though the system used to transfer the payment message may be located in another country. This nuance is important for the IIBF AML KYC Exam 2026.
Domestic wire transfer refers to any wire transfer where the ordering financial institution and beneficiary financial institution are located in India. This term refers to any chain of wire transfers that takes place entirely within the borders of India, even though the system used to transfer the payment message may be located in another country. This nuance is important for the IIBF AML KYC Exam 2026.
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How is the “Video based Customer Identification Process (V-CIP)” treated for the purpose of Customer Due Diligence (CDD)?
Explanation
Correct: C
The bank shall treat such processes (V-CIP) complying with prescribed standards and procedures on par with face-to-face CIP for the purpose of this Direction. This equivalency is a key concept in the IIBF AML KYC Exam 2026.
The bank shall treat such processes (V-CIP) complying with prescribed standards and procedures on par with face-to-face CIP for the purpose of this Direction. This equivalency is a key concept in the IIBF AML KYC Exam 2026.
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Which of the following is NOT one of the four key elements that the Know Your Customer (KYC) policy of a bank must include?
Explanation
Correct: D
The KYC policy shall include following four key elements: (i) Customer Acceptance Policy; (ii) Risk Management; (iii) Customer Identification Procedures (CIP); and (iv) Monitoring of Transactions. Knowing these pillars is essential for the IIBF AML KYC Exam 2026.
The KYC policy shall include following four key elements: (i) Customer Acceptance Policy; (ii) Risk Management; (iii) Customer Identification Procedures (CIP); and (iv) Monitoring of Transactions. Knowing these pillars is essential for the IIBF AML KYC Exam 2026.
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A “Serial Payment” in the context of wire transfers is defined as:
Explanation
Correct: B
‘Serial Payment’ refers to a direct sequential chain of payment where the wire transfer and accompanying payment message travel together from the ordering financial institution to the beneficiary financial institution directly or through one or more intermediary financial institutions. This definition is relevant to the IIBF AML KYC Exam 2026.
‘Serial Payment’ refers to a direct sequential chain of payment where the wire transfer and accompanying payment message travel together from the ordering financial institution to the beneficiary financial institution directly or through one or more intermediary financial institutions. This definition is relevant to the IIBF AML KYC Exam 2026.
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How frequently must a bank review its internal “Money Laundering (ML) and Terrorist Financing (TF) Risk Assessment”?
Explanation
Correct: B
The Board or a committee of the Board to which it has delegated power shall determine the periodicity of the risk assessment exercise… However, the bank shall review it at least annually. Periodic reviews are a compliance requirement tested in the IIBF AML KYC Exam 2026.
The Board or a committee of the Board to which it has delegated power shall determine the periodicity of the risk assessment exercise… However, the bank shall review it at least annually. Periodic reviews are a compliance requirement tested in the IIBF AML KYC Exam 2026.
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Regarding the “Customer Acceptance Policy,” banks are explicitly prohibited from opening accounts in which of the following manners?
Explanation
Correct: B
The bank shall not open any account in an anonymous or fictitious / benami name. This prohibition is a fundamental rule in the IIBF AML KYC Exam 2026.
The bank shall not open any account in an anonymous or fictitious / benami name. This prohibition is a fundamental rule in the IIBF AML KYC Exam 2026.
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Which specific function regarding KYC norms is a bank prohibited from outsourcing?
Explanation
Correct: C
The bank shall ensure that it does not outsource the decision-making functions of determining compliance with KYC norms. Outsourcing limitations are a critical topic in the IIBF AML KYC Exam 2026.
The bank shall ensure that it does not outsource the decision-making functions of determining compliance with KYC norms. Outsourcing limitations are a critical topic in the IIBF AML KYC Exam 2026.
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According to the Customer Acceptance Policy, how should a bank handle a situation where an existing KYC-compliant customer desires to open another account or avail of a new product?
1. The bank must conduct a fresh Customer Due Diligence (CDD) exercise for the new account.
2. The bank must verify the customer’s identity again using a third-party auditor.
3. There is no need for a fresh CDD exercise, as far as identification of the customer is concerned.
4. The CDD procedure should be applied at the Unique Customer Identification Code (UCIC) level.
1. The bank must conduct a fresh Customer Due Diligence (CDD) exercise for the new account.
2. The bank must verify the customer’s identity again using a third-party auditor.
3. There is no need for a fresh CDD exercise, as far as identification of the customer is concerned.
4. The CDD procedure should be applied at the Unique Customer Identification Code (UCIC) level.
Explanation
Correct: C
The bank shall apply the CDD procedure at the UCIC level. Thus, if an existing KYC-compliant customer of a bank desires to open another account… there shall be no need for a fresh CDD exercise as far as identification of the customer is concerned. This concept of UCIC is central to the IIBF AML KYC Exam 2026.
The bank shall apply the CDD procedure at the UCIC level. Thus, if an existing KYC-compliant customer of a bank desires to open another account… there shall be no need for a fresh CDD exercise as far as identification of the customer is concerned. This concept of UCIC is central to the IIBF AML KYC Exam 2026.
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If a bank forms a suspicion of money laundering and reasonably believes that performing the Customer Due Diligence (CDD) process will “tip-off” the customer, it must proceed with the CDD process cautiously.
Explanation
Correct: B
Where the bank forms a suspicion of money laundering or terrorist financing, and it reasonably believes that performing the CDD process will tip-off the customer, it shall not pursue the CDD process, and instead file an STR with FIU-IND. Tipping off rules are critical for the IIBF AML KYC Exam 2026.
Where the bank forms a suspicion of money laundering or terrorist financing, and it reasonably believes that performing the CDD process will tip-off the customer, it shall not pursue the CDD process, and instead file an STR with FIU-IND. Tipping off rules are critical for the IIBF AML KYC Exam 2026.
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To ensure compliance with KYC/AML policies, banks must submit audit notes and compliance reports to the Audit Committee at what periodicity?
Explanation
Correct: B
The bank shall ensure compliance with KYC Policy through… submission of quarterly audit notes and compliance to the Audit Committee. Compliance reporting is a standard question in the IIBF AML KYC Exam 2026.
The bank shall ensure compliance with KYC Policy through… submission of quarterly audit notes and compliance to the Audit Committee. Compliance reporting is a standard question in the IIBF AML KYC Exam 2026.
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When rejecting an application for onboarding or periodic updation of KYC, what specific procedural requirement must the concerned officer fulfill?
Explanation
Correct: B
The bank shall not reject an application for onboarding or periodic updation of KYC without application of mind. The officer concerned shall duly record the reason(s) for rejection. Due process is emphasized in the IIBF AML KYC Exam 2026.
The bank shall not reject an application for onboarding or periodic updation of KYC without application of mind. The officer concerned shall duly record the reason(s) for rejection. Due process is emphasized in the IIBF AML KYC Exam 2026.
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Banks are permitted to inform a customer of their specific “Risk Categorization” (Low, Medium, or High) to ensure transparency in the banking relationship.
Explanation
Correct: B
The bank shall keep the risk categorisation of a customer and the specific reasons for such categorisation confidential and shall not reveal this information to the customer to avoid tipping off. Confidentiality of risk ratings is a key point in the IIBF AML KYC Exam 2026.
The bank shall keep the risk categorisation of a customer and the specific reasons for such categorisation confidential and shall not reveal this information to the customer to avoid tipping off. Confidentiality of risk ratings is a key point in the IIBF AML KYC Exam 2026.
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Under which of the following circumstances is a bank required to undertake the identification of customers (Customer Identification Procedure)?
1. When carrying out an international money transfer for a person who is not an account holder.
2. When selling third-party products for more than ₹50,000.
3. When a walk-in customer conducts a transaction of ₹50,000 or more.
4. When the bank believes a customer is intentionally structuring transactions below the ₹50,000 threshold.
1. When carrying out an international money transfer for a person who is not an account holder.
2. When selling third-party products for more than ₹50,000.
3. When a walk-in customer conducts a transaction of ₹50,000 or more.
4. When the bank believes a customer is intentionally structuring transactions below the ₹50,000 threshold.
Explanation
Correct: D
Identification is required for: international transfers for non-account holders, selling third-party products > ₹50,000, walk-in transactions > ₹50,000, and intentional structuring below ₹50,000. These triggers are essential knowledge for the IIBF AML KYC Exam 2026.
Identification is required for: international transfers for non-account holders, selling third-party products > ₹50,000, walk-in transactions > ₹50,000, and intentional structuring below ₹50,000. These triggers are essential knowledge for the IIBF AML KYC Exam 2026.
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Regarding the opening of bank accounts, what is the specific regulatory stance on “Introductions”?
Explanation
Correct: C
The bank shall ensure it does not seek introductions while opening accounts. This updated norm is important for the IIBF AML KYC Exam 2026.
The bank shall ensure it does not seek introductions while opening accounts. This updated norm is important for the IIBF AML KYC Exam 2026.
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A bank may rely on Customer Due Diligence (CDD) done by a third party, subject to several conditions. Which of the following is NOT a valid condition for such reliance?
Explanation
Correct: C
The bank will have the ultimate responsibility for customer due diligence and undertaking enhanced due diligence measures, as applicable. The other options are valid conditions. Third-party reliance rules are tested in the IIBF AML KYC Exam 2026.
The bank will have the ultimate responsibility for customer due diligence and undertaking enhanced due diligence measures, as applicable. The other options are valid conditions. Third-party reliance rules are tested in the IIBF AML KYC Exam 2026.
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When a customer submits a “Proof of Possession of Aadhaar Number” where authentication is not required (e.g., voluntarily), what specific action must the bank ensure regarding the Aadhaar number on the document?
Explanation
Correct: B
The bank shall, where its customer submits a proof of possession of Aadhaar Number containing Aadhaar Number, ensure that such customer redacts or blacks out his Aadhaar number through appropriate means where the authentication of Aadhaar number is not required. Aadhaar masking is a crucial privacy aspect in the IIBF AML KYC Exam 2026.
The bank shall, where its customer submits a proof of possession of Aadhaar Number containing Aadhaar Number, ensure that such customer redacts or blacks out his Aadhaar number through appropriate means where the authentication of Aadhaar number is not required. Aadhaar masking is a crucial privacy aspect in the IIBF AML KYC Exam 2026.
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When a bank grants an exception for CDD (e.g., offline verification instead of e-KYC) due to a customer’s injury, illness, or old age, which of the following controls must be implemented?
1. An official of the bank shall invariably carry out the CDD.
2. The exception handling must be part of the concurrent audit.
3. The details must be recorded in a centralized exception database.
4. The database must be available for supervisory review.
1. An official of the bank shall invariably carry out the CDD.
2. The exception handling must be part of the concurrent audit.
3. The details must be recorded in a centralized exception database.
4. The database must be available for supervisory review.
Explanation
Correct: D
An official shall carry out CDD, it shall be part of concurrent audit, details recorded in a centralized exception database, and the database made available for supervisory review. Exception handling is a detailed topic in the IIBF AML KYC Exam 2026.
An official shall carry out CDD, it shall be part of concurrent audit, details recorded in a centralized exception database, and the database made available for supervisory review. Exception handling is a detailed topic in the IIBF AML KYC Exam 2026.
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While opening an account, the bank must verify the Permanent Account Number (PAN) from the verification facility of the issuing authority. If the customer furnishes an Officially Valid Document (OVD) that does not have an updated address, they are required to submit an OVD with the current address within a period of …… months.
Explanation
Correct: B
The customer shall submit OVD with current address within a period of three months of submitting the deemed OVDs. This timeline is often asked in the IIBF AML KYC Exam 2026.
The customer shall submit OVD with current address within a period of three months of submitting the deemed OVDs. This timeline is often asked in the IIBF AML KYC Exam 2026.
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Accounts opened using Aadhaar OTP-based e-KYC in non-face-to-face mode are subject to strict aggregate limitations. What is the maximum allowable aggregate balance in all deposit accounts of the customer?
Explanation
Correct: B
The aggregate balance of all the deposit accounts of the customer shall not exceed Rupees One Lakh. Limits on OTP-based accounts are a key part of the IIBF AML KYC Exam 2026.
The aggregate balance of all the deposit accounts of the customer shall not exceed Rupees One Lakh. Limits on OTP-based accounts are a key part of the IIBF AML KYC Exam 2026.
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Regarding the “Digital KYC Process,” which of the following statements correctly describe the requirements for capturing the customer’s live photograph?
1. The background behind the customer must be of white color.
2. No other person shall come into the frame while capturing the photograph.
3. The system must watermark the photograph with GPS coordinates and a timestamp.
4. The photograph must be captured using a printed or video-graphed image if the customer is not physically present.
1. The background behind the customer must be of white color.
2. No other person shall come into the frame while capturing the photograph.
3. The system must watermark the photograph with GPS coordinates and a timestamp.
4. The photograph must be captured using a printed or video-graphed image if the customer is not physically present.
Explanation
Correct: B
The background shall be white, no other person shall be in the frame. The system must watermark with GPS, date, and time. Statement 4 is incorrect because the application must capture only a “live photograph” and not a printed/video-graphed one. Digital KYC nuances are covered in the IIBF AML KYC Exam 2026.
The background shall be white, no other person shall be in the frame. The system must watermark with GPS, date, and time. Statement 4 is incorrect because the application must capture only a “live photograph” and not a printed/video-graphed one. Digital KYC nuances are covered in the IIBF AML KYC Exam 2026.
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In the context of the “Digital KYC Process,” how is the customer’s signature obtained and validated on the Customer Application Form (CAF)?
Explanation
Correct: C
Upon successful validation of the OTP, the bank will treat it as the customer’s signature on CAF. This digital signature method is a relevant topic for the IIBF AML KYC Exam 2026.
Upon successful validation of the OTP, the bank will treat it as the customer’s signature on CAF. This digital signature method is a relevant topic for the IIBF AML KYC Exam 2026.
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Which of the following is NOT a permitted use case for the Video-based Customer Identification Process (V-CIP)?
Explanation
Correct: D
V-CIP is permitted for new individual customers, conversion of OTP-based accounts, and periodic updation. Opening accounts for shell banks is prohibited entirely. V-CIP use cases are a major part of the IIBF AML KYC Exam 2026.
V-CIP is permitted for new individual customers, conversion of OTP-based accounts, and periodic updation. Opening accounts for shell banks is prohibited entirely. V-CIP use cases are a major part of the IIBF AML KYC Exam 2026.
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Which of the following statements regarding the “V-CIP Infrastructure” are incorrect?
1. The technology infrastructure must be housed in the bank’s own premises.
2. The V-CIP connection must originate from the bank’s own secured network domain.
3. Data storage can be delegated entirely to a cloud service provider without transferring data back to the bank’s server.
4. The video recording must contain live GPS coordinates (geo-tagging).
1. The technology infrastructure must be housed in the bank’s own premises.
2. The V-CIP connection must originate from the bank’s own secured network domain.
3. Data storage can be delegated entirely to a cloud service provider without transferring data back to the bank’s server.
4. The video recording must contain live GPS coordinates (geo-tagging).
Explanation
Correct: A
Statement 3 is incorrect. Where the bank uses a cloud model, it shall ensure that all data including video recording is transferred to the bank’s exclusively owned/leased server immediately after the process, and the cloud provider shall retain no data. V-CIP infrastructure rules are critical for the IIBF AML KYC Exam 2026.
Statement 3 is incorrect. Where the bank uses a cloud model, it shall ensure that all data including video recording is transferred to the bank’s exclusively owned/leased server immediately after the process, and the cloud provider shall retain no data. V-CIP infrastructure rules are critical for the IIBF AML KYC Exam 2026.
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For borrowal accounts opened using OTP-based e-KYC in non-face-to-face mode, the bank shall sanction only term loans, and the aggregate amount of such term loans shall not exceed …… in a year.
Explanation
Correct: C
As regards borrowal accounts, the bank shall sanction only term loans. The aggregate amount of term loans sanctioned shall not exceed ₹60,000 in a year. This specific limit is a potential question in the IIBF AML KYC Exam 2026.
As regards borrowal accounts, the bank shall sanction only term loans. The aggregate amount of term loans sanctioned shall not exceed ₹60,000 in a year. This specific limit is a potential question in the IIBF AML KYC Exam 2026.
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In the Digital KYC process, if a customer does not have their own mobile number, the bank is strictly prohibited from using the mobile number of a family member or relative for the purpose of OTP verification.
Explanation
Correct: B
If the customer does not have their own mobile number, the bank may use the mobile number of their family / relatives / known persons for this purpose and clearly mention it in the CAF. This exception is important for the IIBF AML KYC Exam 2026.
If the customer does not have their own mobile number, the bank may use the mobile number of their family / relatives / known persons for this purpose and clearly mention it in the CAF. This exception is important for the IIBF AML KYC Exam 2026.
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If a bank opens a deposit account using OTP-based e-KYC in non-face-to-face mode, what is the maximum period the account can operate before a full Customer Due Diligence (CDD) procedure is required?
Explanation
Correct: B
The bank shall not allow accounts… opened using OTP based e-KYC to operate for more than one year unless it carries out identification as per paragraph 23 or as per paragraphs 26 and 27 (V-CIP). This validity period is a standard question in the IIBF AML KYC Exam 2026.
The bank shall not allow accounts… opened using OTP based e-KYC to operate for more than one year unless it carries out identification as per paragraph 23 or as per paragraphs 26 and 27 (V-CIP). This validity period is a standard question in the IIBF AML KYC Exam 2026.
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When conducting a Video-based Customer Identification Process (V-CIP) using offline verification of Aadhaar via an XML file or Aadhaar Secure QR Code, what is the maximum validity period of the XML file or QR code generation date?
Explanation
Correct: B
In case of offline verification of Aadhaar using XML file or Aadhaar Secure QR Code, the bank shall ensure that the XML file or QR code generation date is not older than three working days from the date of carrying out V-CIP. This technical detail is relevant for the IIBF AML KYC Exam 2026.
In case of offline verification of Aadhaar using XML file or Aadhaar Secure QR Code, the bank shall ensure that the XML file or QR code generation date is not older than three working days from the date of carrying out V-CIP. This technical detail is relevant for the IIBF AML KYC Exam 2026.
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During the Video-based Customer Identification Process (V-CIP), which of the following actions is explicitly invalid or prohibited?
Explanation
Correct: C
The use of printed copy of equivalent e-document, including an e-PAN is not valid for the V-CIP. Understanding prohibited actions in V-CIP is crucial for the IIBF AML KYC Exam 2026.
The use of printed copy of equivalent e-document, including an e-PAN is not valid for the V-CIP. Understanding prohibited actions in V-CIP is crucial for the IIBF AML KYC Exam 2026.
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A “Small Account” can be credited with foreign remittances, provided the amount does not exceed ₹10,000 in a month.
Explanation
Correct: B
The bank shall not allow foreign remittance to be credited into the account unless it fully establishes the identity of the customer as per paragraph 23 or paragraphs 26 and 27 (full KYC). Foreign remittance rules for small accounts are part of the IIBF AML KYC Exam 2026.
The bank shall not allow foreign remittance to be credited into the account unless it fully establishes the identity of the customer as per paragraph 23 or paragraphs 26 and 27 (full KYC). Foreign remittance rules for small accounts are part of the IIBF AML KYC Exam 2026.
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Which of the following limitations apply to a “Small Account”?
1. The aggregate of all credits in a financial year does not exceed Rupees One Lakh.
2. The aggregate of all withdrawals and transfers in a month does not exceed ₹10,000.
3. The balance at any point of time does not exceed ₹50,000.
4. The account can only be opened at Core Banking Solution (CBS) linked branches.
1. The aggregate of all credits in a financial year does not exceed Rupees One Lakh.
2. The aggregate of all withdrawals and transfers in a month does not exceed ₹10,000.
3. The balance at any point of time does not exceed ₹50,000.
4. The account can only be opened at Core Banking Solution (CBS) linked branches.
Explanation
Correct: D
Small accounts entail: aggregate credits ≤ ₹1 Lakh/year, withdrawals ≤ ₹10,000/month, balance ≤ ₹50,000, and must be opened at CBS linked branches (or branches where manual monitoring is possible). These limits are frequently tested in the IIBF AML KYC Exam 2026.
Small accounts entail: aggregate credits ≤ ₹1 Lakh/year, withdrawals ≤ ₹10,000/month, balance ≤ ₹50,000, and must be opened at CBS linked branches (or branches where manual monitoring is possible). These limits are frequently tested in the IIBF AML KYC Exam 2026.
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For a Sole Proprietary firm, if a bank decides to accept only one document as proof of business (instead of the standard two) due to the firm’s inability to furnish two, what additional measure is mandatory?
Explanation
Correct: B
In cases where the bank accepts only one document… the bank undertakes contact point verification and collects such other information… and shall confirm and satisfy itself that it has verified the business activity from the address of the proprietary concern. This is a specific relaxation rule in the IIBF AML KYC Exam 2026.
In cases where the bank accepts only one document… the bank undertakes contact point verification and collects such other information… and shall confirm and satisfy itself that it has verified the business activity from the address of the proprietary concern. This is a specific relaxation rule in the IIBF AML KYC Exam 2026.
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Regarding “Assisted V-CIP,” which of the following statements correctly describes the role of Business Correspondents (BCs)?
1. BCs can conduct the entire V-CIP process on behalf of the bank.
2. BCs can facilitate the process only at the customer end.
3. The bank must maintain the details of the BC assisting the customer.
4. The ultimate responsibility for customer due diligence rests with the BC.
1. BCs can conduct the entire V-CIP process on behalf of the bank.
2. BCs can facilitate the process only at the customer end.
3. The bank must maintain the details of the BC assisting the customer.
4. The ultimate responsibility for customer due diligence rests with the BC.
Explanation
Correct: B
The bank shall permit assisted V-CIP when it takes help of Business Correspondents (BCs) to facilitate the process only at the customer end. The bank shall maintain details of the BC. The bank (not the BC) has the ultimate responsibility for CDD. This distinction is vital for the IIBF AML KYC Exam 2026.
The bank shall permit assisted V-CIP when it takes help of Business Correspondents (BCs) to facilitate the process only at the customer end. The bank shall maintain details of the BC. The bank (not the BC) has the ultimate responsibility for CDD. This distinction is vital for the IIBF AML KYC Exam 2026.
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Which of the following authorities is mandatory to conduct the Vulnerability Assessment, Penetration Testing, and Security Audit of the V-CIP infrastructure?
Explanation
Correct: C
The empanelled auditors of Indian Computer Emergency Response Team (CERT-In) shall conduct such tests. Security audit requirements are part of the technical syllabus of the IIBF AML KYC Exam 2026.
The empanelled auditors of Indian Computer Emergency Response Team (CERT-In) shall conduct such tests. Security audit requirements are part of the technical syllabus of the IIBF AML KYC Exam 2026.
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For opening an account of a Company, which of the following documents is mandatory to obtain as a certified copy?
Explanation
Correct: B
For opening an account of a company, the bank shall obtain… (4) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf. Corporate account opening is a standard topic in the IIBF AML KYC Exam 2026.
For opening an account of a company, the bank shall obtain… (4) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf. Corporate account opening is a standard topic in the IIBF AML KYC Exam 2026.
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According to the guidelines on “Monitoring of Transactions”, how frequently must a bank review the risk categorization of customer accounts?
Explanation
Correct: B
The bank shall put in place a system of periodic review of risk categorisation of accounts, with such periodicity being at least once in every six months. Monitoring frequency is a key compliance metric in the IIBF AML KYC Exam 2026.
The bank shall put in place a system of periodic review of risk categorisation of accounts, with such periodicity being at least once in every six months. Monitoring frequency is a key compliance metric in the IIBF AML KYC Exam 2026.
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Which of the following correctly matches the “Risk Category” with the mandatory minimum periodicity for KYC updation?
1. High-risk customers: Once in every two years
2. Medium risk customers: Once in every eight years
3. Low-risk customers: Once in every ten years
1. High-risk customers: Once in every two years
2. Medium risk customers: Once in every eight years
3. Low-risk customers: Once in every ten years
Explanation
Correct: D
The bank shall carry out periodic updation at least once in every two years for high-risk customers, once in every eight years for medium risk customers and once in every 10 years for low-risk customers. These timelines are essential for the IIBF AML KYC Exam 2026.
The bank shall carry out periodic updation at least once in every two years for high-risk customers, once in every eight years for medium risk customers and once in every 10 years for low-risk customers. These timelines are essential for the IIBF AML KYC Exam 2026.
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For the purpose of opening an account, which of the following entities are explicitly included under the term “Unincorporated Association”?
Explanation
Correct: A
Explanation: Unregistered trusts / partnership firms shall be included under the term ‘unincorporated association’. This definition helps in determining beneficial ownership in the IIBF AML KYC Exam 2026.
Explanation: Unregistered trusts / partnership firms shall be included under the term ‘unincorporated association’. This definition helps in determining beneficial ownership in the IIBF AML KYC Exam 2026.
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When opening an account for a Trust, which of the following parties must be identified as part of the beneficial owner identification process?
1. The author of the trust
2. The trustees
3. The beneficiaries with 10 percent or more interest in the trust
4. Any natural person exercising ultimate effective control over the trust
1. The author of the trust
2. The trustees
3. The beneficiaries with 10 percent or more interest in the trust
4. Any natural person exercising ultimate effective control over the trust
Explanation
Correct: D
For a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 10 percent or more interest… and any other natural person exercising ultimate effective control. Trust accounts are a complex area in the IIBF AML KYC Exam 2026.
For a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 10 percent or more interest… and any other natural person exercising ultimate effective control. Trust accounts are a complex area in the IIBF AML KYC Exam 2026.
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During periodic updation of KYC for an individual customer, if there is a change only in the address details, the bank must verify the declared address through “positive confirmation” within what timeframe?
Explanation
Correct: B
In case of a change only in the address details, the bank shall obtain a self-declaration and verify the declared address through positive confirmation within two months. Address verification rules are part of the IIBF AML KYC Exam 2026.
In case of a change only in the address details, the bank shall obtain a self-declaration and verify the declared address through positive confirmation within two months. Address verification rules are part of the IIBF AML KYC Exam 2026.
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When an account holder who was a minor at the time of account opening becomes a major, the bank is required to obtain fresh photographs and ensure that Customer Due Diligence (CDD) documents are available as per current standards.
Explanation
Correct: A
Upon a minor account holder becoming a major, the bank shall obtain fresh photographs and ensure that CDD documents as per current standards are available. Minor-to-major transitions are tested in the IIBF AML KYC Exam 2026.
Upon a minor account holder becoming a major, the bank shall obtain fresh photographs and ensure that CDD documents as per current standards are available. Minor-to-major transitions are tested in the IIBF AML KYC Exam 2026.
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Regarding the “Due Notices for Periodic Updation of KYC,” what is the minimum number of advance intimations and subsequent reminders a bank must send to a customer before the due date and after the due date, respectively?
Explanation
Correct: C
Prior to the due date, the bank shall give at least three advance intimations. Subsequent to the due date, the bank shall give at least three reminders. Communication protocols are part of the IIBF AML KYC Exam 2026.
Prior to the due date, the bank shall give at least three advance intimations. Subsequent to the due date, the bank shall give at least three reminders. Communication protocols are part of the IIBF AML KYC Exam 2026.
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In the context of customers unable to provide PAN or Form No. 60, “temporary ceasing of operations” in relation to an account is defined as:
Explanation
Correct: C
Temporary ceasing of operations means temporary suspension of all transactions, except for allowing credits in asset accounts such as loan accounts. This definition is specific to the IIBF AML KYC Exam 2026.
Temporary ceasing of operations means temporary suspension of all transactions, except for allowing credits in asset accounts such as loan accounts. This definition is specific to the IIBF AML KYC Exam 2026.
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For accounts opened in non-face-to-face mode (subject to Enhanced Due Diligence), the first transaction must necessarily be a credit from an existing KYC-complied bank account of the customer.
Explanation
Correct: A
The first transaction in such accounts shall be a credit from an existing KYC-complied bank account of the customer. This EDD measure is a key concept in the IIBF AML KYC Exam 2026.
The first transaction in such accounts shall be a credit from an existing KYC-complied bank account of the customer. This EDD measure is a key concept in the IIBF AML KYC Exam 2026.
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How are “Politically Exposed Persons” (PEPs) defined for the purpose of the RBI (Commercial Banks – KYC) Directions, 2025?
Explanation
Correct: B
‘Politically Exposed Persons’ (PEPs) are individuals who are or have been entrusted with prominent public functions by a foreign country. The definition of PEPs is a standard question in the IIBF AML KYC Exam 2026.
‘Politically Exposed Persons’ (PEPs) are individuals who are or have been entrusted with prominent public functions by a foreign country. The definition of PEPs is a standard question in the IIBF AML KYC Exam 2026.
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Regarding the “Simplified norms for Self Help Groups (SHGs),” which of the following statements are correct?
1. The bank must perform Customer Due Diligence (CDD) on all members while opening the savings bank account of the SHG.
2. The CDD of all the office bearers shall suffice for opening the savings account.
3. The bank may undertake CDD of all the members of an SHG at the time of credit linking.
4. SHGs are not permitted to open savings accounts without PAN cards for all members.
1. The bank must perform Customer Due Diligence (CDD) on all members while opening the savings bank account of the SHG.
2. The CDD of all the office bearers shall suffice for opening the savings account.
3. The bank may undertake CDD of all the members of an SHG at the time of credit linking.
4. SHGs are not permitted to open savings accounts without PAN cards for all members.
Explanation
Correct: B
The bank shall not require CDD of all members while opening the savings account; CDD of office bearers suffices. CDD of all members may be done at credit linking. SHG norms are a frequent topic in the IIBF AML KYC Exam 2026.
The bank shall not require CDD of all members while opening the savings account; CDD of office bearers suffices. CDD of all members may be done at credit linking. SHG norms are a frequent topic in the IIBF AML KYC Exam 2026.
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When a bank opens a Non-Resident Ordinary (NRO) account for a foreign student pending address verification, what is the cap on the aggregate withdrawal from such an account during the 30-day period?
Explanation
Correct: C
Pending the verification of address, the account shall be operated with a cap of ₹50,000 on aggregate withdrawal during the 30-day period. Foreign student account rules are part of the IIBF AML KYC Exam 2026.
Pending the verification of address, the account shall be operated with a cap of ₹50,000 on aggregate withdrawal during the 30-day period. Foreign student account rules are part of the IIBF AML KYC Exam 2026.
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Regarding the maintenance and preservation of records, which of the following timeframes are correct?
1. Records of transactions must be maintained for at least five years from the date of the transaction.
2. Records pertaining to the identification of customers must be preserved for at least five years after the business relationship has ended.
3. Records of transactions must be preserved for ten years from the date of the audit.
4. Identification records must be destroyed immediately upon account closure.
1. Records of transactions must be maintained for at least five years from the date of the transaction.
2. Records pertaining to the identification of customers must be preserved for at least five years after the business relationship has ended.
3. Records of transactions must be preserved for ten years from the date of the audit.
4. Identification records must be destroyed immediately upon account closure.
Explanation
Correct: A
Transaction records must be maintained for 5 years from the transaction date. Identification records must be preserved for 5 years after the relationship ends. Record keeping is a mandatory compliance topic in the IIBF AML KYC Exam 2026.
Transaction records must be maintained for 5 years from the transaction date. Identification records must be preserved for 5 years after the relationship ends. Record keeping is a mandatory compliance topic in the IIBF AML KYC Exam 2026.
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Banks are required to register the details of customers who are Non-Profit Organisations (NPOs) on which specific portal?
Explanation
Correct: C
The bank shall ensure that customers who are non-profit organisations register details on the DARPAN Portal of NITI Aayog. NPO monitoring is a critical aspect of the IIBF AML KYC Exam 2026.
The bank shall ensure that customers who are non-profit organisations register details on the DARPAN Portal of NITI Aayog. NPO monitoring is a critical aspect of the IIBF AML KYC Exam 2026.
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When furnishing information to the Director, FIU-IND, a delay of each day in not reporting a transaction constitutes a separate violation.
Explanation
Correct: A
When furnishing information to the Director, FIU-IND, a delay of each day in not reporting a transaction shall constitute as a separate violation. Penalties for non-compliance are tested in the IIBF AML KYC Exam 2026.
When furnishing information to the Director, FIU-IND, a delay of each day in not reporting a transaction shall constitute as a separate violation. Penalties for non-compliance are tested in the IIBF AML KYC Exam 2026.
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Regarding Suspicious Transaction Reports (STRs), banks are explicitly prohibited from taking which of the following actions?
Explanation
Correct: B
The bank shall not put any restriction on operations in the accounts merely on the basis of the STR filed. This protective measure is important for the IIBF AML KYC Exam 2026.
The bank shall not put any restriction on operations in the accounts merely on the basis of the STR filed. This protective measure is important for the IIBF AML KYC Exam 2026.
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Under the “Weapons of Mass Destruction (WMD) and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005,” who is designated as the Central Nodal Officer (CNO) for exercising powers under Section 12A?
Explanation
Correct: C
The Director, FIU-India has been designated as the Central Nodal Officer (CNO) under the WMD Act. This specific designation is a fact-based question in the IIBF AML KYC Exam 2026.
The Director, FIU-India has been designated as the Central Nodal Officer (CNO) under the WMD Act. This specific designation is a fact-based question in the IIBF AML KYC Exam 2026.
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According to the guidelines on Secrecy Obligations, in which of the following circumstances is a bank permitted to disclose customer information?
1. Where disclosure is under compulsion of law.
2. Where there is a duty to the public to disclose.
3. Where the interest of the bank requires disclosure.
4. Where the disclosure is made with the express or implied consent of the customer.
1. Where disclosure is under compulsion of law.
2. Where there is a duty to the public to disclose.
3. Where the interest of the bank requires disclosure.
4. Where the disclosure is made with the express or implied consent of the customer.
Explanation
Correct: D
Exceptions to secrecy: compulsion of law, duty to the public, interest of the bank, and customer consent. Secrecy obligations are a classic banking topic in the IIBF AML KYC Exam 2026.
Exceptions to secrecy: compulsion of law, duty to the public, interest of the bank, and customer consent. Secrecy obligations are a classic banking topic in the IIBF AML KYC Exam 2026.
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When relying on KYC records retrieved from the Central KYC Records Registry (CKYCR), the bank shall NOT require a customer to submit the same KYC records or additional documents, UNLESS one of the following conditions is met. Which condition allows the bank to ask for fresh documents?
Explanation
Correct: B
The bank shall not require fresh documents unless the retrieved record is incomplete, outdated, lapsed, or required for EDD. CKYCR utility is a key efficiency topic in the IIBF AML KYC Exam 2026.
The bank shall not require fresh documents unless the retrieved record is incomplete, outdated, lapsed, or required for EDD. CKYCR utility is a key efficiency topic in the IIBF AML KYC Exam 2026.
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When a bank obtains additional or updated information from a customer, within what timeframe must it furnish this updated information to the Central KYC Records Registry (CKYCR)?
Explanation
Correct: B
The bank shall within seven days or within such period as may be notified by the Central Government, furnish the updated information to CKYCR. Reporting timelines are crucial for the IIBF AML KYC Exam 2026.
The bank shall within seven days or within such period as may be notified by the Central Government, furnish the updated information to CKYCR. Reporting timelines are crucial for the IIBF AML KYC Exam 2026.
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The provisions of the Reserve Bank of India (Commercial Banks – KYC) Directions, 2025, are intended to be in derogation of (i.e., to override) the provisions of any other laws, rules, or regulations for the time being in force.
Explanation
Correct: B
The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations, or directions. Legal interpretation is part of the IIBF AML KYC Exam 2026.
The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations, or directions. Legal interpretation is part of the IIBF AML KYC Exam 2026.
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Regarding the approval process for establishing new “Cross-Border Correspondent Banking Relationships,” which of the following statements is correct?
1. New relationships require prior approval from the Reserve Bank of India.
2. New relationships require prior approval from Senior Management.
3. New relationships require post-facto approval from the Board or the empowered Committee.
4. New relationships can be approved solely by the Principal Officer.
1. New relationships require prior approval from the Reserve Bank of India.
2. New relationships require prior approval from Senior Management.
3. New relationships require post-facto approval from the Board or the empowered Committee.
4. New relationships can be approved solely by the Principal Officer.
Explanation
Correct: B
The bank shall obtain prior approval from senior management and post-facto approval from the Board or the empowered Committee. Correspondent banking governance is a high-level topic in the IIBF AML KYC Exam 2026.
The bank shall obtain prior approval from senior management and post-facto approval from the Board or the empowered Committee. Correspondent banking governance is a high-level topic in the IIBF AML KYC Exam 2026.
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Regarding “Money Mules,” if it is established that an account opened and operated is that of a Money Mule, but the concerned bank failed to file a Suspicious Transaction Report (STR), what is the specific regulatory consequence?
Explanation
Correct: B
If a Money Mule account is found and no STR was filed, the bank shall be deemed to have not complied with the KYC Directions. This compliance failure is a critical warning in the IIBF AML KYC Exam 2026.
If a Money Mule account is found and no STR was filed, the bank shall be deemed to have not complied with the KYC Directions. This compliance failure is a critical warning in the IIBF AML KYC Exam 2026.
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For a domestic wire transfer of less than ₹50,000, where the originator is not an account holder of the ordering bank, what information is sufficient to include, if the full originator information can be made available by other means?
Explanation
Correct: C
For transfers < ₹50,000, a unique transaction reference number is sufficient if it permits traceability. Wire transfer rules are technical and important for the IIBF AML KYC Exam 2026.
For transfers < ₹50,000, a unique transaction reference number is sufficient if it permits traceability. Wire transfer rules are technical and important for the IIBF AML KYC Exam 2026.
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All cross-border wire transfers must be accompanied by accurate and meaningful originator information. Which of the following fields are mandatory?
1. Name of the originator.
2. The originator account number (where used).
3. The originator’s address, or national identity number, or customer identification number, or date and place of birth.
4. The purpose of the transaction.
1. Name of the originator.
2. The originator account number (where used).
3. The originator’s address, or national identity number, or customer identification number, or date and place of birth.
4. The purpose of the transaction.
Explanation
Correct: B
Mandatory information includes: (a) name, (b) account number, and (c) address/ID/DOB. Purpose is not listed as a mandatory field in the wire packet. Cross-border rules are key for the IIBF AML KYC Exam 2026.
Mandatory information includes: (a) name, (b) account number, and (c) address/ID/DOB. Purpose is not listed as a mandatory field in the wire packet. Cross-border rules are key for the IIBF AML KYC Exam 2026.
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What is the maximum validity period for the presentation of cheques, drafts, pay orders, and banker’s cheques?
Explanation
Correct: B
The bank shall not make payment of cheques/drafts if presented beyond three months from the date of the instrument. This instrument validity is a basic banking fact for the IIBF AML KYC Exam 2026.
The bank shall not make payment of cheques/drafts if presented beyond three months from the date of the instrument. This instrument validity is a basic banking fact for the IIBF AML KYC Exam 2026.
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When an intermediary bank in a wire transfer chain cannot retain the originator or beneficiary information with a related domestic wire transfer due to technical limitations, how long must it keep the record of the information received from the ordering financial institution?
Explanation
Correct: C
The intermediary bank shall keep a record for at least five years if technical limitations prevent retaining info with the transfer. Record retention is a recurring theme in the IIBF AML KYC Exam 2026.
The intermediary bank shall keep a record for at least five years if technical limitations prevent retaining info with the transfer. Record retention is a recurring theme in the IIBF AML KYC Exam 2026.
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Any remittance of funds by way of demand draft, mail/telegraphic transfer, NEFT/IMPS, or any other mode for a value of …… and above, shall be effected by debit to the customer’s account or against cheques, and not against cash payment.
Explanation
Correct: C
Any remittance of funds of ₹50,000 and above shall be effected by debit to the customer’s account or against cheques, not cash. Cash limits are strictly enforced and tested in the IIBF AML KYC Exam 2026.
Any remittance of funds of ₹50,000 and above shall be effected by debit to the customer’s account or against cheques, not cash. Cash limits are strictly enforced and tested in the IIBF AML KYC Exam 2026.
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Regarding the sale of “Third Party Products” by a bank acting as an agent, which of the following compliance measures are mandatory?
1. The identity and address of walk-in customers must be verified for transactions above ₹50,000.
2. Transactions involving ₹50,000 and above must be undertaken only by debit to customers’ accounts or against cheques.
3. The bank must obtain and verify the PAN given by walk-in customers for transactions of ₹50,000 and above.
4. The bank must maintain transaction details and related records for at least five years.
1. The identity and address of walk-in customers must be verified for transactions above ₹50,000.
2. Transactions involving ₹50,000 and above must be undertaken only by debit to customers’ accounts or against cheques.
3. The bank must obtain and verify the PAN given by walk-in customers for transactions of ₹50,000 and above.
4. The bank must maintain transaction details and related records for at least five years.
Explanation
Correct: D
Mandatory measures: verify walk-ins > ₹50k, no cash > ₹50k (debit/cheque only), verify PAN, and maintain records for 5 years. Third-party product rules are a complex part of the IIBF AML KYC Exam 2026.
Mandatory measures: verify walk-ins > ₹50k, no cash > ₹50k (debit/cheque only), verify PAN, and maintain records for 5 years. Third-party product rules are a complex part of the IIBF AML KYC Exam 2026.
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To minimize the risk of “Money Mules,” banks must strictly adhere to instructions on opening accounts. If an account is established to be a Money Mule account, but the bank failed to file a Suspicious Transaction Report (STR), what is the consequence?
Explanation
Correct: B
If a Money Mule account is established and no STR was filed, the bank shall be deemed to have not complied with the KYC Directions. This reinforces the importance of STRs in the IIBF AML KYC Exam 2026.
If a Money Mule account is established and no STR was filed, the bank shall be deemed to have not complied with the KYC Directions. This reinforces the importance of STRs in the IIBF AML KYC Exam 2026.
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Since September 15, 2018, what specific detail must a bank incorporate on the face of a Demand Draft, Pay Order, or Banker’s Cheque?
Explanation
Correct: B
The bank shall incorporate the name of the purchaser on the face of the demand draft, pay order, banker’s cheque, etc. This specific instrument rule is often asked in the IIBF AML KYC Exam 2026.
The bank shall incorporate the name of the purchaser on the face of the demand draft, pay order, banker’s cheque, etc. This specific instrument rule is often asked in the IIBF AML KYC Exam 2026.
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Banks must put in place an adequate screening mechanism as an integral part of their personnel recruitment process. What is this specific policy called?
Explanation
Correct: A
The bank shall put in place an adequate screening mechanism, including Know Your Employee / Staff policy. KYE is a vital component of the risk management framework in the IIBF AML KYC Exam 2026.
The bank shall put in place an adequate screening mechanism, including Know Your Employee / Staff policy. KYE is a vital component of the risk management framework in the IIBF AML KYC Exam 2026.
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Which of the following statements are correct regarding the definition and nature of Money Laundering under the Prevention of Money Laundering Act (PMLA), 2002?
1. Under Section 3, the offence is committed if a person knowingly assists or is involved in any process connected with the proceeds of crime, such as concealment or possession.
2. The offence is legally treated as a “derivative crime,” meaning it cannot exist without a valid “Predicate Offence” (Scheduled Offence).
3. Successfully projecting the money as “untainted property” is a mandatory condition for conviction; mere possession of illicit funds is not sufficient.
4. The definition covers activities like acquisition and use of proceeds of crime, even if the funds are not physically converted into legitimate assets.
1. Under Section 3, the offence is committed if a person knowingly assists or is involved in any process connected with the proceeds of crime, such as concealment or possession.
2. The offence is legally treated as a “derivative crime,” meaning it cannot exist without a valid “Predicate Offence” (Scheduled Offence).
3. Successfully projecting the money as “untainted property” is a mandatory condition for conviction; mere possession of illicit funds is not sufficient.
4. The definition covers activities like acquisition and use of proceeds of crime, even if the funds are not physically converted into legitimate assets.
Explanation
Correct: B
The correct answer is Option B. Section 3 of PMLA covers any process connected with proceeds of crime. Money laundering is a derivative crime relying on a Predicate Offence. Mere possession is sufficient; projecting it as untainted is not mandatory. Understanding PMLA definitions is critical for the IIBF AML KYC Exam 2026.
The correct answer is Option B. Section 3 of PMLA covers any process connected with proceeds of crime. Money laundering is a derivative crime relying on a Predicate Offence. Mere possession is sufficient; projecting it as untainted is not mandatory. Understanding PMLA definitions is critical for the IIBF AML KYC Exam 2026.
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Which of the following statements accurately describe the stages and techniques of the Money Laundering cycle?
1. The standard chronological order of operations is Placement, followed by Layering, followed by Integration.
2. “Structuring” or “Smurfing” is a technique used during the Integration stage to purchase high-value assets without alerting authorities.
3. Layering involves distancing illegal funds from their source through complex financial transactions, such as wire transfers between multiple jurisdictions.
4. Integration occurs when “washed” funds re-enter the legitimate economy, for example, through the purchase of luxury real estate or businesses.
1. The standard chronological order of operations is Placement, followed by Layering, followed by Integration.
2. “Structuring” or “Smurfing” is a technique used during the Integration stage to purchase high-value assets without alerting authorities.
3. Layering involves distancing illegal funds from their source through complex financial transactions, such as wire transfers between multiple jurisdictions.
4. Integration occurs when “washed” funds re-enter the legitimate economy, for example, through the purchase of luxury real estate or businesses.
Explanation
Correct: B
The correct answer is Option B. The cycle is Placement, Layering, Integration. Layering distances funds, and Integration re-enters them into the economy. Structuring belongs to the Placement stage, not Integration. The three stages are a classic topic in the IIBF AML KYC Exam 2026.
The correct answer is Option B. The cycle is Placement, Layering, Integration. Layering distances funds, and Integration re-enters them into the economy. Structuring belongs to the Placement stage, not Integration. The three stages are a classic topic in the IIBF AML KYC Exam 2026.
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Consider the following statements regarding the historical origins and international framework of anti-money laundering efforts:
1. The term “Money Laundering” is historically associated with the US Mafia in the 1920s using cash-intensive businesses like laundromats to mix illegal profits with legitimate earnings.
2. The United Nations Vienna Convention of 1988 was the first major international instrument to define money laundering, specifically focusing on drug trafficking proceeds.
3. The Financial Action Task Force (FATF) was established immediately prior to the Vienna Convention to draft its regulations.
1. The term “Money Laundering” is historically associated with the US Mafia in the 1920s using cash-intensive businesses like laundromats to mix illegal profits with legitimate earnings.
2. The United Nations Vienna Convention of 1988 was the first major international instrument to define money laundering, specifically focusing on drug trafficking proceeds.
3. The Financial Action Task Force (FATF) was established immediately prior to the Vienna Convention to draft its regulations.
Explanation
Correct: A
The correct answer is Option A. The concept links to the US Mafia, and the Vienna Convention (1988) was the pioneer treaty. However, FATF was established later in 1989. Historical context is often tested in the IIBF AML KYC Exam 2026.
The correct answer is Option A. The concept links to the US Mafia, and the Vienna Convention (1988) was the pioneer treaty. However, FATF was established later in 1989. Historical context is often tested in the IIBF AML KYC Exam 2026.
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Which of the following statements accurately describe the mechanics of Trade-Based Money Laundering (TBML) and its specific techniques?
1. TBML is defined by the FATF as the process of disguising the proceeds of crime and moving value through the use of trade transactions, rather than just moving financial funds.
2. “Under-invoicing” allows an exporter to transfer value to an importer by shipping goods worth more than the invoiced amount, effectively allowing the importer to receive extra value.
3. “Phantom Shipments” involve the invoicing and payment for goods that are never actually shipped, serving solely as a method to move money between jurisdictions.
4. Unlike cash smuggling, TBML is generally easier to detect because customs data is always synchronized with banking transaction data in real-time.
1. TBML is defined by the FATF as the process of disguising the proceeds of crime and moving value through the use of trade transactions, rather than just moving financial funds.
2. “Under-invoicing” allows an exporter to transfer value to an importer by shipping goods worth more than the invoiced amount, effectively allowing the importer to receive extra value.
3. “Phantom Shipments” involve the invoicing and payment for goods that are never actually shipped, serving solely as a method to move money between jurisdictions.
4. Unlike cash smuggling, TBML is generally easier to detect because customs data is always synchronized with banking transaction data in real-time.
Explanation
Correct: B
The correct answer is Option B. TBML moves value via trade. Under-invoicing transfers value to the importer. Phantom shipments move money without goods. TBML is hard to detect, making statement 4 incorrect. TBML techniques are advanced topics in the IIBF AML KYC Exam 2026.
The correct answer is Option B. TBML moves value via trade. Under-invoicing transfers value to the importer. Phantom shipments move money without goods. TBML is hard to detect, making statement 4 incorrect. TBML techniques are advanced topics in the IIBF AML KYC Exam 2026.
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Consider the following money laundering vehicles and techniques. Which of the statements below are correct?
1. “Hawala” is an informal value transfer system based on trust where money is transferred between brokers without physical movement of cash or use of the formal banking system.
2. “Mingling” involves combining illicit proceeds with the legitimate revenue of cash-intensive businesses (like restaurants) to disguise the origin of the funds.
3. A “Shell Company” is defined as an entity with no active business operations or significant assets, often used to conceal the identity of the true beneficial owner.
4. Incorporating a shell company is a criminal offence per se in all jurisdictions, regardless of its intended use.
1. “Hawala” is an informal value transfer system based on trust where money is transferred between brokers without physical movement of cash or use of the formal banking system.
2. “Mingling” involves combining illicit proceeds with the legitimate revenue of cash-intensive businesses (like restaurants) to disguise the origin of the funds.
3. A “Shell Company” is defined as an entity with no active business operations or significant assets, often used to conceal the identity of the true beneficial owner.
4. Incorporating a shell company is a criminal offence per se in all jurisdictions, regardless of its intended use.
Explanation
Correct: C
The correct answer is Option C. Hawala, Mingling, and Shell Companies are correctly defined. However, shell companies are not inherently illegal; their misuse makes them so. This distinction is vital for the IIBF AML KYC Exam 2026.
The correct answer is Option C. Hawala, Mingling, and Shell Companies are correctly defined. However, shell companies are not inherently illegal; their misuse makes them so. This distinction is vital for the IIBF AML KYC Exam 2026.
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Which of the following statements correctly characterize the risks and red flags associated with Money Laundering in the banking sector?
1. “Operational Risk” refers to the risk of direct or indirect loss resulting from inadequate internal processes, people, or systems failing to detect money laundering.
2. Correspondent Banking is considered “High Risk” because the correspondent bank processes transactions for the respondent bank’s customers without having a direct relationship with them.
3. A customer consistently depositing cash just below the mandatory reporting threshold is a behavioral red flag indicating potential “Structuring.”4. A salaried employee receiving a fixed monthly transfer from a known employer is considered a high-risk red flag requiring Enhanced Due Diligence.
1. “Operational Risk” refers to the risk of direct or indirect loss resulting from inadequate internal processes, people, or systems failing to detect money laundering.
2. Correspondent Banking is considered “High Risk” because the correspondent bank processes transactions for the respondent bank’s customers without having a direct relationship with them.
3. A customer consistently depositing cash just below the mandatory reporting threshold is a behavioral red flag indicating potential “Structuring.”4. A salaried employee receiving a fixed monthly transfer from a known employer is considered a high-risk red flag requiring Enhanced Due Diligence.
Explanation
Correct: B
The correct answer is Option B. Operational risk, high-risk correspondent banking, and structuring are all correctly identified. Salaried employees are low risk, making statement 4 incorrect. Risk profiling is central to the IIBF AML KYC Exam 2026.
The correct answer is Option B. Operational risk, high-risk correspondent banking, and structuring are all correctly identified. Salaried employees are low risk, making statement 4 incorrect. Risk profiling is central to the IIBF AML KYC Exam 2026.
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Which of the following statements accurately describe the history, structure, and current leadership of the global anti-money laundering framework (FATF and Basel Committee)?
1. The Financial Action Task Force (FATF) was established by the G7 Summit in Paris in 1989 with an initial mandate to combat the laundering of drug trafficking proceeds.
2. The “40 Recommendations” and the “9 Special Recommendations” (on Terrorist Financing) currently exist as two separate legal documents that member countries must ratify independently.
3. The Basel Committee on Banking Supervision (BCBS) focuses on the “prudential” aspect of AML, treating money laundering risks as a threat to a bank’s safety and soundness, rather than just a legal compliance issue.
4. As of February 2026, the Presidency of the FATF is held by Elisa de Anda Madrazo of Mexico, whose two-year term focuses on enhancing the effectiveness of the global network.
1. The Financial Action Task Force (FATF) was established by the G7 Summit in Paris in 1989 with an initial mandate to combat the laundering of drug trafficking proceeds.
2. The “40 Recommendations” and the “9 Special Recommendations” (on Terrorist Financing) currently exist as two separate legal documents that member countries must ratify independently.
3. The Basel Committee on Banking Supervision (BCBS) focuses on the “prudential” aspect of AML, treating money laundering risks as a threat to a bank’s safety and soundness, rather than just a legal compliance issue.
4. As of February 2026, the Presidency of the FATF is held by Elisa de Anda Madrazo of Mexico, whose two-year term focuses on enhancing the effectiveness of the global network.
Explanation
Correct: B
The correct answer is Option B. FATF was founded in 1989. BCBS focuses on prudential risks. Elisa de Anda Madrazo is the President (2024-2026). The recommendations are consolidated, not separate. Global bodies are key for the IIBF AML KYC Exam 2026.
The correct answer is Option B. FATF was founded in 1989. BCBS focuses on prudential risks. Elisa de Anda Madrazo is the President (2024-2026). The recommendations are consolidated, not separate. Global bodies are key for the IIBF AML KYC Exam 2026.
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Consider the FATF’s monitoring mechanisms and the consequences of being listed as a “High Risk” jurisdiction. Which of the following statements are correct?
1. FATF Mutual Evaluations assess a country on two distinct levels: “Technical Compliance” (having the laws on paper) and “Effectiveness” (actual results like convictions and asset seizures).
2. Countries listed on the “Black List” (High-Risk Jurisdictions subject to a Call for Action) currently include Iran, North Korea, and Myanmar.
3. Being placed on the “Grey List” (Jurisdictions under Increased Monitoring) has no real economic impact and is merely a diplomatic warning.
4. When a country is placed on the Grey List, international banks are required to apply Enhanced Due Diligence (EDD) to transactions involving that jurisdiction, which often slows down trade and capital flows.
1. FATF Mutual Evaluations assess a country on two distinct levels: “Technical Compliance” (having the laws on paper) and “Effectiveness” (actual results like convictions and asset seizures).
2. Countries listed on the “Black List” (High-Risk Jurisdictions subject to a Call for Action) currently include Iran, North Korea, and Myanmar.
3. Being placed on the “Grey List” (Jurisdictions under Increased Monitoring) has no real economic impact and is merely a diplomatic warning.
4. When a country is placed on the Grey List, international banks are required to apply Enhanced Due Diligence (EDD) to transactions involving that jurisdiction, which often slows down trade and capital flows.
Explanation
Correct: B
The correct answer is Option B. FATF evaluates technical compliance and effectiveness. Black List includes Iran, DPRK, Myanmar. Grey listing has severe economic impacts, triggering EDD. FATF lists are current affairs for the IIBF AML KYC Exam 2026.
The correct answer is Option B. FATF evaluates technical compliance and effectiveness. Black List includes Iran, DPRK, Myanmar. Grey listing has severe economic impacts, triggering EDD. FATF lists are current affairs for the IIBF AML KYC Exam 2026.
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Which of the following statements correctly describe the key provisions and extraterritorial powers of the USA PATRIOT Act (2001) regarding international money laundering?
1. Title III of the Act, titled “International Money Laundering Abatement and Anti-Terrorist Financing Act,” empowers US authorities to take action against foreign banks that access the US financial system.
2. Under Section 311, the US Treasury can designate a foreign jurisdiction or institution as a “Primary Money Laundering Concern,” allowing it to impose “Special Measures” such as prohibiting US banks from maintaining correspondent accounts for that entity.
3. Section 313 explicitly prohibits US banks from maintaining correspondent accounts for “Foreign Shell Banks” (banks with no physical presence) and requires them to ensure their foreign partners do not provide access to such shell banks.
4. Section 319(b) grants the US government the power to seize funds from a foreign bank’s correspondent account in the US as a substitute for dirty money held in that foreign bank’s accounts overseas.
1. Title III of the Act, titled “International Money Laundering Abatement and Anti-Terrorist Financing Act,” empowers US authorities to take action against foreign banks that access the US financial system.
2. Under Section 311, the US Treasury can designate a foreign jurisdiction or institution as a “Primary Money Laundering Concern,” allowing it to impose “Special Measures” such as prohibiting US banks from maintaining correspondent accounts for that entity.
3. Section 313 explicitly prohibits US banks from maintaining correspondent accounts for “Foreign Shell Banks” (banks with no physical presence) and requires them to ensure their foreign partners do not provide access to such shell banks.
4. Section 319(b) grants the US government the power to seize funds from a foreign bank’s correspondent account in the US as a substitute for dirty money held in that foreign bank’s accounts overseas.
Explanation
Correct: D
The correct answer is Option D. The PATRIOT Act empowers the US to target foreign banks (Title III), designate concerns (Section 311), ban shell banks (Section 313), and seize correspondent funds (Section 319b). US regulations are relevant for the IIBF AML KYC Exam 2026.
The correct answer is Option D. The PATRIOT Act empowers the US to target foreign banks (Title III), designate concerns (Section 311), ban shell banks (Section 313), and seize correspondent funds (Section 319b). US regulations are relevant for the IIBF AML KYC Exam 2026.
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The UK Proceeds of Crime Act (POCA) 2002 establishes a strict regime for reporting money laundering. Which of the following statements regarding this framework are correct?
1. POCA adopts an “All-Crimes” approach, where “Criminal Property” is defined as any benefit derived from any criminal conduct, provided the alleged offender knows or suspects it constitutes such a benefit.
2. If a bank suspects a specific transaction involves criminal property, it must file a Suspicious Activity Report (SAR) seeking a “Defense Against Money Laundering” (DAML) and freeze the transaction for a Notice Period of 7 working days.
3. The offence of “Tipping Off” is committed if a bank employee discloses to a customer that a SAR has been filed, likely prejudicing an investigation.
4. A solicitor or banker can legally proceed with a suspicious transaction first and file a SAR afterwards to obtain “Retrospective Consent” without committing an offence.
1. POCA adopts an “All-Crimes” approach, where “Criminal Property” is defined as any benefit derived from any criminal conduct, provided the alleged offender knows or suspects it constitutes such a benefit.
2. If a bank suspects a specific transaction involves criminal property, it must file a Suspicious Activity Report (SAR) seeking a “Defense Against Money Laundering” (DAML) and freeze the transaction for a Notice Period of 7 working days.
3. The offence of “Tipping Off” is committed if a bank employee discloses to a customer that a SAR has been filed, likely prejudicing an investigation.
4. A solicitor or banker can legally proceed with a suspicious transaction first and file a SAR afterwards to obtain “Retrospective Consent” without committing an offence.
Explanation
Correct: B
The correct answer is Option B. POCA covers all crimes. DAML requires a 7-day wait. Tipping off is an offence. Retrospective consent is not allowed; consent must be obtained before the transaction. UK law basics are part of the IIBF AML KYC Exam 2026.
The correct answer is Option B. POCA covers all crimes. DAML requires a 7-day wait. Tipping off is an offence. Retrospective consent is not allowed; consent must be obtained before the transaction. UK law basics are part of the IIBF AML KYC Exam 2026.
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Based on recent Supreme Court judgments (including Vijay Madanlal Choudhary and Pavana Dibbur), which of the following statements correctly interpret the scope and nature of the offence of Money Laundering under the PMLA, 2002?
1. The offence of money laundering is a “derivative” crime; therefore, if the Predicate Offence is quashed or the accused is acquitted in the primary case, the PMLA proceedings cannot legally survive.
2. To prove the offence under Section 3, the prosecution must demonstrate that the accused successfully “projected” the illicit money as untainted property; mere possession or concealment is insufficient.
3. Following the 2013 amendment, there is no monetary threshold for offences listed in Part A of the Schedule; a PMLA case can theoretically be registered for any amount involved in a Scheduled Offence.
4. The definition of “Proceeds of Crime” covers only the property directly derived from the crime and does not extend to the value of such property held abroad.
1. The offence of money laundering is a “derivative” crime; therefore, if the Predicate Offence is quashed or the accused is acquitted in the primary case, the PMLA proceedings cannot legally survive.
2. To prove the offence under Section 3, the prosecution must demonstrate that the accused successfully “projected” the illicit money as untainted property; mere possession or concealment is insufficient.
3. Following the 2013 amendment, there is no monetary threshold for offences listed in Part A of the Schedule; a PMLA case can theoretically be registered for any amount involved in a Scheduled Offence.
4. The definition of “Proceeds of Crime” covers only the property directly derived from the crime and does not extend to the value of such property held abroad.
Explanation
Correct: A
The correct answer is Option A. PMLA is a derivative crime; acquittal in the predicate offence kills the PMLA case. There is no monetary threshold. Mere possession is sufficient (Section 3), making statement 2 incorrect. Case law is vital for the IIBF AML KYC Exam 2026.
The correct answer is Option A. PMLA is a derivative crime; acquittal in the predicate offence kills the PMLA case. There is no monetary threshold. Mere possession is sufficient (Section 3), making statement 2 incorrect. Case law is vital for the IIBF AML KYC Exam 2026.
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Consider the procedural powers of the Enforcement Directorate (ED) and the constitutional safeguards for the accused as clarified by 2025-2026 jurisprudence. Which of the following statements are correct?
1. Statements recorded by ED officers under Section 50 of the PMLA are admissible as evidence in court because ED officers are not considered “Police Officers” under the Evidence Act.
2. According to the Pankaj Bansal judgment, a verbal communication of the grounds of arrest is sufficient under Section 19; providing a written copy to the accused is optional.
3. Under Section 24, the burden of proof is reversed (the accused must prove innocence), but the Supreme Court (Sarla Gupta case) has ruled that the accused is entitled to access “un-relied documents” to ensure a fair trial.
1. Statements recorded by ED officers under Section 50 of the PMLA are admissible as evidence in court because ED officers are not considered “Police Officers” under the Evidence Act.
2. According to the Pankaj Bansal judgment, a verbal communication of the grounds of arrest is sufficient under Section 19; providing a written copy to the accused is optional.
3. Under Section 24, the burden of proof is reversed (the accused must prove innocence), but the Supreme Court (Sarla Gupta case) has ruled that the accused is entitled to access “un-relied documents” to ensure a fair trial.
Explanation
Correct: B
The correct answer is Option B. Section 50 statements are admissible. The accused has a right to un-relied documents. Written grounds of arrest are mandatory (Pankaj Bansal), making statement 2 incorrect. ED powers are a hot topic in the IIBF AML KYC Exam 2026.
The correct answer is Option B. Section 50 statements are admissible. The accused has a right to un-relied documents. Written grounds of arrest are mandatory (Pankaj Bansal), making statement 2 incorrect. ED powers are a hot topic in the IIBF AML KYC Exam 2026.
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Section 45 of the PMLA imposes “Twin Conditions” for the grant of bail. In light of the Delhi High Court ruling (February 2026) and established precedents, which of the following statements accurately describe this legal standard?
1. The Court must be satisfied that there are reasonable grounds to believe the accused is not guilty of the offence.
2. The Court must be satisfied that the accused is not likely to commit any offence while on bail.
3. To satisfy these conditions, the Court must conduct a mini-trial and return a definitive, positive finding of innocence before granting bail.
4. The standard required is a “prima facie” view based on broad probabilities, maintaining a delicate balance rather than a final verdict.
1. The Court must be satisfied that there are reasonable grounds to believe the accused is not guilty of the offence.
2. The Court must be satisfied that the accused is not likely to commit any offence while on bail.
3. To satisfy these conditions, the Court must conduct a mini-trial and return a definitive, positive finding of innocence before granting bail.
4. The standard required is a “prima facie” view based on broad probabilities, maintaining a delicate balance rather than a final verdict.
Explanation
Correct: B
The correct answer is Option B. The twin conditions require satisfaction that the accused is not guilty and won’t reoffend. This is a prima facie view, not a mini-trial verdict. Bail provisions are critical for the IIBF AML KYC Exam 2026.
The correct answer is Option B. The twin conditions require satisfaction that the accused is not guilty and won’t reoffend. This is a prima facie view, not a mini-trial verdict. Bail provisions are critical for the IIBF AML KYC Exam 2026.
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The Financial Intelligence Unit – India (FIU-IND) plays a central role in the AML architecture. Which of the following statements accurately describe its institutional structure and powers under the PMLA, 2002?
1. FIU-IND is an independent administrative body that reports directly to the Economic Intelligence Council (EIC) headed by the Finance Minister, not to the Reserve Bank of India.
2. Unlike the Enforcement Directorate (ED), the FIU-IND is not a law enforcement agency; it does not have the power to arrest individuals or prosecute crimes directly.
3. Under Section 13 of the PMLA, the Director of FIU-IND is empowered to impose monetary penalties and issue warnings to Reporting Entities (banks) for failure to comply with reporting obligations.
4. FIU-IND officers are legally classified as “Police Officers” and can conduct custodial interrogations of money laundering suspects.
1. FIU-IND is an independent administrative body that reports directly to the Economic Intelligence Council (EIC) headed by the Finance Minister, not to the Reserve Bank of India.
2. Unlike the Enforcement Directorate (ED), the FIU-IND is not a law enforcement agency; it does not have the power to arrest individuals or prosecute crimes directly.
3. Under Section 13 of the PMLA, the Director of FIU-IND is empowered to impose monetary penalties and issue warnings to Reporting Entities (banks) for failure to comply with reporting obligations.
4. FIU-IND officers are legally classified as “Police Officers” and can conduct custodial interrogations of money laundering suspects.
Explanation
Correct: B
The correct answer is Option B. FIU-IND reports to EIC, is an intelligence body (not law enforcement), and can penalize banks. Its officers are not police, making statement 4 incorrect. FIU roles are central to the IIBF AML KYC Exam 2026.
The correct answer is Option B. FIU-IND reports to EIC, is an intelligence body (not law enforcement), and can penalize banks. Its officers are not police, making statement 4 incorrect. FIU roles are central to the IIBF AML KYC Exam 2026.
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Reporting Entities (REs) in India are mandated to file specific reports with the FIU-IND. Which of the following statements regarding these obligations and the definition of REs are correct?
1. As of recent notifications (2023-2025), Virtual Digital Asset (VDA) Service Providers, such as Crypto Exchanges and Wallet Providers, are classified as Reporting Entities and must perform KYC and file reports.
2. A Cash Transaction Report (CTR) must be filed for all cash transactions (or integrally connected series) exceeding ₹10 Lakhs, and submitted by the 15th day of the succeeding month.
3. A Suspicious Transaction Report (STR) has no monetary threshold; it must be filed within 7 working days of arriving at a conclusion of suspicion, even for attempted transactions.
4. A Counterfeit Currency Report (CCR) is only required if the value of counterfeit notes detected in a single transaction exceeds ₹50,000.
1. As of recent notifications (2023-2025), Virtual Digital Asset (VDA) Service Providers, such as Crypto Exchanges and Wallet Providers, are classified as Reporting Entities and must perform KYC and file reports.
2. A Cash Transaction Report (CTR) must be filed for all cash transactions (or integrally connected series) exceeding ₹10 Lakhs, and submitted by the 15th day of the succeeding month.
3. A Suspicious Transaction Report (STR) has no monetary threshold; it must be filed within 7 working days of arriving at a conclusion of suspicion, even for attempted transactions.
4. A Counterfeit Currency Report (CCR) is only required if the value of counterfeit notes detected in a single transaction exceeds ₹50,000.
Explanation
Correct: B
The correct answer is Option B. VDA providers are REs. CTRs trigger at ₹10 Lakhs. STRs have no threshold. CCRs have no threshold either, making statement 4 incorrect. Reporting norms are essential for the IIBF AML KYC Exam 2026.
The correct answer is Option B. VDA providers are REs. CTRs trigger at ₹10 Lakhs. STRs have no threshold. CCRs have no threshold either, making statement 4 incorrect. Reporting norms are essential for the IIBF AML KYC Exam 2026.
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Every Reporting Entity must appoint a “Principal Officer” to manage AML compliance. Consider the following operational protocols regarding this role:
1. The Principal Officer (PO) acts as the central nodal officer responsible for communicating directly with the FIU-IND and furnishing information.
2. If a branch manager suspects a transaction, they must escalate it to the Principal Officer, who then decides whether to file an STR with the FIU-IND.
3. Under the “Tipping Off” prohibition, the bank is strictly forbidden from informing the customer that their transaction is being reported or investigated.
4. To ensure corporate oversight, the Principal Officer is legally required to obtain approval from the Board of Directors for every individual STR filed.
1. The Principal Officer (PO) acts as the central nodal officer responsible for communicating directly with the FIU-IND and furnishing information.
2. If a branch manager suspects a transaction, they must escalate it to the Principal Officer, who then decides whether to file an STR with the FIU-IND.
3. Under the “Tipping Off” prohibition, the bank is strictly forbidden from informing the customer that their transaction is being reported or investigated.
4. To ensure corporate oversight, the Principal Officer is legally required to obtain approval from the Board of Directors for every individual STR filed.
Explanation
Correct: B
The correct answer is Option B. The PO communicates with FIU-IND and decides on STRs. Tipping off is banned. Board approval for individual STRs is not required (to ensure independence), making statement 4 incorrect. PO duties are key in the IIBF AML KYC Exam 2026.
The correct answer is Option B. The PO communicates with FIU-IND and decides on STRs. Tipping off is banned. Board approval for individual STRs is not required (to ensure independence), making statement 4 incorrect. PO duties are key in the IIBF AML KYC Exam 2026.
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According to the RBI Master Direction on KYC (updated 2025), which of the following statements correctly describe the documentation standards and verification methods for opening bank accounts?
1. The “Officially Valid Documents” (OVDs) are limited to six specific documents (Passport, Driving License, Voter ID, NREGA Job Card, NPR Letter, and Aadhaar); the PAN Card is not an OVD for KYC because it does not contain the holder’s address.
2. A “Small Account” can be opened by a person who lacks any valid OVD, provided the account operates under strict limitations such as a maximum balance of Rs. 50,000 and no foreign remittances.
3. The Video Customer Identification Process (V-CIP) can be conducted by a Business Correspondent (BC) from a remote location using their personal device to facilitate easy onboarding in rural areas.
4. Once a customer’s KYC data is uploaded to the Central KYC Records Registry (CKYCR) and a unique 14-digit identifier is generated, the customer generally does not need to submit fresh documents when opening an account with another reporting entity.
1. The “Officially Valid Documents” (OVDs) are limited to six specific documents (Passport, Driving License, Voter ID, NREGA Job Card, NPR Letter, and Aadhaar); the PAN Card is not an OVD for KYC because it does not contain the holder’s address.
2. A “Small Account” can be opened by a person who lacks any valid OVD, provided the account operates under strict limitations such as a maximum balance of Rs. 50,000 and no foreign remittances.
3. The Video Customer Identification Process (V-CIP) can be conducted by a Business Correspondent (BC) from a remote location using their personal device to facilitate easy onboarding in rural areas.
4. Once a customer’s KYC data is uploaded to the Central KYC Records Registry (CKYCR) and a unique 14-digit identifier is generated, the customer generally does not need to submit fresh documents when opening an account with another reporting entity.
Explanation
Correct: B
The correct answer is Option B. PAN is not an OVD (for address). Small accounts allow no OVD. CKYC identifier aids interoperability. V-CIP cannot be done by BCs (must be bank officials), making statement 3 incorrect. Documentation is the base of the IIBF AML KYC Exam 2026.
The correct answer is Option B. PAN is not an OVD (for address). Small accounts allow no OVD. CKYC identifier aids interoperability. V-CIP cannot be done by BCs (must be bank officials), making statement 3 incorrect. Documentation is the base of the IIBF AML KYC Exam 2026.
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Customer Due Diligence (CDD) involves risk categorization and identifying beneficial ownership. Which of the following statements accurately reflect the current RBI norms?
1. For periodic updation of KYC (Re-KYC), the standard timelines are every 2 years for High-Risk customers, every 8 years for Medium-Risk, and every 10 years for Low-Risk customers.
2. A Foreign Diplomat or a Politically Exposed Person (PEP) is automatically classified as “High Risk,” requiring Senior Management approval for account opening and establishing the source of funds.
3. To identify the “Beneficial Owner” (BO) of a legal entity, the controlling ownership threshold is currently set at 10 percent of shares, capital, or profits for Companies, Partnership Firms, and Trusts.
4. Salaried employees receiving funds from known government or corporate sources are typically classified as “High Risk” due to the volume of monthly transactions.
1. For periodic updation of KYC (Re-KYC), the standard timelines are every 2 years for High-Risk customers, every 8 years for Medium-Risk, and every 10 years for Low-Risk customers.
2. A Foreign Diplomat or a Politically Exposed Person (PEP) is automatically classified as “High Risk,” requiring Senior Management approval for account opening and establishing the source of funds.
3. To identify the “Beneficial Owner” (BO) of a legal entity, the controlling ownership threshold is currently set at 10 percent of shares, capital, or profits for Companies, Partnership Firms, and Trusts.
4. Salaried employees receiving funds from known government or corporate sources are typically classified as “High Risk” due to the volume of monthly transactions.
Explanation
Correct: B
The correct answer is Option B. Re-KYC is 2-8-10 years. PEPs are high risk. BO threshold is 10%. Salaried employees are low risk, making statement 4 incorrect. Risk and BO concepts are central to the IIBF AML KYC Exam 2026.
The correct answer is Option B. Re-KYC is 2-8-10 years. PEPs are high risk. BO threshold is 10%. Salaried employees are low risk, making statement 4 incorrect. Risk and BO concepts are central to the IIBF AML KYC Exam 2026.
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Terrorist Financing (TF) is conceptually distinct from Money Laundering (ML). Which of the following statements accurately describe these distinctions and the international framework governing them?
1. While Money Laundering involves processing “dirty” money derived from criminal activities, Terrorist Financing can involve funds raised from legitimate sources (such as salaries, profits, or charitable donations) that are then used for illegal purposes.
2. United Nations Security Council Resolution (UNSCR) 1267 establishes a global list of designated terrorists (specifically Taliban, Al-Qaeda, and ISIL) whose assets must be frozen by all member states.
3. United Nations Security Council Resolution (UNSCR) 1373 mandates that countries create their own domestic mechanisms to designate terrorists and freeze their assets, allowing for “Domestic Designations” beyond the UN list.
4. In Money Laundering, the primary goal is to disguise the origin of funds, whereas in Terrorist Financing, the primary goal is to disguise the destination or purpose of the funds.
1. While Money Laundering involves processing “dirty” money derived from criminal activities, Terrorist Financing can involve funds raised from legitimate sources (such as salaries, profits, or charitable donations) that are then used for illegal purposes.
2. United Nations Security Council Resolution (UNSCR) 1267 establishes a global list of designated terrorists (specifically Taliban, Al-Qaeda, and ISIL) whose assets must be frozen by all member states.
3. United Nations Security Council Resolution (UNSCR) 1373 mandates that countries create their own domestic mechanisms to designate terrorists and freeze their assets, allowing for “Domestic Designations” beyond the UN list.
4. In Money Laundering, the primary goal is to disguise the origin of funds, whereas in Terrorist Financing, the primary goal is to disguise the destination or purpose of the funds.
Explanation
Correct: D
The correct answer is Option D. TF can use clean money. UNSCR 1267 lists global terrorists. UNSCR 1373 mandates domestic lists. ML hides origin; TF hides destination. These distinctions are critical for the IIBF AML KYC Exam 2026.
The correct answer is Option D. TF can use clean money. UNSCR 1267 lists global terrorists. UNSCR 1373 mandates domestic lists. ML hides origin; TF hides destination. These distinctions are critical for the IIBF AML KYC Exam 2026.
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The Unlawful Activities (Prevention) Act, UAPA 1967, acts as India’s primary anti-terror legislation. Which of the following statements regarding its offences, bail provisions, and asset freezing procedures are correct?
1. Section 17 criminalizes the “raising of funds” for a terrorist act or organization, regardless of whether the funds were collected from legitimate or illegitimate sources.
2. Under Section 43D(5), no person accused of an offence under Chapters IV and VI shall be released on bail if the Court acts on the opinion that there are reasonable grounds for believing that the accusation is “prima facie true.”3. Under Section 51A, Reporting Entities (Banks) must verify their databases against UNSC lists and report matches to the “UAPA Nodal Officer” (Joint Secretary, MHA) within 24 hours, but they cannot freeze the account unilaterally without a specific Freezing Order from the Nodal Officer.
4. In recent years (2024-2025), the Government has used UAPA to declare organizations such as the Tehreek-e-Hurriyat (J&K) and Muslim League Jammu Kashmir (Masarat Alam faction) as “Unlawful Associations.”
1. Section 17 criminalizes the “raising of funds” for a terrorist act or organization, regardless of whether the funds were collected from legitimate or illegitimate sources.
2. Under Section 43D(5), no person accused of an offence under Chapters IV and VI shall be released on bail if the Court acts on the opinion that there are reasonable grounds for believing that the accusation is “prima facie true.”3. Under Section 51A, Reporting Entities (Banks) must verify their databases against UNSC lists and report matches to the “UAPA Nodal Officer” (Joint Secretary, MHA) within 24 hours, but they cannot freeze the account unilaterally without a specific Freezing Order from the Nodal Officer.
4. In recent years (2024-2025), the Government has used UAPA to declare organizations such as the Tehreek-e-Hurriyat (J&K) and Muslim League Jammu Kashmir (Masarat Alam faction) as “Unlawful Associations.”
Explanation
Correct: D
The correct answer is Option D. Raising funds is a crime (Section 17). Bail is restricted (Section 43D(5)). Banks report to Nodal Officer (Section 51A). Recent bans confirm statement 4. UAPA is a vital law for the IIBF AML KYC Exam 2026.
The correct answer is Option D. Raising funds is a crime (Section 17). Bail is restricted (Section 43D(5)). Banks report to Nodal Officer (Section 51A). Recent bans confirm statement 4. UAPA is a vital law for the IIBF AML KYC Exam 2026.
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Non-Profit Organizations (NPOs) are considered “High Risk” for terrorist financing. Which of the following statements regarding the global standards (FATF Recommendation 8) and compliance risks are correct?
1. FATF Recommendation 8 requires countries to ensure that NPOs are not misused by terrorist organizations to pose as legitimate entities or to divert funds to conflict zones.
2. In 2025, the FATF introduced a mechanism for NPOs to report “Unintended Consequences,” where countries misapply these standards to suppress legitimate civil society or human rights groups under the guise of stopping terror funding.
3. For NPOs operating in conflict zones, the “Know Your Beneficiary” (KYB) principle is as critical as “Know Your Donor,” requiring them to verify that the ultimate recipients of aid are not linked to designated terrorist entities.
1. FATF Recommendation 8 requires countries to ensure that NPOs are not misused by terrorist organizations to pose as legitimate entities or to divert funds to conflict zones.
2. In 2025, the FATF introduced a mechanism for NPOs to report “Unintended Consequences,” where countries misapply these standards to suppress legitimate civil society or human rights groups under the guise of stopping terror funding.
3. For NPOs operating in conflict zones, the “Know Your Beneficiary” (KYB) principle is as critical as “Know Your Donor,” requiring them to verify that the ultimate recipients of aid are not linked to designated terrorist entities.
Explanation
Correct: D
The correct answer is Option D. FATF Rec 8 targets NPO misuse. The 2025 update addresses “unintended consequences” (harassment of NGOs). KYB is essential in conflict zones. NPO risks are a niche topic in the IIBF AML KYC Exam 2026.
The correct answer is Option D. FATF Rec 8 targets NPO misuse. The 2025 update addresses “unintended consequences” (harassment of NGOs). KYB is essential in conflict zones. NPO risks are a niche topic in the IIBF AML KYC Exam 2026.
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Correspondent Banking relies on specific terminologies and structures to move money globally. Which of the following statements accurately describe these mechanisms?
1. A “Nostro” account represents “Our money held with You” (e.g., an Indian bank holding a US Dollar account with a bank in New York), while a “Vostro” account represents “Your money held with Us.”2. “Nesting” (or Downstream Correspondent Banking) occurs when a respondent bank provides services to other financial institutions, effectively allowing third-tier banks to access the correspondent’s network anonymously.
3. In a “Cover Payment” method, the detailed information about the originator and beneficiary is sent directly between the banks, but the actual funds move through intermediary banks using a stripped-down message, potentially hiding the identities from those identities from those intermediaries.
4. “Loro” accounts refer to the central bank’s reserves held at the IMF and are not used in commercial correspondent banking.
1. A “Nostro” account represents “Our money held with You” (e.g., an Indian bank holding a US Dollar account with a bank in New York), while a “Vostro” account represents “Your money held with Us.”2. “Nesting” (or Downstream Correspondent Banking) occurs when a respondent bank provides services to other financial institutions, effectively allowing third-tier banks to access the correspondent’s network anonymously.
3. In a “Cover Payment” method, the detailed information about the originator and beneficiary is sent directly between the banks, but the actual funds move through intermediary banks using a stripped-down message, potentially hiding the identities from those identities from those intermediaries.
4. “Loro” accounts refer to the central bank’s reserves held at the IMF and are not used in commercial correspondent banking.
Explanation
Correct: B
The correct answer is Option B. Nostro/Vostro are standard terms. Nesting is a risk. Cover payments split info from funds. Loro means “Theirs” (3rd party), not just IMF reserves. Banking terms are fundamental to the IIBF AML KYC Exam 2026.
The correct answer is Option B. Nostro/Vostro are standard terms. Nesting is a risk. Cover payments split info from funds. Loro means “Theirs” (3rd party), not just IMF reserves. Banking terms are fundamental to the IIBF AML KYC Exam 2026.
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Certain correspondent banking services are classified as “Prohibited” or “High Risk” due to their potential for abuse. Which of the following statements regarding Shell Banks and Payable Through Accounts (PTAs) are correct?
1. A “Shell Bank” is defined as a bank incorporated in a jurisdiction where it has no physical presence and is not affiliated with a regulated financial group.
2. Under RBI and FATF norms, banks are strictly prohibited from entering into a correspondent relationship with a Shell Bank and must ensure their respondent banks do not permit Shell Banks to use their accounts.
3. A “Payable Through Account” (PTA) is a mechanism where the foreign respondent bank allows its own customers (sub-account holders) to conduct transactions directly on the correspondent account.
4. PTAs are considered high-risk because the correspondent bank often has no direct relationship with, or KYC data on, the sub-account holders who are accessing its system.
1. A “Shell Bank” is defined as a bank incorporated in a jurisdiction where it has no physical presence and is not affiliated with a regulated financial group.
2. Under RBI and FATF norms, banks are strictly prohibited from entering into a correspondent relationship with a Shell Bank and must ensure their respondent banks do not permit Shell Banks to use their accounts.
3. A “Payable Through Account” (PTA) is a mechanism where the foreign respondent bank allows its own customers (sub-account holders) to conduct transactions directly on the correspondent account.
4. PTAs are considered high-risk because the correspondent bank often has no direct relationship with, or KYC data on, the sub-account holders who are accessing its system.
Explanation
Correct: D
The correct answer is Option D. Shell banks are prohibited. PTAs allow sub-account access and are high risk due to lack of direct KYC. These high-risk services are emphasized in the IIBF AML KYC Exam 2026.
The correct answer is Option D. Shell banks are prohibited. PTAs allow sub-account access and are high risk due to lack of direct KYC. These high-risk services are emphasized in the IIBF AML KYC Exam 2026.
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The “Travel Rule” (FATF Recommendation 16) and the ISO 20022 standard govern the data that must accompany cross-border wire transfers. Which of the following statements are correct?
1. For cross-border wire transfers, the “Travel Rule” mandates that the message must contain full details of the Originator (Name, Account Number, Address) and the Beneficiary (Name, Account Number).
2. The migration to the ISO 20022 standard enhances AML compliance by replacing unstructured text blocks with rich, granular data fields (e.g., separate fields for Street, City, Country), reducing false positives in sanctions screening.
3. If a receiving bank detects a wire transfer with missing originator information, it must immediately return the funds to the sender and file a Suspicious Transaction Report.
4. Under the “Risk-Based Approach,” a bank should ask the ordering bank for missing information and, if the issue persists, consider restricting or terminating the business relationship rather than automatically rejecting every single incomplete transfer.
1. For cross-border wire transfers, the “Travel Rule” mandates that the message must contain full details of the Originator (Name, Account Number, Address) and the Beneficiary (Name, Account Number).
2. The migration to the ISO 20022 standard enhances AML compliance by replacing unstructured text blocks with rich, granular data fields (e.g., separate fields for Street, City, Country), reducing false positives in sanctions screening.
3. If a receiving bank detects a wire transfer with missing originator information, it must immediately return the funds to the sender and file a Suspicious Transaction Report.
4. Under the “Risk-Based Approach,” a bank should ask the ordering bank for missing information and, if the issue persists, consider restricting or terminating the business relationship rather than automatically rejecting every single incomplete transfer.
Explanation
Correct: B
The correct answer is Option B. The Travel Rule requires data to move with funds. ISO 20022 improves data quality. Missing info requires a risk-based approach (ask/restrict), not immediate auto-return, making statement 3 incorrect. Tech standards are key for the IIBF AML KYC Exam 2026.
The correct answer is Option B. The Travel Rule requires data to move with funds. ISO 20022 improves data quality. Missing info requires a risk-based approach (ask/restrict), not immediate auto-return, making statement 3 incorrect. Tech standards are key for the IIBF AML KYC Exam 2026.
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The inclusion of Virtual Digital Assets (VDAs) under the PMLA framework has introduced specific compliance mandates. Which of the following statements accurately describe the regulations regarding “Reporting Entities” in the crypto sector?
1. Entities facilitating the exchange between VDAs and fiat currencies, or the transfer/safekeeping of VDAs, are classified as Reporting Entities and must register with the FIU-IND.
2. Under the “Travel Rule,” Beneficiary VASPs (Virtual Asset Service Providers) are obligated to verify beneficiary information and screen the originator’s wallet address against sanctions lists for transactions exceeding the prescribed threshold.
3. “Crypto Mixers” or “Tumblers” are considered high-risk services because they obfuscate the audit trail on the blockchain by mixing funds from multiple users, making it difficult to trace the original source of funds.
4. Individuals holding VDAs in personal unhosted “cold wallets” for long-term investment are automatically classified as Reporting Entities and must file monthly transaction reports.
1. Entities facilitating the exchange between VDAs and fiat currencies, or the transfer/safekeeping of VDAs, are classified as Reporting Entities and must register with the FIU-IND.
2. Under the “Travel Rule,” Beneficiary VASPs (Virtual Asset Service Providers) are obligated to verify beneficiary information and screen the originator’s wallet address against sanctions lists for transactions exceeding the prescribed threshold.
3. “Crypto Mixers” or “Tumblers” are considered high-risk services because they obfuscate the audit trail on the blockchain by mixing funds from multiple users, making it difficult to trace the original source of funds.
4. Individuals holding VDAs in personal unhosted “cold wallets” for long-term investment are automatically classified as Reporting Entities and must file monthly transaction reports.
Explanation
Correct: B
The correct answer is Option B. VASPs are REs. The Travel Rule applies to crypto. Mixers are high risk. Individuals with cold wallets are not REs, making statement 4 incorrect. Crypto regulations are new to the IIBF AML KYC Exam 2026.
The correct answer is Option B. VASPs are REs. The Travel Rule applies to crypto. Mixers are high risk. Individuals with cold wallets are not REs, making statement 4 incorrect. Crypto regulations are new to the IIBF AML KYC Exam 2026.
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As financial crime evolves, the banking sector is adopting advanced technologies to enhance AML operations. Which of the following statements regarding the role of AI and the threat of Deepfakes are correct?
1. Artificial Intelligence (AI) and Machine Learning help reduce “False Positives” in transaction monitoring by learning from past analyst decisions, unlike legacy rule-based systems that generate excessive alerts.
2. AI-driven “Network Analysis” can visualize complex links between seemingly unrelated accounts, helping investigators detect “Mule Networks” or organized crime rings.
3. To counter the threat of “Deepfakes” and synthetic identity fraud during Video-KYC (V-CIP), regulators now mandate robust “Liveness Detection” (Active and Passive) to distinguish between a live human and a pre-recorded or injected video.
4. “Behavioral Biometrics” refers to the use of AI to analyze a user’s physical interactions (like typing speed or mouse movement) to detect bot activity or account takeovers.
1. Artificial Intelligence (AI) and Machine Learning help reduce “False Positives” in transaction monitoring by learning from past analyst decisions, unlike legacy rule-based systems that generate excessive alerts.
2. AI-driven “Network Analysis” can visualize complex links between seemingly unrelated accounts, helping investigators detect “Mule Networks” or organized crime rings.
3. To counter the threat of “Deepfakes” and synthetic identity fraud during Video-KYC (V-CIP), regulators now mandate robust “Liveness Detection” (Active and Passive) to distinguish between a live human and a pre-recorded or injected video.
4. “Behavioral Biometrics” refers to the use of AI to analyze a user’s physical interactions (like typing speed or mouse movement) to detect bot activity or account takeovers.
Explanation
Correct: D
The correct answer is Option D. AI reduces false positives and finds networks. Liveness detection stops Deepfakes. Behavioral biometrics detect bots. Emerging tech is a modern module in the IIBF AML KYC Exam 2026.
The correct answer is Option D. AI reduces false positives and finds networks. Liveness detection stops Deepfakes. Behavioral biometrics detect bots. Emerging tech is a modern module in the IIBF AML KYC Exam 2026.
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Cross-border banking operations require a strategic approach to conflicting regulations and risk management. Which of the following statements align with the RBI Master Direction on KYC and global best practices?
1. When a foreign branch of an Indian bank faces a conflict between Home Country (India/RBI) and Host Country AML regulations, the branch must strictly follow the “Stricter of the Two” rule.
2. If the Host Country’s laws (e.g., secrecy jurisdictions) completely prohibit the implementation of Indian AML standards, the bank must inform the RBI and may be required to close the branch or prohibit the business relationship.
3. The “Risk-Based Approach” (RBA) permits banks to apply “Simplified Due Diligence” (SDD) to low-risk customers (like Self-Help Groups) to optimize resource allocation.
4. Indian banks are permitted to open accounts in secrecy jurisdictions without identifying the Beneficial Owner, provided they obtain an indemnity bond from the corporate client.
1. When a foreign branch of an Indian bank faces a conflict between Home Country (India/RBI) and Host Country AML regulations, the branch must strictly follow the “Stricter of the Two” rule.
2. If the Host Country’s laws (e.g., secrecy jurisdictions) completely prohibit the implementation of Indian AML standards, the bank must inform the RBI and may be required to close the branch or prohibit the business relationship.
3. The “Risk-Based Approach” (RBA) permits banks to apply “Simplified Due Diligence” (SDD) to low-risk customers (like Self-Help Groups) to optimize resource allocation.
4. Indian banks are permitted to open accounts in secrecy jurisdictions without identifying the Beneficial Owner, provided they obtain an indemnity bond from the corporate client.
Explanation
Correct: B
The correct answer is Option B. The “Stricter of the Two” rule applies. If compliance isn’t possible, the branch must close. RBA allows SDD. Indemnity bonds cannot replace BO identification, making statement 4 incorrect. Global compliance is the final test in the IIBF AML KYC Exam 2026.
The correct answer is Option B. The “Stricter of the Two” rule applies. If compliance isn’t possible, the branch must close. RBA allows SDD. Indemnity bonds cannot replace BO identification, making statement 4 incorrect. Global compliance is the final test in the IIBF AML KYC Exam 2026.
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⚡ Quick Revision: Key Facts for IIBF AML KYC Exam 2026
Beneficial Ownership: 10% ownership threshold applies to Companies, Partnerships, AND Trusts.
Cash Transaction Reporting (CTR): Mandatory for cash transactions > ₹10 Lakhs; filed by 15th of next month.
Occasional Transaction (CDD): Mandatory verification for any walk-in transaction > ₹50,000.
Small Account Limits: Max Balance: ₹50,000 | Max Credits/Year: ₹1 Lakh | Max Withdrawals/Month: ₹10,000.
Foreign Students (NRO): Max withdrawal cap of ₹50,000/month pending address verification.
Record Retention: 5 Years for Transaction Records (from date of transaction) AND 5 Years for KYC Records (from date of relationship end).
PMLA Section 45: Bail requires “Twin Conditions”: (1) Prima facie innocence, (2) Unlikely to commit offence while on bail.
Money Mule Penalty: Failure to file STR for a mule account = Deemed non-compliance with KYC Directions.
❓ Frequently Asked Questions: IIBF AML KYC Exam 2026
What is the specific difference between “Digital KYC” and “V-CIP”?
V-CIP is a live, face-to-face video interaction with a bank official (treated as physical presence). Digital KYC is merely capturing a live photo with geo-tagging (GPS) without a live interview. V-CIP is a higher standard.
Can a “Small Account” receive foreign remittances if below ₹10,000?
No. Foreign remittances are strictly prohibited in Small Accounts regardless of amount. The customer must complete full KYC to receive foreign funds.
Is the PAN Card considered an OVD for address proof?
No. The PAN Card is an OVD for Identity only. It is NOT accepted as proof of address under the RBI Master Direction because it does not contain address details.
Does the “Travel Rule” apply to Crypto/Virtual Digital Assets?
Yes. Virtual Asset Service Providers (VASPs) must ensure Originator and Beneficiary details “travel” with the crypto transfer. Beneficiary exchanges must also screen wallets against sanction lists.
What constitutes “Tipping Off” under PMLA?
It is a criminal offence where a bank official informs a customer that their transaction is being reported (STR) or investigated. The existence of an STR must be kept strictly confidential.
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