CAF-4 · Chapter 15
Anti-money laundering and electronic payments MCQs with Answers
9 multiple-choice questions on Anti-money laundering and electronic payments for CAF-4 Business Law Dynamics. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
How is 'Money Laundering' fundamentally defined?
- A) The act of physically washing currency to remove traces of drugs.
- B) The process whereby proceeds of crime are converted into assets appearing to have a legitimate origin.
- C) Hiding money in offshore bank accounts to avoid paying taxes on legal income.
- D) The process of printing counterfeit currency notes.
Show answer & explanation
Answer: B) The process whereby proceeds of crime are converted into assets appearing to have a legitimate origin.
Money laundering is the illegal process of taking 'dirty' money generated by criminal activity (predicate offence) and 'laundering' it to make it look like clean, legitimate income.
Question 2
Under the Anti-Money Laundering Act, a person found guilty of money laundering shall be punished with rigorous imprisonment. What is the statutory duration of this imprisonment?
- A) Not less than six months and up to five years.
- B) Not less than one year but may extend up to ten years.
- C) A mandatory life sentence.
- D) A maximum of two years without minimum limits.
Show answer & explanation
Answer: B) Not less than one year but may extend up to ten years.
The Act prescribes strict punishment for money laundering, which includes rigorous imprisonment that shall not be less than one year but may extend up to ten years.
Question 3
In addition to imprisonment, what is the maximum financial fine that can be imposed on an individual found guilty of money laundering?
- A) Rs. 5 million
- B) Rs. 10 million
- C) Rs. 25 million
- D) Rs. 50 million
Show answer & explanation
Answer: C) Rs. 25 million
The law states that a person guilty of money laundering shall be liable to a fine which may extend up to Rs. 25 million.
Question 4
If Arslan and Faisal agree to resolve a civil dispute outside the court of law by appointing neutral decision-makers, this process is known as:
- A) Litigation
- B) Arbitration
- C) Money laundering
- D) Estoppel
Show answer & explanation
Answer: B) Arbitration
Arbitration is a method (Alternate Dispute Resolution) through which parties resolve civil disputes outside the court of law by avoiding the technicalities of procedural law.
Question 5
In an arbitration agreement where each party appoints one arbitrator, what is the default rule for appointing an 'umpire' if the agreement is silent on the matter?
- A) The court automatically appoints the umpire.
- B) The arbitrators shall appoint an umpire within a month of their appointments.
- C) An umpire is not required for a two-arbitrator panel.
- D) The parties must vote on an umpire within six months.
Show answer & explanation
Answer: B) The arbitrators shall appoint an umpire within a month of their appointments.
In the absence of a contrary intention, when an even number of arbitrators are appointed, the arbitrators themselves shall appoint an umpire within one month of their appointment.
Question 6
If the appointed arbitrators allow their time to expire without making an award, what is the immediate legal consequence?
- A) The entire arbitration process is cancelled and must go to court.
- B) The umpire shall forthwith enter on the reference in lieu of the arbitrators.
- C) The parties must appoint entirely new arbitrators.
- D) The arbitrators are fined by the court.
Show answer & explanation
Answer: B) The umpire shall forthwith enter on the reference in lieu of the arbitrators.
If the arbitrators' time expires without an award, or they notify that they cannot agree, the umpire takes over the reference in lieu of the arbitrators to make the decision.
Question 7
Which of the following is an 'implied power' granted to arbitrators under the Arbitration Act, 1940?
- A) The power to sentence a party to prison.
- B) The power to correct in an award any clerical mistake or error arising from an accidental slip.
- C) The power to seize assets without notice.
- D) The power to rewrite the original contract between the parties.
Show answer & explanation
Arbitrators have implied powers such as administering oaths, making the award conditional, and correcting clerical mistakes or accidental slips in the award.
Question 8
In legal proceedings involving the estate of a deceased person, how is a 'legal representative' defined?
- A) Strictly the eldest son of the deceased.
- B) The lawyer representing the family.
- C) A person who in law represents the estate of the deceased, including any person who intermeddles with the estate.
- D) Any person who witnessed the will being signed.
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Answer: C) A person who in law represents the estate of the deceased, including any person who intermeddles with the estate.
A legal representative is someone who represents the estate, which explicitly includes any person who 'intermeddles' (involves themselves) with the estate of the deceased.
Question 9
Under the Anti-Money Laundering Act, a person commits an offence if they hold or possess property on behalf of another, knowing what?
- A) Knowing that the property is undervalued.
- B) Knowing or having reason to believe that such property is proceeds of crime.
- C) Knowing that the property was bought on a loan.
- D) Knowing the owner is a foreigner.
Show answer & explanation
Answer: B) Knowing or having reason to believe that such property is proceeds of crime.
It is an explicit offence if a person acquires, converts, or possesses property knowing, or having reason to believe, that the property is derived from the proceeds of crime.