Which red flag is most relevant to money laundering through capital markets?

The correct answer is A. A low-priced security sees a sudden spike in investor demand with a rising price. Money laundering through capital markets often involves pump-and-dump schemes, wash trading, and layering funds through rapid trading activity. Option A (Correct): A sudden spike in demand for a low-priced security is a red flag for pump- and-dump schemes, where criminals…

Risks and Methods of Money Laundering and Terrorist Financing

Question

Options

AA low-priced security sees a sudden spike in investor demand with a rising price.
BA security sees a transactional pattern of a steady decrease in both trading volume and prices.
CA firm sees an unexpected increase in demand for electronically traded funds.
DA trading customer maintains a portfolio of securities concentrated in one specific emerging

How the community answered

(37 responses)

A
84% (31)
B
3% (1)
C
5% (2)
D
8% (3)

Explanation

Money laundering through capital markets often involves pump-and-dump schemes, wash trading, and layering funds through rapid trading activity. Option A (Correct): A sudden spike in demand for a low-priced security is a red flag for pump- and-dump schemes, where criminals manipulate the market to inflate stock prices artificially before selling off shares for a profit.

Topics

#capital markets#pump and dump#securities fraud#money laundering red flags

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