ACAMS CAMS Certified Anti-Money Laundering Specialist (the 6th edition) Exam Practice Test

UN sanctions regimes are not punitive but aim to:

B: “Support peaceful resolution of conflicts.”

D: “Deter non-democratic and unconstitutional changes of government.”

E: “Promote respect for human rights and humanitarian law.”(CAMS 6th Edition, United Nations Sanctions; UN Security Council Mandates)

Incorrect:

A: The UN does not impose sanctions to force regime type.

C: Sanctions are not for punishing weak AML controls.

According to the ACAMS study guide, one of the red flags for money laundering in loan transactions is “the use of shell companies or other legal entities whose ownership is not transparent or whose beneficial owners are unknown” (p. 223). Money launderers may use such entities to hide their identity and the source of their funds, or to create complex layers of transactions to obscure the trail of money. The other options are not necessarily indicative of money laundering risk, as they could be explained by legitimate factors such as the location of the property, the repayment schedule, or the choice of attorney.

ACAMS. (2020). Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.

MLO Mentor: Anti-Money Laundering 1

Compliance Obligations of Certain Loan or Finance Company Affiliates of Federally Regulated Banks and Other Financial Institutions 2

 One of the common methods used by money launderers to hide the origin and destination of illicit funds is to create complex corporate structures that obscure the identity of the real owners or controllers of the assets. Lawyers can facilitate this process by providing legal services such as setting up shell companies, trusts, foundations, or other entities in jurisdictions with weak AML regulations or high secrecy. By doing so, lawyers can help their clients evade taxes, avoid sanctions, conceal criminal activities, or launder money. This is why lawyers are considered high-risk professionals for AML purposes and are subject to due diligence and reporting obligations.

= Some of the references that support this answer are:

ACAMS Study Guide for the CAMS Certification Examination, Chapter 3, Section 3.2.2, page 77: “Lawyers are often used to create complex corporate structures that can be used to hide the beneficial ownership of assets.”

Money Laundering Reporting Officer: The Role Of MLRO, Section “Money Laundering Risks For Lawyers”: “Lawyers are at risk of being used by criminals to launder money through various means, such as creating corporate entities, conducting transactions, or providing advice.”

New York Lawyer Pleads Guilty to Ponzi Scheme, Money Laundering, Section “Lawyer agrees to forfeit $19 million from investment scheme”: “A New York lawyer admitted Monday to money laundering and orchestrating an $18.8 million Ponzi scheme using his Forest Hills-based law firms, Wisnicki & Associates LLP and Wisnicki Neuhauser LLP.”

 Spear phishing is a targeted form of phishing scam in which cybercriminals send highly convincing emails to specific individuals within an organization. The emails often contain personal information or details that make them seem legitimate and trustworthy. The goal of spear phishing is to trick the recipients into clicking a malicious link or downloading an infected attachment, or to reveal confidential information or money to the attackers. In this case, the customers of the telecommunications firm received an email that pretended to be from the company, but was actually a fake. The email directed them to a spoofed website that asked for their personal information, which could be used for identity theft or fraud. This is a clear example of a spear phishing attack.

When presented with a search warrant, the AML specialist should record the names and affiliations of the agents who conduct the search. This will help in identifying who conducted the search in case there are any issues that need to be addressed later. Additionally, the AML specialist should obtain a copy of the warrant or photocopy the original warrant. This is important to ensure that the warrant is valid and that the agents are authorized to conduct the search. It is not appropriate to ask the agents questions or remember what items they have seized, as this could interfere with the search and potentially lead to legal issues. Finally, leaving the premises to allow the agents to conduct the search is not necessary, as the AML specialist has the right to be present during the search.

According to the ACAMS CAMS Certification Study Guide (6th edition), one of the key steps of conducting an investigation of a suspicious activity is to maintain and secure supporting documentation used to perform the investigation. This includes the transaction activity that generated the alert, the analysis performed, the decision made, and the rationale for the decision. This documentation serves as evidence of the investigation process and the compliance with the relevant policies and procedures. It also helps to ensure consistency, accountability, and transparency in the investigation process1

 1: ACAMS CAMS Certification Study Guide (6th edition), page 156.

The anti-money laundering specialist should secure all the documents related to the suspicious activity and the decision to report before submitting the suspicious transaction report (STR). This is to ensure that the evidence is preserved, the confidentiality is maintained, and the audit trail is documented. The documents may include the customer identification, transaction records, account statements, monitoring alerts, investigation reports, and any other relevant information12.

Checking with other financial institutions, adding information to the customer’s file, or contacting the customer are not appropriate actions to take before submitting the STR. These actions may compromise the confidentiality of the report, alert the customer of the suspicion, or interfere with the investigation by the competent authorities12.

 1: ACAMS (2020), Study Guide for the Certification Examination, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, pp. 35-36. 2: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, individuals who violate anti-money laundering laws can face severe consequences, such as imprisonment, fines, asset forfeiture, and sanctions. These penalties can apply not only to the perpetrators of money laundering, but also to the employees, managers, directors, and officers of financial institutions or other entities that fail to comply with their anti-money laundering obligations. Therefore, violations of anti-money laundering laws can pose a significant risk to individuals, both personally and professionally.

Anti-Money Laundering Specialist (the 6th edition) study guide, page 9

ACAMS website, section on CAMS certification

Money Laundering website, article on “The Consequences of Non-Compliance with Anti-Money Laundering Laws”

payments received on the account that reference unknown companies in the instructions indicate a possible attempt to obscure the source or purpose of the funds. This could be a sign of money laundering, tax evasion, fraud, or other illicit activities. Such payments should be referred to AML Investigations for further review and verification of the identity and legitimacy of the companies involved.

FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones, page 18, paragraph 57: “The dealer should also pay attention to the information provided by the customer on the source and origin of the funds or assets, and verify it where possible. For example, the dealer should be alert to situations where the customer provides vague, incomplete or inconsistent information about the source and origin of the funds or assets, or where the information provided does not match with the customer’s profile or business activity.”

Risk-Based Approach For Dealers in Precious Metals and Stones (DPMS), section “Business-based risk approach”, sub-section “2- Geographical location”: “You must also assess the geographical location of your business and the countries you deal with. You must be aware of the countries that are high-risk or non-cooperative jurisdictions as per the FATF recommendations. You must also consider the countries that are subject to sanctions, embargoes, or similar measures issued by the United Nations, the European Union, or any other relevant organization. You must also be careful of the countries that are known to have significant levels of corruption, organized crime, or terrorist activity.”

What are the Risks of Money Laundering for Precious Metals Dealers?, section “Money Laundering Red Flags for DPMS”, bullet point 4: “The customer provides vague, incomplete, or inconsistent information about the source and origin of the funds or assets.”

Lawyers’ trust accounts arecommonly exploited for money laundering, particularly forlayering and integration stages.

Option A (Correct):Receiving and immediately forwarding wire transfers from unknown sources in a high-risk jurisdiction is a strong red flag for money laundering.

Option B (Incorrect):While legal professionals in high-risk countries require monitoring, the transaction itself is not necessarily suspicious.

Option C (Incorrect):Insurance company payments are typically traceable, reducing money laundering risk.

Option D (Incorrect):Lawyers handling real estate transactions is normal unless the deal structure is highly irregular.

Red Flags for Money Laundering in Legal Professions:

Use of client accounts to receive and distribute funds without legal purpose.

Multiple transactions involving unrelated third parties.

Legal services that do not align with the nature of payments received.

Best Practices for AML in Legal Professions:

Conduct enhanced due diligence (EDD) on high-risk transactions.

Monitor transactions involving high-risk jurisdictions.

File Suspicious Activity Reports (SARs) for unexplained transactions.

Accountants can be involved in money laundering schemes in various ways, either knowingly or unknowingly. Some of the common methods that accountants can use to launder money are:

Overstating income to hide excess cash: This method involves inflating the revenues or profits of a business to conceal the origin of illicit funds. For example, an accountant can create fake invoices or receipts to justify the deposit of cash from illegal sources into the business account. This can make the cash appear as legitimate income from the business operations.

Acting as a conduit for transferring cash between accounts: This method involves using the accountant’s own account or a third-party account to move funds around and obscure the audit trail. For example, an accountant can receive cash from a client and deposit it into their own account, then transfer it to another account or withdraw it in a different location. This can make it difficult to trace the source and destination of the funds.

Acting as a designee for someone who wishes to hide their identity: This method involves using the accountant’s name or credentials to open accounts or conduct transactions on behalf of a client who wants to remain anonymous. For example, an accountant can act as a nominee director or shareholder for a shell company that is used to launder money. This can make it appear as if the accountant is the owner or beneficiary of the funds, while the actual owner or beneficiary is hidden.

Money Laundering: What It Is and How to Prevent It - Investopedia, The Process of Laundering Money

Revealed: accountants aiding money laundering - Accountancy Age, Accountants’ methods

Accountants in the anti-money laundering front line, Accountants’ obligations

https://www.ojp.gov/pdffiles1/Digitization/119840NCJRS.pdf

According to the Basel Committee on Banking Supervision principles, the most important question the banker should ask when opening a numbered or alternate name account is who will control the account. This is because such accounts pose a higher risk of money laundering and terrorist financing, as they can be used to conceal the identity and beneficial ownership of the funds. Therefore, the banker should perform enhanceddue diligence and verify the identity and source of funds of the person who has the authority to operate the account, as well as the purpose and nature of the business relationship12

The other questions are less relevant or secondary to the issue of control. The inheritance of the proceeds in the event of the businessman’s death is a matter of succession law and does not affect the identification of the beneficial owner. The amount of money deposited into the account may indicate the level of risk, but does not reveal the origin or destination of the funds. The account-opening date is a procedural detail thatdoes not affect the compliance with the anti-money laundering and counter-terrorist financing standards12

1: Basel Committee on Banking Supervision - Core principles for effective banking supervision, 2012, Principle 14 and Essential Criterion 14.1

2: Basel Committee on Banking Supervision - Sound management of risks related to money laundering and financing of terrorism, 2014, Paragraphs 30 and 31

TheAML supervisory authorityis responsible for overseeing financial institutions' compliance with AML/CFT regulations.

Option D (Correct):AML supervisory authorities, such as theFinancial Conduct Authority (FCA) in the UK,FinCEN in the US, orEuropean Central Bank (ECB) for EU institutions, conduct inspections, issue reports, and enforce penalties when AML deficiencies are found.

Option A (Incorrect):Self-regulatory bodies provide guidelines butdo not have legal authorityto withdraw banking licenses.

Option B (Incorrect):Law enforcement may investigate criminal conduct, butregulatory compliance issuesfall under AML supervisory authorities.

Option C (Incorrect):FATF provides guidance and assessments but doesnot directly enforcecompliance at individual financial institutions.

Chip dumpingis a commonmoney laundering techniquein online gambling.

Option D (Correct):Chip dumpingoccurs whenplayers colludetotransfer fundsvia staged betting, making illicit funds appear as gambling winnings.

Option A (Incorrect):Concealmentis a broad term, not a specific technique.

Option B (Incorrect):Coordinated bettingrefers tomatch-fixing, not money laundering.

Option C (Incorrect):Player-to-player transfersare used in money laundering but arenot specific to online gambling.

According to the FATF Recommendations (2012), page 111, the FATF calls on its members and urges all jurisdictions to apply enhanced due diligence and, in the most serious cases, countermeasures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from countries with significant strategic AML/CFT deficiencies. Countermeasures are proportionate and effective actions that can be applied by countries individually or collectively to protect their financial systems from these risks. Examples of countermeasures include restricting or prohibiting financial transactions with the high-risk country, requiring financial institutions to review and terminate correspondent relationships with the high-risk country, or applying enhanced reporting mechanisms or systematic reporting of financial transactions with the high-risk country.

 Conducting small cash transactions at multiple locations during the same day is the strongest example of avoiding reporting thresholds. This is a common technique used by money launderers to evade the attention of financial institutions and regulators, who are required to report cash transactions above a certain amount (usually $10,000) to the authorities. By splitting the large sum of money into smaller amounts and depositing them at different branches or ATMs, the money launderer can avoid triggering the reporting requirement and conceal the source and destination of the funds. This practice is also known as smurfing or structuring12.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2, page 36

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.2, Structuring and Smurfing

1, Smurfing Money Laundering: Mechanics, Detection, and Prevention

2, AML & eWallets - The Risks & How To Comply | ComplyAdvantage

When a high volume of incoming wire transfers generates an alert about a client and the funds are immediately debited by cash withdrawals and outgoing wire transfers, the first information that should be reviewed to investigate this alert/case is the customer’s account activity. This is because the account activity can reveal the origin, destination, purpose, frequency, and amount of the wire transfers, as well as any unusual or inconsistent patterns that may indicate money laundering or fraud. The account activity can also help to compare the wire transfers with the customer’s profile, risk rating, expected behavior, and source of funds. Reviewing the account activity can help to determine if the alert is a false positive or a true positive, and if further investigation or reporting is required.

TheFATF Immediate Outcomes (IOs)measure the effectiveness of AML/CFT frameworks in jurisdictions.

Option A (Correct):International cooperationis key to combating financial crime, as outlined inImmediate Outcome 2.

Option B (Correct):Effective regulation of financial institutionsis part ofImmediate Outcome 3, which ensures compliance with AML laws.

Option E (Correct):Investigation and prosecution of money laundering offensesalign withImmediate Outcome 7.

Option C (Incorrect):FATF itself does not conduct investigations; FIUs share intelligence with domestic and international agencies.

Option D (Incorrect):While financial criminals face legal consequences, there is no global mandate to restrict their access to banking.

This is when a customer or a transaction does not provide sufficient or credible information about their identity, source of funds, business activity, or purpose of the transaction. Lack of transparency can indicate that the customer or the transaction is trying to conceal the origin, ownership, or destination of illicit funds, or to evade regulatory scrutiny or reporting obligations. Lack of transparency is a common risk factor for money laundering and terrorist financing, especially in high-risk jurisdictions or sectors.

The other options are not necessarily red flags, although they may increase the risk or require further due diligence depending on the circumstances and the risk profile of the customers and countries involved. Option A describes a referral by a longtime friend of the dealer, which may be a legitimate source of trust or business relationship, but it does not substitute the need for proper customer identification and verification. Option B describes the location of the precious metals dealer, which may be a high-risk jurisdiction due to factors such as weak governance, corruption, crime, or sanctions, but it does not imply that the dealer or the customer is involved in money laundering. Option C describes the amount and nature of the transaction, which may be unusual or large, but it does not necessarily indicate money laundering, as long as the customer can provide a reasonable explanation and evidence for the source and use of funds.

ACAMS CAMS Certification Video Training Course - 6th Edition1

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)2

ACAMS CAMS Study Guide - 6th Edition, Chapter 3, pages 64-65

https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-3.pdf

D: NGOs play an important role in raising awareness about money laundering, lobbying for strong AML/CFT laws, and educating the public and stakeholders about the risks and consequences.

“NGOs help combat money laundering primarily through advocacy, education, and raising public and industry awareness.”(CAMS 6th Edition, Role of NGOs in AML/CFT)

purchasing a low volume of chips with cash and turning them in for a casino check is a common technique of money laundering in casinos. This method allows the launderer to convert “dirty” money into physical casino chips, which are then played with for a short while, and then cashed out as “clean” money in the form of a check. This way, the launderer can avoid the reporting requirements and the traceability of cash transactions.

ACAMS CAMS Certification Video Training Course - Exam-Labs1

Understanding Money Laundering in Casinos | ComplyAdvantage2

Casino Money Laundering: Red Flag Indicators - Alessa3

Public-Private Partnerships (PPPs)are collaborative initiatives involvinglaw enforcement, FIUs, and financial institutions. Their objective is to improve theefficiency and effectivenessof the fight against money laundering, terrorist financing, and other financial crimes bysharing both operational and strategic intelligence.

Option A – Exchange operational information between public authorities and obliged entities:

PPPs often facilitate real-time or near-real-time information sharing that supportsspecific investigations and the detection of suspicious activity, helping financial institutions respond quickly and accurately to ongoing threats.

Option B – Exchange strategic information between FIUs and obliged entities:

Strategic-level intelligence sharing helps financial institutionsunderstand typologies, risk trends, and evolving criminal methods, thereby strengthening their risk assessments and transaction monitoring frameworks.

Option Cis incorrect: Strategic information exchange between private institutions is limited and heavily regulated.

Option Dis incorrect: FATF does not collect or manage databases of suspicious activity reports; it sets standards and reviews national frameworks.

TheUSA PATRIOT Act Section 313 & 319(b)placesstrict requirements on foreign correspondent banking relationshipsto prevent money laundering.

Option A (Correct):Theforeign bank must disclose its ownership structureto identifyultimate beneficial owners (UBOs).

Option C (Correct):Theforeign bank must certify that it maintains a physical presencein a regulated jurisdiction.

Option E (Correct):Theforeign bank must not allow shell banks to use its U.S. correspondent accounts.

Why Other Options Are Incorrect:

Option B (Incorrect):Thecertification does not specifically exclude PEPs, butPEPs require enhanced due diligence (EDD).

Option D (Incorrect):The foreign bankmay operate in multiple jurisdictions, but it must be regulated where it has a presence.

Key Compliance Measures for Correspondent Banking:

Conduct EDD on foreign bank relationships.

Ensure correspondent banks do not facilitate shell banks.

Monitor transactions for money laundering and terrorist financing risks.

The Office of Foreign Assets Control (OFAC) is a department of the U.S. Treasury that administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals1. OFAC regulations cover all persons and entities within the U.S., all U.S.-domiciled entities and their foreign branches, and all U.S. citizens, wherever located or employed2. These include U.S. banks, U.S. corporations, U.S. subsidiaries of foreign corporations, U.S. residents, and U.S. citizens living or traveling abroad3. OFAC regulations do not cover foreign-based entities that have U.S. customers, unless they are owned or controlled by U.S. persons or entities4.

 1: Home | Office of Foreign Assets Control 2: eCFR :: 31 CFR Chapter V – Office of Foreign Assets Control, Department of the Treasury 3: FFIEC BSA/AML Office of Foreign Assets Control - Office of Foreign Assets Control 4: Office of Foreign Assets Control (OFAC): Definition, Sanctions

Financial institutions closely monitor customer accounts for suspicious activity related to money laundering, terrorist financing, or other illicit activities. If an account consistently triggers multiple suspicious activity reports (SARs), it raises red flags. These reports indicate unusual or potentially illegal transactions, such as large cash deposits, frequent transfers to high-risk jurisdictions, or patterns inconsistent with the customer’s profile. To mitigate risk and comply with anti-money laundering (AML) regulations, the financial institution may decide to close the account. Regular SAR filings are essential for maintaining the integrity of the financial system and preventing illicit financial flows12.

According to the ACAMS CAMS Certification Study Guide, 6th Edition, one of the four pillars of an effective anti-money laundering compliance program is the training of appropriate employees on their responsibilities and the institution’s policies and procedures. Training is essential to ensure that employees are aware of the risks of money laundering and terrorist financing, the applicable laws and regulations, the red flags and indicators of suspicious activity, and the reporting and record-keeping requirements. Without proper training, employees may not be able to perform their duties effectively and efficiently, and may expose the institution to legal, regulatory, reputational, and operational risks.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2, Section 2.1.4, page 39.

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.1.4.

USA PATRIOT Act Section 314(b)allows financial institutions tovoluntarily share information with one another, after notifying the U.S. Treasury, toidentify and report possible money laundering or terrorist financing activities.

Key elements include:

Voluntary participation

Prior notice to FinCEN (part of the U.S. Treasury)

Protection from liability when acting in good faith

Enhanced collaborative detection across institutions

Section 314(a)refers toinformation sharing between law enforcement and financial institutions, not peer-to-peer sharing.

COSMICis an initiative in certain jurisdictions like Singapore, not U.S. regulation.

Regulation (EU) 2024/1624is part of the EU AML framework, not relevant to U.S. institutions.

The activities that could be considered a potential spear phishing scam are:

A courier delivers a duplicate invoice to a business that contains updated payment details of an existing supplier. This could be a way of diverting funds to a fraudulent account by impersonating a legitimate vendor and exploiting the trust relationship between the business and the supplier1.

Payroll receives an external email from an employee looking to update their bank account information. This could be a way of stealing money from the employee or the employer by pretending to be the employee and requesting a change in the payment method or destination2.

An employee receives an email that asks to download an attachment, but the attachment is a malware. This could be a way of infecting the employee’s computer or network with malicious software that could compromise sensitive data, disrupt operations, or demand ransom3.

The other options are not necessarily spear phishing scams, although they may be other types of fraud or deception. For example:

An employee receives a phone call requesting that money be sent to assist someone in trouble. This could be a vishing scam, which is a form of voice phishing that uses phone calls to solicit personal or financial information or to request money transfers4.

A business sends its employees an email warning that email passwords must be changed to prevent cyber-fraud. This could be a legitimate security measure, or it could be a phishing scam, which is a form of email phishing that targets a broad audience and tries to trick them into revealing their credentials or clicking on malicious links.

Members of a religious organization receive a donation request by email claiming to be from their leader. This could be a genuine appeal, or it could be a social engineering scam, which is aform of manipulation that exploits the human factor and relies on the victim’s emotions, trust, or sympathy.

Identity theft is a form of fraud or cheating of identity in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain. By compromising an individual's personal data, such as their Social SecurityNumber, bank account numbers, or other personal information, a cybercriminal can use it to gain access to credit cards or other financial accounts, or to open new accounts in the victim's name.

 it describes the organization that a national Financial Intelligence Unit (FIU) should consider becoming a member of, which is the Egmont Group. The Egmont Group is an international network of FIUs that was established in 1995 to facilitate the exchange of financial intelligence and information among its members, and to promote cooperation and coordination in the fight against money laundering and terrorist financing. The Egmont Group currently has 166 member FIUs from different jurisdictions, and provides them with various benefits, such as access to secure communication channels, bestpractices, training, and technical assistance. The Egmont Group also works closely with other international organizations, such as the Financial Action Task Force (FATF), the United Nations, and the World Bank, to enhance the global anti-money laundering and counter-terrorist financing (AML/CTF) framework.

The other options are not necessarily organizations that a national FIU should consider becoming a member of, although they may have some relevance or influence on the AML/CTF field. Option B describes the Wolfsberg Group, which is an association of 13 global banks that was formed in 2000 to develop standards and guidance for the financial industry on AML/CTF and other financial crime issues. The Wolfsberg Group is not an organization for FIUs, but rather for financial institutions. Option C describes the Financial Action Task Force (FATF), which is an inter-governmental body that was established in 1989 to set the international standards and recommendations for AML/CTF and to monitor the compliance and effectiveness of its members and other jurisdictions. The FATF is not an organization for FIUs, but rather for governments and policy-makers. Option D describes the Basel Committee, which is a forum of central bank governors and heads of banking supervision authorities from 28 jurisdictions that was established in 1974 to enhance the quality and consistency of banking supervision and regulation. The Basel Committee is not an organization for FIUs, but rather for banking regulators and supervisors.

ACAMS CAMS Certification Video Training Course - 6th Edition1

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)2

ACAMS CAMS Study Guide - 6th Edition, Chapter 5, pages 108-109

https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-5.pdf

 According to the ACAMS CAMS Certification Study Guide, 6th Edition, one of the four pillars of an effective anti-money laundering compliance program is the training of appropriate employees on their responsibilities and the institution’s policies and procedures. Training is essential to ensure that employees are aware of the risks of money laundering and terrorist financing, the applicable laws and regulations, the red flags and indicators of suspicious activity, and the reporting and record-keeping requirements. Without proper training, employees may not be able to perform their duties effectively and efficiently, and may expose the institution to legal, regulatory, reputational, and operational risks.

The other options are less serious deficiencies, but still need to be addressed and corrected. The compliance officer should have regular meetings with upper management to inform them of the current money laundering trends and the status of the compliance program, but this is not as critical as providing training to the employees. The company’s anti-money laundering manual should be updated to reflect any changes in the internal controls, policies, or procedures, but this is not as urgent as ensuring that the employees are familiar with the existing ones. The company should download the most recent regulation from the Financial Intelligence Unit web site, but this is not as important as complying with the existing ones.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2, Section 2.1.4, page 39.

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.1.4.

Aneffective AML programbalancesalert accuracy and operational efficiency.

Option D (Correct):The true positive vs. false positive ratio reflects the efficiency and accuracy of an AML transaction monitoring system.

Option A (Incorrect):The number of alerts does not indicate system effectiveness—many could be false positives.

Option B (Incorrect):Clients exiting for commercial reasons are unrelated to AML efficiency.

Option C (Incorrect):Tracking high-risk customer onboarding is important but does not measure AML effectiveness.

Best Practices for Measuring AML Effectiveness:

Monitor system efficiency through alert validation metrics.

Reduce false positives while maintaining regulatory compliance.

Enhance machine learning and AI models for transaction monitoring.

If a financial institution wishes to close an account due to concerns about potential money laundering or other financial crimes, it is generally required to file a suspicious activity report (SAR) with the appropriate government agency. However, there may beinstances where the government requires the account to remain open for ongoing investigation purposes.

In such cases, the government must provide a written request under proper letterhead and authority to keep the account open. This document will serve as legal justification for the financial institution to maintain the account, even though it may pose a higher risk for money laundering or other financial crimes.

Civil and Criminal Prosecution, Fines, and Imprisonment: The Chief AML Officer may face legal action, including both civil and criminal proceedings. This could result in fines and even imprisonment if found guilty of negligence or misconduct related to anti-money laundering compliance.

Ban from Employment: Regulators have the authority to ban individuals from working in the financial services industry if they are deemed unfit due to AML-related failures. Such a ban can significantly impact the individual’s career prospects.

Recommend Termination of Employment: While the regulator cannot directly terminate employment, they can recommend that the financial institution (FI) take appropriate action, including termination, based on the Chief AML Officer’s performance.

This represents the highest risk factor for terrorist financing because it may indicate that the charity is diverting funds to support terrorist organizations or activities, or that it is acting as a front or conduit for terrorist financing. Disbursement of funds to entities unrelated to the purpose of the charity may also violate the donor’s intentions, the charity’s mission, or the applicable laws and regulations. A charity with unaudited accounts may have weak internal controls, governance, or transparency, which may increase the risk of misappropriation, diversion, or misuse of funds.

ACAMS CAMS Certification Video Training Course1, Module 2: Money Laundering Risks and Methods, Lesson 2.3: Money Laundering Risks and Methods by Sector

ACAMS CAMS Study Guide, 6th Edition2, Chapter 2: Money Laundering Risks and Methods, Section 2.3: Money Laundering Risks and Methods by Sector, pp. 40-41

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 2: Money Laundering Risks and Methods, Section 2.3: Money Laundering Risks and Methods by Sector, Slide 18

 Predicate offenses are the criminal activities that generate the proceeds that are later laundered through money laundering schemes. A country that does not have strong predicate offenses and is lax in prosecuting AML cases could suffer from increased organized crime and corruption, as criminals would have more opportunities and incentives to engage in illicit activities and evade detection and punishment. Organized crime and corruption can have serious social and economic consequences for a country, such as undermining the rule of law, eroding public trust, threatening national security, harming human rights, reducing economic growth, and distorting market competition123.

The clients are not willing to have their names provided to the bank is a red flag that should stop the agent from discussing this potential purchase further, as this could indicate that the clients are trying to evade customer due diligence (CDD) or know your customer (KYC) requirements, or hide their beneficial ownership or source of funds. According to the U.K. Money Laundering Regulations 2017, real estate agents must conduct CDD on their customers and any beneficial owners, and verify their identity and address1. The U.K. also has a register of people with significant control (PSC) over companies, which requires companies to disclose their beneficial owners2. The use of private companies and wire transfers could also be a sign of layering, a money laundering technique that involves moving funds through multiple accounts or entities to obscure their origin3.

1: U.K. Government, Money Laundering Regulations 2017, Part 2: Customer Due Diligence, Section 5-6 2: U.K. Government, People with significant control (PSC) register, Overview 3: ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorist Financing, Page 19

 According to the USA PATRIOT Act, a shell bank is defined as “a bank that has no physical presence in any country” (Section 313(a)(1)). A physical presence means “a place of business that is maintained by a bank and is located at a fixed address, other than solely a post office box or an electronic address, in a country in which the bank is authorized to conduct banking activities, at which location the bank employs one or more individuals on a full-time basis and maintains operating records related to its banking activities” (Section 313(a)(2)). Therefore, option A is the correct answer, as it describes a bank that has no physical presence or employees in any country. Options B, C, and D are not correct, as they describe banks that have some form of physical presence or affiliation with another bank in a country.

USA PATRIOT Act, Title III, Subtitle A, Section 313, Prohibition on United States Correspondent Accounts with Foreign Shell Banks, 1.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 4: International Standards and Global Initiatives, page 103.

The Basel Committee on Banking Supervision (BCBS) is an international body that sets standards and guidelines for the prudential regulation of banks. One of its key publications is the Customer Due Diligence for Banks, which outlines the essential elements of Know Your Customer (KYC) standards for banks. According to this document, customer acceptance, customer due diligence, and record-keeping policies and procedures should be changed as necessary to address variations in risk among each line of business within the organization. This means that banks should adopt a risk-based approach to KYC, taking into account the different types, levels, and sources of risk associated with different customers, products, services, transactions, and delivery channels. By doing so, banks can allocate their resources more efficiently and effectively, and mitigate the potential for money laundering, terrorist financing, and other financial crimes.

 According to the BSA/AML Manual1, once a financial institution files a SAR, it should maintain a copy of the SAR and the original or business record equivalent of any supporting documentation for a period of five years from the date of filing the SAR. The supporting documentation should be identified and maintained by the financial institution as such, and be deemed to have been filed with the SAR. The financial institution should make all supporting documentation available to FinCEN or any federal, state, or local law enforcement agency, or any federal regulatory authority that examines the financial institution for compliance with the BSA, upon request. Therefore, the best action to take regarding a particular account once suspicious activity is reported by the institution is to secure all supporting documentation, as it may be needed for further investigation or examination.

BSA/AML Manual1

Suspicious Activity Reporting - Overview2

Suspicious Activity Report (SAR) Basics3

One of the methods that FATF-style regional bodies (FSRBs) use to understand the inherent money laundering and terrorist financing risks in their regions is to conduct regional-level research and analysis of the methods and trends used by criminals and terrorists to exploit the vulnerabilities of the financial system. This research and analysis is done using the standards and templates developed by the FATF for its typologies reports, which are documents that describe the common features, techniques, and patterns of money laundering and terrorist financing activities. By producing their own typologies reports, FSRBs can identify the specific risks and challenges faced by their member countries and jurisdictions, and provide guidance and recommendations on how to mitigate them.

What are the 9 FATF-Style Regional Bodies (FSRBs)? - Sygna, What are FATF and FSRB typologies?

FATF-Style Regional Bodies (FSRBs) - Asia/Pacific Group on Money Laundering, What are the main duties of FSRBs?

Financial Action Task Force - Wikipedia, Typologies.

One of the most common methods of money laundering in the insurance industry is to purchase a policy with illicit funds and then request a refund of the premiums, either partially or fully, before the policy matures. This way, the money launderer can receive a legitimate payment from the insurance company, effectively washing the dirty money. This technique is also known as premium fraud or early surrender12

According to the Financial Crimes Enforcement Network (FinCEN), the most significant money laundering and terrorist financing risks in the insurance industry are found in life insurance and annuity products, because such products allow a customer to place largeamounts of funds into the financial system and seamlessly transfer such funds to disguise their true origin34

Some indicators of potential money laundering through insurance products are: 12

The customer pays the premiums with cash, cashier’s checks, money orders, or other anonymous or unusual payment methods.

The customer overpays the premiums or makes multiple payments in excess of the required amount.

The customer cancels the policy during the free-look or grace period and requests a refund to a different account or a third party.

The customer purchases a policy that is inconsistent with their income, age, or risk profile.

The customer shows little interest in the benefits or terms of the policy, but is more concerned about the cancellation or surrender options.

1: AML in Insurance: How to Detect & Combat Money Laundering, ComplyAdvantage, 2022

2: Anti Money Laundering (AML) In Insurance Industry In 2021, Financial Crime Academy, 2023

3: Money laundering in the insurance industry, Insurance Commission, 2022

4: Money laundering in the insurance industry, Atty. Dennis B. Funa, Business Mirror, 2016

[5]: Anti-Money Laundering Requirements: FAQs for Insurance Companies, FinCEN, 2005

Non-compliance with anti-money laundering (AML) laws and regulations can lead to severe consequences for both financial institutions and individuals. One of the indirect consequences is the imposition of punitive fines. These fines can vary based on the type of violation and the institution’s willingness to address the issue. Additionally, non-compliance may damage a company’s reputation, impacting its standing in the market and potentially leading to financial losses beyond the fines themselves123.

According to the risk-based approach, financial institutions should apply enhanced due diligence and ongoing monitoring to higher-risk clients, and take appropriate measures to mitigate the risks of money laundering and terrorist financing. If the client exceeds the criteria of an acceptable risk model created by the institution, the institution shouldcommunicate the issues to the client and request remedial actions, such as providing additional information, documentation, or evidence of compliance. If the client does not cooperate or comply with the institution’s requirements, the institution should consider terminating the relationship with the client, as the risk may outweigh the benefits of continuing the business relationship.

ACAMS CAMS Certification Package - 6th Edition, Chapter 2: Risk Assessments, pp. 51-521

ACAMS CAMS Certification Package - 6th Edition, Chapter 4: Customer Due Diligence, pp. 97-981

ACAMS CAMS Certification Video Training Course, Module 2: Risk Assessments, Lesson 2.3: Risk-Based Approach2

ACAMS CAMS Certification Video Training Course, Module 4: Customer Due Diligence, Lesson 4.3: Enhanced Due Diligence

Law enforcement should obtain documentation from an institution when suspicious activity was identified by either requesting copies of the relevant documents from the accountable institution or acquiring a search warrant to obtain the documents. These are the legal and proper ways to access the supporting documentation that the institution is required to maintain for five years after filing a suspicious activity report (SAR). The institution must provide the documentation upon request by FinCEN or an appropriate law enforcement or supervisory agency, and should verify the identity and authority of the requestor. Law enforcement can also obtain a search warrant from a court if they have probable cause to believe that the documents contain evidence of a crime.

Suspicious Activity Report Supporting Documentation

Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations, Question 1.

Obtaining Documentation from an Institution: Law Enforcement Procedures

 The investigator should escalate these concerns to the bank anti-money laundering officer, who is responsible for overseeing the implementation and effectiveness of the bank’s AML/CFT policies and procedures, as well as ensuring compliance with relevant laws and regulations. The bank anti-money laundering officer can then decide on the appropriate course of action, such as conducting further investigation, reporting to the regulators, or terminating the relationship with the customer. The other options are not suitable for escalating these concerns, as they may not have the authority, expertise, or responsibility to handle such matters.

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 4, pp. 113-114

FATF Guidance: The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing, October 20131, p. 19

Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 20172, p. 10

One of the criteria that the Financial Action Task Force (FATF) uses to define non-cooperative countries and territories (NCCTs) is the lack of adequate rules for the licensing and creation of financial institutions, especially those with no or minimal presence, and the lack of effective systems for checking the backgrounds of managers and beneficial owners of such institutions. This criterion aims to prevent the establishment and operation of shell banks or other entities that can be used for money laundering or terrorist financing purposes. The FATF requires that countries and territories should have laws and regulations that ensure that financial institutions are subject to adequate licensing or registration procedures, that the authorities have the power to deny or revoke licenses or registrations, and that the authorities have access to information on the identity, reputation, and financial soundness of the managers and beneficial owners of financial institutions.

= Some of the references that support this answer are:

About the Non-Cooperative Countries and Territories NCCT Initiative, Section “The review and listing process”: “The FATF established at that time four regional review groups (Americas, Asia/Pacific, Europe, Africa/Middle East) consisting of representatives from the FATF member governments that served as the main points of contact with the reviewed country or territory. … The review groups gathered relevant laws, regulations and other relevant information, analysed this information against the 25 NCCT criteria, and drafted a report that was sent to the jurisdictions for comment.”

Annual Review of Non-Cooperative Countries and Territories 2006-2007: Eighth NCCT Review, Annex 1: “List of Criteria for Defining Non-Cooperative Countries or Territories”, Criterion 1: “Licensing and creation of financial institutions, in particular those with no physical presence, and the ability to obtain information on the beneficial ownership and control of such institutions.”

FATF (Financial Action Task Force) Countries 2024 - World Population Review, Section “Blacklisted Countries”: “These are countries which were previously placed on the grey list and advised by the FATF to adopt the recommended financial security procedures, but have either failed or refused to do so. Blacklisted countries may be labeled as Non-Cooperative Countries or Territories (NCCTs).”

 This is a red flag of money laundering or terrorist financing that involves the use of non-profit organizations (NPOs) as conduits for illicit funds. NPOs may be vulnerable to abuse by criminals who exploit their legitimate activities, reputation, and access to funds and resources. A transaction monitoring process that would alert a bank for this red flag activity is to analyze the source, destination, frequency, and purpose of the funds transferred to and from the charity account, and to compare them with the expected profile and activity of the NPO. If the bank detects any inconsistency, discrepancy, or deviation from the norm, it should raise an alert and conduct further investigation.

FATF Report: Risk of Terrorist Abuse in Non-Profit Organisations, page 9

Transaction Monitoring Processes for Red Flag Activity in Banking

AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage, section “Red flags related to the nature of transactions”

Transaction monitoring alerts requirefurther analysisto determine whether they indicategenuine suspicious activity or a false positive.

Option C (Correct):Requesting information from the relationship manager helps gather customer background details, past transaction patterns, and business rationale.

Option A (Incorrect):Below-the-line testing assesses system effectiveness but does not resolve an immediate AML alert.

Option B (Incorrect):Directly contacting a counterparty bank may violate privacy regulations and should only be done if escalation is required.

Option D (Incorrect):Restricting access without due diligence may lead to regulatory and reputational risks.

Best Practices for Investigating AML Alerts:

Review transaction history and customer risk profile.

Engage the relationship manager for business context.

Escalate to AML compliance teams if red flags persist.

According to the Financial Action Task Force (FATF) 40 Recommendations, financial institutions should obtain senior management approval before establishing new correspondent banking relationships1. This is to ensure that the financial institution has assessed the money laundering and terrorist financing risks associated with the respondent institution and has applied appropriate due diligence measures. The FATF also requires financial institutions to gather sufficient information about the respondent institution, its business activities, its reputation, its supervision, and its anti-money laundering and counter-terrorist financing policies and procedures1. Additionally, the FATF recommends that financial institutions document the respective responsibilities of each institution and prevent the use of their accounts by shell banks1.

1: Guidance on Correspondent Banking Services, FATF, 2016

The most important consideration when deciding whether to recommend closing the account is the institution’s anti-money laundering policy. This is because the policy should provide clear and consistent criteria for account closure decisions, based on the risk assessment, the nature and severity of the suspicious activity, the customer due diligence information, and the legal and regulatory obligations of the institution. The policy should also ensure that the account closure process is independent, objective, and transparent, and that it does not compromise the confidentiality of the suspicious transaction report or the investigation.

=

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 5, Section 5.4.2, page 1971

ACAMS CAMS Certification Video Training Course, Module 5, Lesson 5.4, video time 9:00-10:302

ACAMS CAMS Certification Practice Exam, Question 145, page 2863

According to the Financial Action Task Force (FATF), financial institutions should apply a risk-based approach to customer due diligence (CDD), which includes obtaining and updating information on the identity, beneficial ownership, and business activities of their clients. If a client refuses to provide or update such information, or provides false or misleading information, the financial institution should consider this as a red flag for potential money laundering or terrorist financing, and should exit the relationship with the client, unless the circumstances warrant otherwise. Exiting the relationship with a client who refuses to update information is also consistent with the FATF’s Recommendation 10, which requires financial institutions to terminate the business relationship if they are unable to perform CDD measures.

The threat of US sanctions against foreign individuals and entities continues to exist despite the absence of a US nexus. This is stated in the Certified Anti-Money Laundering Specialist (the 6th edition) manual on page 591, which states: “It is important to note that the threat of US sanctions against foreign individuals and entities continues to exist even when there is no direct US nexus (i.e., no US persons or assets involved).”

In situations involving significant AML concerns, especially with high-risk clients, thecompliance officer must follow proper escalation procedureswithin the institution. The appropriate course of action is toescalate the matter to a senior governance body, such as ahigh-risk client committee, which is typically tasked with balancing AML risk against business considerations.

Unilateral offboarding (Option B)may violate internal protocols.

Persuading the relationship manager (Option C)bypasses formal governance.

Delaying action (Option D)risks further exposure to regulatory or reputational damage.

This escalation ensuresdocumented risk-based decision-makingand demonstrates to regulators that the institution appliesstructured and objective AML governance.

Money laundering through capital marketsoften involvespump-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 marketto inflate stock prices artificially before selling off shares for a profit.

Option B (Incorrect):A gradual decline in trading volume and price does not indicate suspicious activity related to money laundering.

Option C (Incorrect):An increase in demand for ETFs is common and not necessarily linked to money laundering.

Option D (Incorrect):Holding securities in one specific emerging market may indicate a geographic investment strategy, not necessarily money laundering.

Common Money Laundering Typologies in Capital Markets:

Pump-and-Dump Schemes– Fraudulently inflating stock prices to cash out illicit funds.

Wash Trading– Conductingself-tradesto create an illusion of high market activity.

Layering Funds Through Rapid Trading– Engaging infrequent buy-and-sell ordersto obfuscate the origin of funds.

Best Practices for AML in Capital Markets:

Monitor unusual trading volume and price fluctuations.

Use AI-driven surveillance systems to detect manipulative behavior.

Investigate transactions involving offshore brokers or shell entities.

The Wolfsberg Group is an association of thirteen global banks that aims to develop guidance and standards for the management of financial crime risks. The Group has issued a number of documents since its inception to provide financial institutions with an industry perspective on effective financial crime risk management.

A risk-based compliance program is one that identifies and prioritizes the highest compliance risks to the FI and implements controls, policies and procedures to mitigate them. A data-based option is the most suitable for a risk-based compliance program, as it allows the FI to collect, analyze and monitor relevant data on its customers, transactions, products, services, geographies and other risk factors. A data-based option also enables the FI to measure the effectiveness of its compliance program and adjust it as needed to respond to changing risks and regulatory expectations12.

1: Risk-Based Approach to Compliance Management2

2: A Risk-Based Approach to Regulatory Compliance1

Terrorist financing can be facilitated on gaming platforms particularly through the trading of in-game items for fiat currency. This mechanism allows for the movement of value outside the formal financial system, potentially evading detection and reporting requirements.

“One of the key ML/TF risks in online gaming is the ability to convert virtual assets or in-game items into real-world (fiat) currency, thereby providing a channel for laundering money or funding terrorist activities.”

(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing; FATF, Virtual Assets Guidance 2019)

Incorrect Options:

A: Buying in-game items with in-game currency does not in itself facilitate terrorist financing.

B: Exchanging items between players may be a step in layering but is not direct TF unless items are traded for fiat.

D: Obtaining items by in-game activity is standard gameplay and not a TF method.

A compliance officer should consider the following three factors as part of the approach to implement an enterprise-wide anti-money laundering program for a bank that operates in multiple countries:

The types of customers serviced by the bank: Different types of customers may pose different levels of money laundering risk, depending on their nature, source of funds, geographic location, transaction patterns, and other factors. A compliance officer should identify and assess the money laundering risk associated with each customer type and segment, and apply appropriate due diligence measures, monitoring systems, and risk mitigation strategies accordingly12.

The extent of anti-money laundering regulations in the various countries: A compliance officer should be aware of the legal and regulatory requirements and expectations for anti-money laundering compliance in each country where the bank operates, and ensure that the bank’s policies and procedures are consistent with them. A compliance officer should also monitor any changes or updates in the anti-money laundering laws and regulations in the various countries, and adjust the bank’s program accordingly34.

The anti-money laundering risk posed by the products and services offered by the bank: Different products and services may have different features and functionalities that could be exploited by money launderers, such as anonymity, cross-border transfers, cash transactions,complex structures, or new technologies. A compliance officer should evaluate the money laundering risk associated with each product and service offered by the bank, and implement appropriate controls, safeguards, and oversight mechanisms to prevent and detect money laundering activities5 .

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 2: Risk Assessments

2: FATF, Guidance for a Risk-Based Approach: The Banking Sector

3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT)

4: Deloitte, AML Program Effectiveness Reform

5: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4: AML Program Design

[6]: OCC, Money Laundering: A Banker’s Guide to Avoiding Problems

A comprehensive risk analysis is the first and most important step in developing an effective anti-money laundering program. A risk analysis helps a financial institution identify and assess its exposure to money laundering and terrorist financing risks, based on its products, services, customers, geographic locations, and other factors. A risk analysis also enables a financial institution to tailor its policies, procedures, controls, and training to mitigate the specific risks it faces. A risk analysis should be conducted periodically and updated as necessary to reflect changes in the institution’s risk profile.

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.1: Risk-Based Approach, p. 29-30

ACAMS Risk Assessment, What is Anti-Money Laundering (AML) Risk Assessment?

How to Conduct an AML Risk Assessment - Assess Key Risk Drivers

According to the CAMS Certification Package - 6th Edition1, the decision to keep or close an account after filing a suspicious transaction report (STR) should be based on a risk-based approach that considers the nature and severity of the suspicious activity, the customer profile and relationship, the regulatory and legal obligations, and the reputational and operational risks for the institution. The financial impact, the administrativecosts, and the number of accounts closed are not the primary factors in determining the appropriate course of action. Therefore, the correct answer is B. Procedures to ascertain the potential risk to the organization.

CAMS Certification Package - 6th Edition1, Chapter 5: Risk Management, Section: Account Closure, pp. 211-212.

B: When a subpoena is received, the institution should first consult with legal counsel to ensure the validity and scope of the subpoena. Compliance with law enforcement requests is mandatory and subject to strict legal obligations. All documentation and responses should be properly recorded.

“A subpoena requires a legal response; consult legal counsel to validate the request and respond as required by law.”

FinCEN 314(b) information-sharing requests are voluntary and can proceed only after fulfilling required legal steps, such as verifying membership in the program and ensuring information-sharing agreements are in place.

CAMS 6th Edition clarifies that “under no circumstances should a customer be notified of a law enforcement inquiry or subpoena.”

An effective anti-money laundering training program should include real-life money laundering examples to illustrate the concepts and strategies for detecting and preventing money-laundering activity. Real-life examples can help employees to understand the risks, methods, indicators, and impacts of money laundering, as well as the roles and responsibilities of different staff members in combating it. Real-life examples can also enhance the engagement, retention, and application of the knowledge gained from the training program.

= The main references for this question are the following sources:

The document titled “Anti-Money Laundering Awareness Training” published by ACAMS. You can access it by clicking here. This document states that “ACAMS AML General Awareness Training equips employees with knowledge of basic anti-money laundering (AML) principles” and that it is “based on real-life industry scenarios with interactive content to help learning stick”.

The document titled “Anti-Money Laundering (AML) Training” published by LIMRA. You can access it by clicking here. This document states that “LIMRA’s AML training program provides training for insurance and securities producers and home office employees” and that it “uses real-life scenarios to help learners understand how to apply AML principles to their everyday work”.

it describes the word “certification” as a written representation by a respondent bank, certifying that they do not do business with shell banks. This is one of the requirements for correspondent accounts in the USA PATRIOT Act, which is a law enacted in 2001 to enhance the anti-money laundering and counter-terrorist financing (AML/CTF) measures in the United States. The USA PATRIOT Act requires that correspondent banks, which are banks that provide services to other banks, such as clearing, settlement, or cash management, to obtain a certification from their respondent banks, which are banks that receive services from correspondent banks, to ensure that they are not involved in money laundering or terrorist financing activities. One of the elements of the certification is that the respondent bank does not do business with shell banks, which are banks that have no physical presence or meaningful supervision in any jurisdiction, and are often used by money launderers and other criminals to hide their identity and funds.

The other options are not necessarily the word “certification” as a written representation by a respondent bank under the USA PATRIOT Act, although they may have some relevance or importance depending on the circumstances and the nature of the correspondent relationship. Option A describes a possible certification by a federal receiver, which is a person appointed by a court to take custody and control of the assets of a failed bank, but this is not related to the correspondent accounts requirements in the USA PATRIOT Act. Option B describes a possible certification by a respondent bank, certifying that they do not do business with politically exposed persons (PEPs), which are individuals who hold or have held prominent public positions or their close associates or family members, and who may pose a higher risk of money laundering or corruption, but this is not a mandatory element of the certification under the USA PATRIOT Act, although itmay be a good practice or a risk-based measure. Option C describes a possible certification by a correspondent bank, certifying that they do not open correspondent accounts for alternative remittance companies, which are businesses that provide money transfer or payment services outside the formal banking system, and which may pose a higher risk of money laundering or terrorist financing, but this is not a requirement for the respondent bank under the USA PATRIOT Act, although it may be a regulatory obligation or a risk-based measure for the correspondent bank.

ACAMS CAMS Certification Video Training Course - 6th Edition1

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)2

ACAMS CAMS Study Guide - 6th Edition, Chapter 7, pages 156-157

https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-7.pdf

The Office of Foreign Assets Control (OFAC) administers and enforces economic sanctions programs [1][2], which are designed to protect US national security, foreign policy, and economic interests. Transactions that would otherwise be prohibited can be allowed through an OFAC licensing process, in which the OFAC evaluates the request to determine that the transaction does not undermine US policy objectives.

 A free-look provision is a period of time, typically 10 to 30 days, in which a new life insurance policy owner can terminate the policy and have their premium refunded1. This can help criminals to launder money by purchasing a policy with illicit funds and then cancelling it within the free-look period to receive a clean check from the insurance company2. This way, they can disguise the source and origin of their funds and avoid any penalties or charges that would otherwise apply to early termination of the policy.

1: Investopedia, What Is a Free Look Period and How Does It Work?

2: FinCEN, Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Insurance Companies

A sound Customer Due Diligence Program (CDD) is a key component of an effective anti-money laundering and counter-terrorism financing (AML/CFT) framework. According to the Financial Action Task Force (FATF), the global standard-setter for AML/CFT, CDD involves the following elements1:

Identifying the customer and verifying their identity using reliable, independent sources of information or documents.

Identifying the beneficial owner and taking reasonable measures to verify their identity, so that the financial institution understands who ultimately owns or controls the customer or the funds.

Understanding and obtaining information on the purpose and intended nature of the business relationship.

Conducting ongoing due diligence on the business relationship and scrutinizing transactions to ensure that they are consistent with the financial institution’s knowledge of the customer, their business and risk profile, and the source of funds.

Therefore, the three elements of a sound CDD program that are listed in the question are:

Determination of what type of customer the financial institution will accept: This involves defining the customer acceptance policy and risk appetite of the financial institution, and applying appropriate risk-based measures to accept or reject customers based on their risk profile and the financial institution’s ability to manage and mitigate those risks2.

Training as to how and to what extent to identify prospective customers: This involves providing adequate and regular training to the staff who are responsible for conducting CDD, and ensuring that they are aware of the legal and regulatory requirements, the internal policies and procedures, the risk indicators, the verification methods, and the reporting obligations3.

Obtaining date of birth and address of a prospective customer: This is part of the basic information that is required to identify and verify the customer’s identity, and to establish their risk profile and the source of funds. The date of birth and address can also be used to check against various databases and watchlists to detect any potential matches with sanctioned or high-risk individuals or entities4.

The element that is not part of a sound CDD program is:

Determination of who in the institution should be assigned to the prospective customer as a liaison: This is not a mandatory or essential element of CDD, although it may be a good practice to assign a dedicated relationship manager or contact person to each customer, especially for high-risk or complex customers, to ensure effective communication, monitoring, and service delivery.

FATF Guidance on Customer Due Diligence and Financial Inclusion 1

ACAMS Study Guide for the CAMS Certification Examination (6th Edition), Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) 2

ACAMS Study Guide for the CAMS Certification Examination (6th Edition), Chapter 4: Developing an AML/CFT Program 3

ACAMS Study Guide for the CAMS Certification Examination (6th Edition), Chapter 5: Conducting and Supporting the Investigation Process 4

Wolfsberg Group Guidance on Customer Due Diligence (CDD)

TheBasel Committee on Banking Supervision (BCBS)setsglobal standards for bank governanceand states that theBoard of Directors plays a critical rolein AML oversight.

Option D (Correct):The Board is responsible for:

Establishing and approving the AML compliance function.

Ensuring the compliance function has adequate authority and resources.

Overseeing risk management efforts and policies.

Option A (Incorrect):The Board should be actively involved, not just informed when required.

Option B (Incorrect):The compliance function must have direct access to the Boardto ensure independent oversight.

Option C (Incorrect):The Board must be involved in policy establishmentfor effective compliance management.

Why Board Oversight is Critical:

Ensures effective AML governance and accountability.

Reduces regulatory risks and potential financial penalties.

Strengthens financial institution stability and reputation.

Best Practices for Board Oversight in AML Governance:

Establish independent compliance reporting lines to the Board.

Ensure regular AML risk assessments and policy reviews.

Mandate regular AML training for senior management.

 The correct answer is C because the European Union Money Laundering Directives require lawyers and other independent legal professionals to report suspicious transactions to the competent authority when they are involved in certain activities on behalf of their clients, such as creating or managing companies, trusts, or other legal arrangements. The directives also provide that the obligation to report overrides any professional secrecy or confidentiality rules, except when the lawyer is ascertaining the legal position of the client or representing the client in legal proceedings or in connection with such proceedings. Therefore, the lawyer in this scenario should report the activity as suspicious to the competent authority, as creating a financial holding company for the client falls within the scope of the reporting obligation and does not qualify for the exemption12

=

1: ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 4, page 141

2: Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, Article 33 and 34

 New business products should be evaluated for AML concerns before they are launched into the market. This is because new products may introduce new risks or vulnerabilities that could be exploited by money launderers or terrorist financiers. By conducting a pre-launch assessment, a financial institution can identify and mitigate these risks, design appropriate controls and procedures, and ensure compliance with the relevant laws and regulations. A pre-launch assessment can also help a financial institutionto align its AML strategy with its business objectives, and avoid potential reputational damage or regulatory sanctions.

9 Things to Consider When Evaluating an AML Solution

CAMS Study Guide 6th Edition, page 38.

Effective AML programs promote aculture of compliance, which includes an environment where staff are empowered to raise concerns, challenge decisions, and continuously improve through cross-functional learning.Providing effective challengeis a supervisory expectation and best practice in institutions that value AML governance integrity.

While AML officer authority (option B) supports oversight, it is not as impactful on daily operational effectiveness as fostering a challenging and adaptive compliance culture.

A corporate account opened on behalf of several beneficial owners is a red flag because it may indicate an attempt to conceal the identity or source of funds of the ultimate beneficiaries1. The customer’s stated investment goal of long-term investment is not reflective of the account activity, which involves frequent and large transfers, currency exchanges, and account depletion within a short period of time. This discrepancy may suggest that the customer is using the account for money laundering or other illicit purposes2.

= 1: ACAMS CAMS Certification Video Training Course - Exam-Labs, Module 3, Lesson 4, Topic: Corporate Accounts 2: ACAMS CAMS Certification Video Training Course - Exam-Labs, Module 3, Lesson 4, Topic: Customer Profile and Account Activity

Wire transfer requests initiated by phone and internet should be included in the review of the customer’s activity, as they may indicate a higher risk of fraud, identity theft, or money laundering. Phone and internet wire transfers are more vulnerable to cyberattacks, phishing, or social engineering, and may bypass some of the verification and authentication procedures that are applied to in-person or paper-based requests. Therefore, the compliance officer should monitor these requests for any signs of unusual or suspicious activity, such as changes in beneficiary, amount, frequency, or destination of the wires.

ACAMS CAMS Certification Study Guide, 6th Edition, page 41

ACAMS CAMS Certification Exam Outline, 6th Edition, Domain 2, Task 2.1

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.1

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 325

Bank A should file a suspicious transaction report (STR) on the transaction in Country A, as it is the financial institution that observes and processes the suspicious activity in its jurisdiction. According to the FATF Recommendations, financial institutions should report any transaction that they have reason to suspect is related to money laundering, terrorist financing, or other criminal activities, regardless of the amount involved1. The STR should include information about the originator, the beneficiary, and the purpose of the transaction, as well as the reasons for suspicion2. Bank A should also comply with any legal or regulatory requirements in Country A regarding the reporting of cross-border wire transfers3.

1: FATF Recommendation 20 - Reporting of suspicious transactions

2: FATF Interpretive Note to Recommendation 20

3: FATF Recommendation 16 - Wire transfers

 According to the ACAMS CAMS Certification Study Guide (6th edition), a financial institution (FI) should update its ML/TF risk assessment when there are changes in its business activities, customer base, or operating environment that may affect its exposure to ML/TF risks1 Some examples of such changes are:

When new products, services or customer types are introduced: New products, services or customer types may introduce new or increased ML/TF risks that the FI may not have previously considered or addressed. For example, offering online banking, prepaid cards, or cross-border remittances may create new opportunities for money launderers or terrorist financiers to exploit the FI’s systems and processes. Therefore, the FI should assess the ML/TF risks associated with the new products, services or customer types and implement appropriate controls to mitigate them12

When the institution faces a merger or acquisition: A merger or acquisition may result in the FI inheriting the ML/TF risks of the other entity, as well as the potential liabilities and reputational damage that may arise from any ML/TF issues or violations. Therefore, the FI should conduct a due diligence on the other entity’s ML/TF risk assessment, policies, procedures, and controls, and identify any gaps or weaknesses that need to be addressed. The FI should also integrate and harmonize the ML/TF risk assessment and compliance programs of the merged or acquired entity with its own13

 1: ACAMS CAMS Certification Study Guide (6th edition), page 32. 2: Money laundering/terrorism financing risk assessment | AUSTRAC4 3: MONEY LAUNDERING & TERRORIST FINANCING (ML/TF) RISK ASSESSMENT METHODOLOGY5, page 4.

According to the CDD Rule, covered financial institutions must establish and maintain written procedures that are reasonably designed to identify and verify beneficial owners of legal entity customers and to include such procedures in their anti-money laundering compliance program1. These procedures should also be updated as necessary to reflect changes in the law or the institution’s risk profile2. Moreover, the institution should provide adequate training to its employees on the new requirements and monitor their compliance3.

1: FinCEN Guidance, FIN-2020-G002, August 3, 2020, p. 1

2: Your responsibilities under money laundering supervision - GOV.UK, Section: Customer due diligence requirements

3: Customer identification: Know your customer (KYC) | AUSTRAC, Section: Training and awareness

According to the Certified Anti-Money Laundering Specialist (CAMS) study guide, 6th edition, page 105, the correct answer is C. It can be difficult to determine if there is negative media associated with counterparties solely from the customer's account activity and KYC file.

The study guide explains that negative media can include news articles, government sanctions lists, and other sources of public information that may indicate that a counterparty is involved in illicit activities. However, this information may not be readily available in a customer's account activity or KYC file, and may require additional research or investigation.

According to the third European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing1, Member States may allow the identity verification of the beneficiary under the policy to be carried out at or before the time of payout or before the beneficiary intends to exercise rights vested under the policy, provided that the following conditions are met:

the beneficiary is identified as a natural or legal person or a legal arrangement, and the verification of the identity is not possible earlier, due to the nature of the product or the transaction;

there is a low risk of money laundering or terrorist financing, taking into account the type of policy, the product features, the premium amount, and the distribution channel;

the Member States adopt appropriate risk-sensitive measures to prevent the misuse of the policy during the life of the relationship.

This provision is intended to accommodate the specificities of the life insurance sector, where the beneficiary may not be known at the time of the conclusion of the contract, or may change during the life of the policy. However, the Directive also requires that the identity verification of the beneficiary is carried out as soon as possible after the establishment of the business relationship, and that the insurance undertaking applies enhanced customer due diligence measures when the beneficiary is a politically exposed person.

1: Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309, 25.11.2005, p. 15) 2

The compliance officer should perform the first step of reviewing the institution’s risk assessment before implementing any changes to the customer onboarding program. The risk assessment is a key component of the AML compliance program, as it identifies and measures the institution’s exposure to money laundering and terrorist financingrisks. The risk assessment should be updated regularly and reflect the institution’s products, services, customers, geographic locations, and delivery channels. By reviewing the risk assessment, the compliance officer can determine the adequacy and effectiveness of the current customer onboarding program and identify any gaps or weaknesses that need to be addressed. The compliance officer can also benchmark the institution’s risk assessment against the regulatory expectations and best practices in the industry.

The other steps are also important, but they should be performed after the risk assessment review. Revising training materials for frontline staff, conducting enhanced due diligence on high risk customers, and resolving substantive discrepancies in customer verification are all part of the customer onboarding program, but they depend on the risk assessment to provide the appropriate level of controls and procedures. For example, the training materials should reflect the risk assessment results and the revised customer onboarding policies. The enhanced due diligence should be applied to customers who pose a higher risk according to the risk assessment criteria. The customer verification should be consistent with the risk assessment and the customer identification program.

AML KYC Onboarding Lifecycle Process Flow | Guide – AdvisoryHQ

New EBA AML Guidelines on the use of Remote Customer Onboarding Solutions - Bird & Bird

KYC Onboarding Process 2023 - AML requirements - Sumsub

Review of any AML/CFT program begins with the Risk Based Approached. It should first check the internal system to identify risk factors and design program accordingly.

Cryptoassets, such as cryptocurrencies, pose specific ML/TF risks due to their technological characteristics and usage patterns:

Potential for anonymity (C): Cryptoassets allow users to make transactions without revealing their true identities, which hinders law enforcement from tracking illicit activity. The CAMS 6th Edition states:“Cryptoassets can be transferred or exchanged between users without the need for identification, presenting a significant risk due to the potential for anonymity.”(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing, Virtual Assets section)

Global reach (D): Cryptoassets operate on a global scale, enabling rapid cross-border transfers without the limitations of traditional financial systems. This increases the complexity of monitoring and controlling illicit transactions.“The global nature of virtual assets makes it easy for criminals to move value across borders quickly, evading jurisdictional controls.”(CAMS 6th Edition; FATF Guidance on Virtual Assets 2019)

Use to layer illicit funds (F): The ability to move cryptoassets between numerous wallets and exchanges allows criminals to obscure the source of funds through layering, a key stage of money laundering.“Layering can be achieved by rapidly moving cryptoassets between wallets, exchanges, and across different jurisdictions, making tracing more difficult.”(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing)

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the best practices for conducting an internal investigation is to request formal company authorization to conduct the investigation. Such authorization should be granted, if possible, by the board of directors or audit committee, as this will help to establish the independence and legitimacy of the investigation, as well as the protection of the attorney-client privilege and the work product doctrine1. The other options are incorrect because:

B. Refusing to provide any records or documents to law enforcement may be seen as obstructing justice or violating regulatory obligations, and may also result in the loss of the privilege or the imposition of sanctions or penalties23.

C. Letting the bank hire any and all contract investigators may compromise the quality and integrity of the investigation, as well as the protection of the privilege or the work product doctrine, as the investigators may not be properly supervised or instructed by legal counsel, or may not be covered by the Kovel doctrine45.

D. Not marking files or documents with privileged and confidential: attorney-client privilege and/or work-product may undermine the claim of the privilege or the work product doctrine, as it may indicate that the materials were not prepared for the purpose of seeking or providing legal advice or in anticipation of litigation, or that they were not intended to be kept confidential67.

1: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

2: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 151

3: Perkins Coie, Protecting Internal Investigation Materials From Disclosure, Updates, August 10, 2020

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

5: Eversheds Sutherland, Legal privilege of corporate internal investigations under US law - 2019 caselaw update, JDSupra, December 20, 2019

6: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

7: Norton Rose Fulbright, Internal investigations: when does privilege apply?, Global law firm, September 11, 2018

Section 313 of the USA PATRIOT Act prohibits U.S. financial institutions from establishing, maintaining, administrating or managing correspondent accounts for foreign shell banks. A foreign shell bank is a foreign bank that does not have a physical presence in any country. To ensure compliance with this prohibition, U.S. financial institutions must obtain from each foreign bank that maintains a correspondent account the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest. This information must be updated within 30 days of any change.

USA PATRIOT Act | FinCEN.gov, Section 313

US PATRIOT ACT | State Street

The primary consideration the institution should keep in mind when deciding whether to agree to the law enforcement request is whether the institution can continue to meet its regulatory obligations with the accounts open. This is because the institution has a duty to comply with the applicable laws and regulations, and to protect its reputation and integrity from being associated with money laundering or terrorist financing. The institution should assess the risks and benefits of keeping the account open, and consult with its legal counsel and senior management before making a decision. The institution should also document itsdecision and the rationale behind it, and communicate it to the law enforcement agency12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 7: Conducting or Supporting the Investigation Process, p. 143-144 2: FATF Guidance: Anti-Money Laundering and Terrorist Financing Measures and Financial Inclusion, February 2013, p. 50-51, http://www.fatf-gafi.org/media/fatf/documents/reports/AML_CFT_Measures_and_Financial_Inclusion_2013.pdf

 The most appropriate step for an AML compliance officer to take upon receiving notice of government update including the names of the latest terrorists sanctioned by the United Nations Security Council is to update the monitoring software containing sanctioned persons. This is because the AML compliance officer is responsible for ensuring that the financial institution does not engage in any transactions or business relationships with individuals or entities that are subject to sanctions, as this could expose the institution to legal, regulatory, and reputational risks. By updating the monitoring software, the AML compliance officer can ensure that the institution’s screening and filtering systems are up to date and can flag any potential matches or hits with the sanctioned persons. This would also enable the AML compliance officer to take appropriate actions, such as blocking or freezing funds, reporting to the relevant authorities, and conducting further due diligence, if necessary.

Anti-Money Laundering (AML) | FINRA.org, Overview.

AML Compliance Officer and Their Responsibilities - Tookitaki, Role and Responsibilities of an AML Compliance Officer.

What is an AML Compliance Officer? - Sanction Scanner, Communicate openly with the company’s internal management team.

Guidance on Existing AML Program Rule Compliance … - FinCEN.gov, Financial Institutions Toll-Free Hotline.

1. Tax Compliance: Banks have a responsibility to ensure that their clients comply with tax regulations. If a client fails to provide evidence of tax compliance or is unwilling to do so, the bank may terminate the relationship to avoid legal and regulatory risks.

2. Reputational Risk: High-profile clients with extremist political views can create reputational risks for the bank. If the client’s political activities or views could harm the bank’s reputation, the bank may choose to terminate the relationship.

A (ISO): Ensures information security controls are aligned with AFC efforts, protecting sensitive data and reducing the risk of cyber-enabled financial crime.

D (DPO): Helps ensure compliance with data privacy laws and enables secure, lawful information-sharing for AML purposes.

“Collaboration with the ISO and DPO is critical to maintaining data security and privacy within AFC compliance frameworks.”(CAMS 6th Edition, Governance and Cross-Functional Collaboration)

Many jurisdictions lack robust sanctions frameworks, requiring international cooperation and education to improve compliance.

Option B (Correct):Educational initiatives such as AML/sanctions training and workshops help raise awareness and build capacity.

Option D (Correct):Bilateral cooperation allows knowledge-sharing and technical assistance between regulatory authorities.

Why Other Options Are Incorrect:

Option A (Incorrect):Trade restrictions may pressure non-compliant nations, but they do not directly improve sanctions awareness.

Option C (Incorrect):Enforcing fines without prior education or assistance is ineffective and may create diplomatic tensions.

Best Practices for Sanctions Awareness & Compliance:

Develop international AML/sanctions training programs for emerging markets.

Encourage diplomatic engagement to strengthen legal frameworks.

Leverage FATF’s Mutual Evaluation process to assess progress.

The first Financial Action Task Force (FATF) initiative was the 40 Recommendations on Money Laundering, which were issued in April 1990, less than a year after the FATF was established by the G7 summit in Paris in 1989. The 40 Recommendations aimed to provide a comprehensive plan of action to fight money laundering by setting out the principles and measures for effective legal, regulatory, and operational frameworks at the national and international levels. The 40 Recommendations have been revised and updated several times since then, most recently in 2022, to reflect the evolving trends and techniques of money laundering and to include the issues of terrorist financing and the financing of proliferation of weapons of mass destruction.

The other options are not the first FATF initiative, but they are related to the FATF’s work and mandate. The Report on Non-Cooperative Countries and Territories (NCCTs) was launched in 2000 to identify and monitor the jurisdictions that did not comply with the FATF standards and posed a risk to the international financial system. The Report on Money Laundering Typologies was first published in 1996 and has been updated annually to provide an analysis of the methods, techniques, and trends of money launderingand to assist the FATF members and observers in developing effective countermeasures. The Special Recommendations on Terrorist Financing were issued in October 2001, following the September 11 attacks, to complement the 40 Recommendations and to address the specific challenges of combating the financing of terrorism and terrorist acts.

History of the FATF, 1

Financial Action Task Force - Wikipedia, 2

Financial Action Task Force (FATF): What it is, How it Works - Investopedia, 3

The FINANCIAL ACTION TASK FORCE (FATF) - INSIGHTSIAS, 4

According to the Basel Committee on Banking Supervisionprinciples, one of the core principles for effective banking supervision is that the supervisor determines that banks have adequate policies and processes for identifying, assessing and managing the risk and impact of exposures to and transactions with related parties, and that these policies and processes are effectively implemented1. Failure to conduct proper due diligence on a close relative of a senior manager who requests to open an account posesthe highest operational risk, as it could result in conflicts of interest, reputational damage, legal liability, or financial losses for the bank. The other options are not necessarily the highest operational risk, as they depend on the nature and extent of the relationship, the type and size of the account, and the regulatory and legal framework of the jurisdiction.

 1 Core principles for effective banking supervision, Principle 20.

Failure to report suspected fraud activity is a serious breach of the anti-money laundering (AML) and anti-fraud obligations of a financial institution (FI). It could expose the FI to legal risks, such as civil lawsuits, criminal prosecutions, regulatory sanctions, and reputational damage. One possible legal risk is that the FI could be held liable for the losses suffered by the victims of the fraudster, either by the victims themselves or by a third party acting on their behalf, such as a government agency or a class action representative. This could result in significant financial costs and damages for the FI, as well as loss of trust and confidence from its customers and stakeholders.

1: This web article explains what a suspicious activity report (SAR) is, who regulates it, when it is required, and what are the consequences of failing to file it.

2: This guide provides information on how to make a SAR, what to include, how to request a defence against money laundering (DAML), and what happens if you fail to report suspicious activity.

3: This blog post discusses the legal implications of not reporting an alleged crime, such as fraud, and gives examples of cases where individuals or entities were prosecuted or sued for their failure to report.

AML compliancemust balance financial crime prevention with data privacy regulationssuch asGDPR (EU) and CCPA (U.S.).

Option B (Correct):Data minimization ensures that only essential data is collected and processed, reducing privacy risks.

Option C (Correct):Regularly updating policies helps organizations align with evolving privacy laws and AML requirements.

Why Other Options Are Incorrect:

Option A (Incorrect):Unrestricted access to customer data increases the risk of data breaches and privacy violations.

Option D (Incorrect):Repurposing data beyond AML purposescan violatedata protection laws (e.g., GDPR's purpose limitation principle).

Key Data Privacy Considerations for AML Compliance:

Data minimization:Only collect data necessary for risk assessment.

Access controls:Limit employee access to customer data based on job role.

Transparency:Inform customers about how their data is used for AML compliance.

 The compliance officer should provide a high level summary of the activity and the interactions with law enforcement to the board of directors, as this would be the most appropriate way to escalate the information without compromising the confidentiality of the STR or the ongoing investigation. Providing a copy of the STR or the letter from law enforcement could expose the bank to legal risks or jeopardize the investigation. Informing the regulator to bring it up with the board would not be sufficient, as the compliance officer has the responsibility to report directly to the board on significant compliance issues.

ACAMS CAMS Certification Video Training Course, Module 5: Risk Management, Lesson 5.3: Reporting to Senior Management and the Board1

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 5: Risk Management, Section 5.3:Reporting to Senior Management and the Board2

Mutual Legal Assistance (MLA) is a form of cooperation between different countries for the purpose of collecting and exchanging information and evidence in criminal matters. MLA is usually governed by bilateral or multilateral treaties that establish the procedures and requirements for requesting and providing assistance. The first valid step in the MLA process is to send a formal request from the central authority of the requesting country to the central authority of the requested country. The central authority is the designated entity that is responsible for making, receiving, and facilitating the execution of MLA requests. The request should contain the necessary information and documents to enable the requested country to assess and execute the request, such as the nature and purpose of the request, the legal basis, the description of the assistance sought, the identity of the persons involved, the applicable legal provisions, and the deadline for the response. The request may also be accompanied by a commission letter of request, which is a judicial document that authorizes a foreign authority to perform certain acts on behalf of the requesting authority, such as taking evidence or statements from witnesses or suspects.

Guidelines on Mutual Legal Assistance in Criminal Matters, Section 1.1, 1.2, 1.3, 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.18, 2.19, 2.20, 2.21, 2.22, 2.23, 2.24, 2.25, 2.26, 2.27, 2.28, 2.29, 2.30, 2.31, 2.32, 2.33, 2.34, 2.35, 2.36, 2.37, 2.38, 2.39, 2.40, 2.41, 2.42, 2.43, 2.44, 2.45, 2.46, 2.47, 2.48, 2.49, 2.50, 2.51, 2.52, 2.53, 2.54, 2.55, 2.56, 2.57, 2.58, 2.59, 2.60, 2.61, 2.62, 2.63, 2.64, 2.65, 2.66, 2.67, 2.68, 2.69, 2.70, 2.71, 2.72, 2.73, 2.74, 2.75, 2.76, 2.77, 2.78, 2.79, 2.80, 2.81, 2.82, 2.83, 2.84, 2.85, 2.86, 2.87, 2.88, 2.89, 2.90, 2.91, 2.92, 2.

Terrorist financing (TF) differs from traditional money laundering, as funds can originate fromlegitimate sources(e.g., donations, charities) and often involvelow-value transactions.

Option A (Correct):Non-profits with no online presencecan beshell organizations used to finance terrorism.

Option C (Correct):Small-dollar payments to high-risk jurisdictions(e.g., FATF-listed countries)may indicate terrorist funding activity.

Why Other Options Are Incorrect:

Option B (Incorrect):Crowdfunding payments with transparency and project detailsare generallylow-risk.

Option D (Incorrect):Charities helping refugeesmay behigh-risk but not automatically suspicious.

Option E (Incorrect):Structuring below reporting thresholds is more indicative of money laundering than terrorist financing.

Red Flags for Terrorist Financing:

Frequent low-value transactions to conflict zones.

Use of charities and non-profits as fronts for terror groups.

Funds moving through unregulated crowdfunding platforms.

Best Practices for Detecting Terrorist Financing:

Identify transactions involving known terrorist financing typologies.

Enhance monitoring of non-profit organizations operating in high-risk regions.

Use negative news screening to detect links to sanctioned entities.

A customer visiting multiple branches of the MSB on the same day in order to transfer funds internationally is a potential indicator of structuring, which is a technique used by money launderers to avoid reporting thresholds or detection by authorities. A customer attempting to buy money orders under $3,000 USD in cash multiple times a day is also apossible sign of structuring, as well as an attempt to evade the identification and recordkeeping requirements for MSBs. Both scenarios should be included in the procedures for further review by the AML Officer.

BSA/AML Risk Assessment for Money Services Businesses (MSBs), section “Risk Factors”, sub-section “Structuring”: “Structuring is the practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by the BSA and/or 31 CFR Chapter X. Structuring is illegal and is often indicative of money laundering or other illicit activity.”

Money Services Business (MSB) — AML Compliance Guide, section “AML Compliance Requirements for MSBs”, sub-section “Identification and Recordkeeping”: “MSBs must verify the identity of any person who conducts a transaction of $3,000 or more. They must also keep records of the transaction, including the name, address, date of birth, and identification number of the customer, as well as the amount, date, and method of payment.”

According to the CAMS manual 6th edition, the USA PATRIOT Act allows the US government to subpoena documents from foreign financial institutions (FIs) that have no presence in the US (option B). The manual states that "The USA PATRIOT Act provides US law enforcement agencies with the power to subpoena documents from foreign banks that maintain correspondent accounts with US banks or have no presence in the United States" (p. 77).

The compliance officer should report the suspicious activity to the Board of Directors, as they are ultimately responsible for the bank’s compliance program and oversight.The Board should be informed of the potential conflict of interest and reputational risk involved in the case, as well as the steps taken by the compliance officer to investigate and file the suspicious transaction report. The compliance officer should not prevent the filing of the report, as this would violate the legal obligations of the bank and expose it to regulatory sanctions and penalties. The compliance officer should not ask the Board member to explain the transaction, as this could compromise the integrity and independence of the investigation and the reporting process. The compliance officer should not maintain standard summary statistical reporting to the Board, as this would not adequately address the seriousness and complexity of the case.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 5, page 1271

ACAMS CAMS Certification Video Training Course, Module 5, Lesson 22

ACAMS CAMS Certification Exam Outline, Domain 5, Task 13

 According to the FATF Recommendation 12, financial institutions should take reasonable measures to determine whether the beneficiaries of a life insurance policy and/or, where required, the beneficial owner of the beneficiary are politically exposed persons. This should occur at the latest at the time of the payout1. The purpose of this requirement is to prevent the abuse of life insurance products for money laundering or terrorist financing by PEPs or their associates. Therefore, the best way to mitigate the risk of adding a beneficiary to a life insurance policy for a foreign PEP is to perform due diligence on the beneficiary, such as verifying their identity, relationship with the PEP, and source of funds2.

The other options are not correct because they either do not comply with the FATF standards, or do not adequately address the risk of adding a beneficiary to a life insurance policy for a foreign PEP. Determining the source of wealth and source of funds is a measure that should be applied to the PEP as the customer, not the beneficiary, as partof the enhanced due diligence process2. Declining the request if the beneficiary is a foreign PEP may not be feasible or proportional, as not all foreign PEPs are involved in money laundering or terrorist financing, and some may have legitimate reasons to add a beneficiary to their life insurance policy. Declining the request to add a beneficiary due to increased risk may also not be feasible or proportional, as it may violate the contractual rights of the PEP as the customer, and may not be necessary if the due diligence on the beneficiary does not reveal any red flags or suspicions.

 https://complyadvantage.com/insights/peps-life-insurance/

https://www.cfatf-gafic.org/index.php/documents/fatf-40r/378-fatf-recommendation-12-politically-exposed-persons

OFAC sanctions apply extraterritoriallyto ensureU.S. financial and economic interests are protected.

Option A (Correct):U.S. citizensmust comply with OFAC sanctionsregardless of where they are located.

Option D (Correct):U.S.-incorporated entities and their foreign branchesare required to followOFAC restrictions.

Option E (Correct):Permanent U.S. resident aliensare subject toOFAC complianceeven outside the U.S.

Option B (Incorrect):Non-U.S. financial institutionsare notdirectly subject to OFACunless they have aU.S. presenceordeal in USD transactions.

Option C (Incorrect):Selling U.S.-origin goods does not automatically subject merchants to OFAC laws, unless they are in asanctioned jurisdiction.

According to the Financial Action Task Force (FATF) Special Recommendation IV, if financial institutions, or other businesses or entities subject to anti-money laundering obligations, suspect or have reasonable grounds to suspect that funds are linked or related to, or are to be used for terrorism, terrorist acts or by terrorist organisations, they should be required to report promptly their suspicions to the competent authorities1. This is consistent with the FATF Recommendation 20, which requires the same reporting obligation for money laundering and the financing of proliferation of weapons of mass destruction2. Reporting suspicious transactions related to terrorism is a key measure to detect, prevent and suppress the financing of terrorism and terrorist acts, and to facilitate international cooperation and information exchange.

1: The FATF Recommendations - Financial Action Task Force

2: IX Special Recommendations - Financial Action Task Force

Undermining the Legitimate Private Sector: One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers are known to use front companies: businesses that appear legitimate and engage in legitimate business but are in fact controlled by criminals who commingle the proceeds of illicit activity with legitimate funds to hide the ill-gotten gains. These front companies have a competitive advantage over legitimate firms as they have access to substantial illicit funds, allowing them to subsidize products and services sold at below market rates. This makes it difficult for legitimate businesses to compete against front companies. Clearly, the management principles of these criminal enterprises are not consistent with traditional free market principles, which results in further negative macroeconomic effects

Suspicious transaction report (STR) information is confidential and should not be disclosed to anyone outside the compliance function or law enforcement authorities. Providing STR information to the credit department could compromise the integrity of the reporting process and expose the institution to legal risks. The compliance officer should decline to provide the STR information to the credit department and explain the reasons for doing so.

CAMS Certification Package - 6th Edition | ACAMS, Chapter 4: Conducting and Supporting the Investigation Process, page 136

CAMS Certifications: How to Get CAMS Certified | ACAMS, Candidate Handbook, page 16

ACAMS CAMS Certification Video Training Course - Exam-Labs, Video 4.3: Suspicious Transaction Reporting

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Practice Test 1,

A customer’s account appears to function as a funnel account whereby cash deposits occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made

The auditor should include the regulatory violation in the audit report and report it to the board of directors. This is because the auditor has the responsibility to report any findings of non-compliance or material weaknesses in the institution’s internal controls, policies, and procedures. The auditor should also provide recommendations for corrective actions and follow-up on their implementation. The board of directors has the ultimate oversight and accountability for the institution’s compliance program and should be informed of any significant issues or risks that may affect the institution’s reputation, operations, or regulatory status12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 6: Developing an Effective Anti-Money Laundering Program, p. 125-126 2: The Wolfsberg Group, The Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, October 2014, p. 7, https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/Wolfsberg-Correspondent-Banking-Principles-2014.pdf

Public-private partnerships (PPPs) are highlighted by FATF, the EU, and CAMS 6th Edition as a key method for improving the fight against financial crime. The main benefit is the sharing of intelligence and typologies between banks, law enforcement, and regulators, enabling more effective detection and prevention of illicit activity.

“PPPs facilitate the exchange of actionable intelligence between public and private sectors, resulting in better detection, investigation, and prevention of financial crime.”

(CAMS 6th Edition, Public-Private Partnerships in AML/CTF)

Incorrect Options:

B: PPPs are not primarily designed to automate information sharing or reduce costs.

C: SARs must always be filed with the FIU; PPPs do not change this.

D: PPPs do not guarantee real-time intelligence, which remains a challenge.

A multinational institution may face challenges in conducting a full investigation of unusual activity across its foreign operations, due to the different legal and regulatory frameworks that apply in each jurisdiction. One of the main obstacles is the local privacy and data protection laws that may restrict the access, transfer, or disclosure of customer information, especially personal or sensitive data, to other entities within the same group or to external parties, such as law enforcement or regulators. Therefore, the institution should be aware of the local laws and regulations that govern the collection, processing, and sharing of customer data, and ensure compliance with them12.

ACAMS Study Guide, 6th Edition, page 191

Which statement about a multinational institution’s ability to fully investigate unusual activity in all its foreign operations is correct? - Exam4Training

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A multinational institution may face challenges in conducting a full investigation of unusual activity across its foreign operations, due to the different legal and regulatory frameworks that apply in each jurisdiction. One of the main obstacles is the local privacy and data protection lawsthat may restrict the access, transfer, or disclosure of customer information, especially personal or sensitive data, to other entities within the same group or to external parties, such as law enforcement or regulators. Therefore, the institution should be aware of the local laws and regulations that govern the collection, processing, and sharing of customer data, and ensure compliance with them12.

 According to the Financial Action Task Force (FATF), a financial institution must take certain steps to fulfill its customer due diligence (CDD) obligations [1][2]. These steps include verifying the customer's identity, understanding the customer's business, and assessing the customer's risk profile. Additionally, the financial institution must verify that the customer is not on any sanction lists, such as the OFAC Specially Designated Nationals list. This step is important to ensure that the financial institution is not doing business with any individuals or entities that are subject to economic sanctions. Other steps include obtaining information on the intended nature of the banking relationship, securing a written declaration from the customer confirming the source of the funds, and identifying shareholders listed on the stock exchange of corporate entities holding fifty percent of the shares.

 Before disclosing any supporting documentation for a suspicious transaction report (STR) to a law enforcement agency, the financial institution should confirm thatthe request is legitimate and authorized by verifying the identity and credentials of the requester1. This is to prevent unauthorized access or misuse of the confidential information by impostors or fraudsters. The other options are not true, as they may either compromise the security, integrity, or timeliness of the disclosure, or violate the confidentiality or privacy rights of the customer.

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 4, p. 117

FATF Guidance: The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing, October 20132, p. 20

Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 20173, p. 11

The line of business is responsible for creating, implementing and maintaining policies and procedures, as well as communicating these to all personnel. It must also establish processes for screening employees to ensure high ethical and professional standards and deliver appropriate training on AML policies and procedures based on roles and functions performed so employees aware of their responsibilities. To facilitate this, employees should be trained as soon as possible after being hired, with refresher training as appropriate.

Customer due diligence (CDD) is a key component of anti-money laundering (AML) and counter-terrorism financing (CTF) compliance. CDD helps financial institutions identify and verify their customers, assess their risk levels, and monitor their transactions for suspicious activity.

One of the main objectives of CDD is to understand the nature and purpose of customer relationships, which involves collecting and analyzing relevant information about the customer’s business activities, expected transaction patterns, source and destination of funds, and beneficial ownership. This information helps financial institutions develop a customer risk profile, which is a tool to measure and manage the risk exposure of each customer.

A customer risk profile reflects the financial institution’s risk appetite, which is the level and type of risk that the institution is willing and able to accept. By comparing the customer’s risk profile with the institution’s risk appetite, the institution can determine if the customer operates in line with the firm’s expectations and requirements for a specific industry segment. For example, if the institution has a low risk appetite for customers involved in high-risk sectors such as gambling, cryptocurrency, or arms trade, it can use the customer risk profile to identify and mitigate any potential risks associated with such customers.

Therefore, to understand if the customer operates in line with the firm’s risk appetite for a specific industry segment, a financial institution must obtain sufficient customer information to understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile.

Banks mustcomply with legal subpoenaswhile ensuring AML compliance.

Option B (Correct):The bank shouldreview client transactionsandrespond fullyto law enforcement.

Option A (Incorrect):Filing a SAR simply because of a subpoenaisnot requiredunless suspicious activity is identified.

Option C (Incorrect):Tipping offthe client about the subpoena isillegalunder AML laws.

Option D (Incorrect):Risk scores should be reviewedbut not automatically adjustedsolely based on a subpoena.

The European Union Money Laundering Directives (AMLDs) are issued periodically by the European Parliament to prevent money laundering and terrorist financing and establish a consistent regulatory environment across the EU1. They apply to all member states of the European Union and require them to enact laws and/or regulations to comply with the directives2. The directives are legally binding and set forth minimum standards and obligations for financial institutions and other entities within the member states3. The directives do not set forth non-binding best practices, but rather harmonize the AML/CFT rules and procedures across the EU4. The directives do not have extraterritorial impact and do not apply to states that have diplomatic relations with member states, unless they are part of the European Economic Area (EEA) or have equivalent AML/CFT regimes5.

 1: Guide to EU Anti Money Laundering Directives (AMLD) - ComplyAdvantage 2: Directive - 2015/849 - EN - Fourth Anti-Money Laundering Directive - EUR-Lex 3: EU context of anti-money laundering and countering the financing of terrorism - European Commission 4: EU Anti-Money Laundering Directives (AMLD) | LSEG - Refinitiv 5: Anti-money laundering and countering the financing of terrorism legislative package - European Commission

The correct next course of action is to request that the new product approval committee include the compliance officer. This is because the compliance officer has the responsibility to ensure that the new financial service complies with the applicable laws, regulations, and standards, and does not pose any undue risks to the institution or its customers. The compliance officer should be involved in the new product development process from the beginning, and provide guidance and feedback on the potential compliance implications and requirements of the new service12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 6: Developing an Effective Anti-Money Laundering Program, p. 121-122 2: FATF Guidance: The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing, October 2013, p. 28, http://www.fatf-gafi.org/media/fatf/documents/reports/Role-of-hawala-and-similar-in-ml-tf.pdf

According to the CAMS Certification Package - 6th Edition1, a financial institution that processes a wire transfer is required to file a suspicious transaction report (STR) in thejurisdiction where it is located, if it detects any red flags or indicators of money laundering, terrorism financing, or other financial crimes. The financial institution does not need to file an STR in the jurisdictions of the originator or the beneficiary of the wire transfer, unless it has a branch or a subsidiary there. Therefore, the correct answer is A. The transaction in Country A.

CAMS Certification Package - 6th Edition1, Chapter 4: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section: Wire Transfers, pp. 161-162.

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 38, one of the steps that a financial institution should take when it suspects money laundering activity is to file a suspicious transaction report (STR) or a suspicious activity report (SAR) to the relevant authorities. This will alert the regulators and law enforcement of the potentialmoney laundering scheme and provide them with valuable information to trace the funds and identify the perpetrators.

Another step that a financial institution should take is to identify any unusual or suspicious wire transfers initiated by casas de cambio to jurisdictions outside of Mexico that bear no apparent business relationship with that casa de cambio. This could indicate that the casas de cambio are involved in layering and integration stages of money laundering, where they are moving the illicit funds across borders and disguising their origin and ownership. The financial institution should monitor and document these wire transfers and report them to the authorities if necessary.

Option B is not a relevant step to trace funds through the bank, as it does not provide any information about the source, destination, or purpose of the funds. A decrease in the sale of large denomination U.S. bank notes to casas de cambio by the bank could be due to various factors, such as market demand, exchange rates, or regulatory changes, and does not necessarily indicate money laundering activity.

Option C is also not a relevant step to trace funds through the bank, as it does not indicate any connection to the suspected money laundering scheme. Deposits by casas de cambio that include third-party items, such as sequentially numbered monetary instruments, could be legitimate transactions that are part of the normal business operations of the casas de cambio. Unless there is evidence that these deposits are related to the sale of large denomination U.S. bank notes or the Mexican syndicate, they are not useful for tracing the funds.

ACAMS Study Guide 6th Edition, Chapter 2, page 38

Combating Money Laundering and Other Forms of Illicit Finance

Sting Operation Snares Casa de Cambio for Allegedly Laundering Millions Through U.S. Banks

Political system changes can have an impact on an organization's AML risk as they can affect the legal and regulatory framework in which the organization operates. For example, changes to the laws or regulations related to AML, or changes in the way in which the government enforces AML regulations, can have an impact on the organization's AML risk by increasing or decreasing the likelihood of it being exposed to AML risk. In addition, changes in the political environment or political stability in a specific jurisdiction can also affect the organization's AML risk.

The Egmont Group is a united body of 174 Financial Intelligence Units (FIUs) that uniquely support national and international efforts to counter terrorist financing and share financial information per global anti-money laundering and counter-financing of terrorism (AML/CFT) standards. Its primary objective is to enhance international cooperation in the investigation and prosecution of money laundering and financing of terrorism. The Egmont Group facilitates the exchange of expertise and financial intelligence among FIUs to combat money laundering, terrorist financing, and associated predicate offenses. While it does not conduct financial investigationsitself, it plays a crucial role in improving stakeholders’ understanding of ML/TF risks and informing policy considerations related to AML/CFT implementation and reforms12.

According to the Financial Action Task Force (FATF) methodology, financial institutions (FIs) are required to consider filing a suspicious activity report (SAR) in situations where they suspect or have reasonable grounds to suspect that funds are the proceeds of criminal activity or related to terrorist financing. One such situation is when a beneficiary of a transaction is a politically exposed person (PEP). PEPs are individuals who hold prominent public positions or have close associations with such individuals. Their involvement in transactions can raise red flags due to the potential risk of corruption, money laundering, or other illicit activities1.

 A financial institution can verify the nature and purpose of a business and its legitimacy by using an independent information verification process, such as by accessing public and private databases. This method can help the financial institution to check the names of businesses against anti-money laundering (AML) watchlists, parse and analyze ownership information to determine beneficial ownership structure, and run the beneficial owners themselves through identity verification and AML watchlist checks1. This can also help the financial institution to comply with the regulatory requirements for customer due diligence (CDD), which include obtaining and analyzing sufficient customer information to understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile2. Other methods, such as reviewing a copy of the corporation’s latest audited reports and accounts, undertaking a company search or other commercial inquiries, or reviewing the company’s website, may not provide sufficient or reliable information to verify the nature and purpose of a business and its legitimacy.

Customer due diligence for banks by the Basel Committee on Banking Supervision, October 2001.

How to Verify Legitimate Businesses and Merchants by Trulioo, March 2021.

According to the Egmont Group and CAMS 6th Edition, PPPs benefit FIUs by:

A: “PPPs help address challenges around data protection and facilitate information sharing between public and private sectors, overcoming common legal barriers.”

B: “PPPs result in higher-quality reports from the private sector and provide valuable additional informational input for FIUs.”

E: “These partnerships give FIUs increased flexibility and agility, allowing them to respond dynamically to evolving ML/TF threats.”(CAMS 6th Edition, Egmont Group Guidance on PPPs; Egmont Group, Public-Private Partnerships for FIUs)

ARisk Appetite Statement (RAS)defines an institution’sacceptable level of risk-takingand alignsAML and financial crime controlswithorganizational strategy.

Option C (Correct):AnRAS sets clear limits for acceptable risk-taking, balancingrisk and business opportunities.

Option D (Correct):The RASis a management-approved documentthat integratesrisk tolerance, compliance strategy, and business goals.

Why Other Options Are Incorrect:

Option A (Incorrect):An RASis not just a reporting document; it actively shapesrisk management decisions.

Option B (Incorrect):An RAS includesboth qualitative and quantitative factors, butnot just qualitative elements.

Option E (Incorrect):An RAS does notonly define residual risk—itguides overall risk limitsand policies.

How an RAS Strengthens AML Compliance:

Defines acceptable AML risk levels across business units.

Guides compliance teams on risk tolerance for high-risk customers.

Ensures alignment with FATF, regulatory expectations, and internal controls.

The individual responsible for setting the anti-money laundering software parameters should recommend ensuring that the alert parameters are based on risk, rather than on default software rules. This means that the software should be configured to generate alerts only when transactions or customers exhibit a high level of risk, based on factors such as the source and destination of funds, the amount and frequency of transactions, the type and purpose of the account, the customer profile and behavior, and the presence of any red flags or indicators of money laundering or terrorist financing. By aligning the alert parameters with the risk assessment of the financial institution, the software can reduce the number of false positives and focus on the most relevant and suspicious cases, thus improving the efficiency and effectiveness of the anti-money laundering staff.

Setting AML Transaction Monitoring Thresholds 1, ComplyAdvantage, 2020.

Machine learning techniques for anti-money laundering (AML) analysis: a survey 2, Springer, 2018.

Anti Money Laundering (AML) Definition: Its History and How It Works 3, Investopedia, 2021.

The red flags that should be considered prior to establishing a relationship with a third party are the lack of anti-corruption compliance clauses in agreements (A) and unusual payment or billing procedures requested by the third party (C). According to the Certified Anti-Money Laundering Specialist (CAMS) Sixth Edition manual, "red flags include, but are not limited to: [...] lack of anti-corruption compliance clauses in agreements (page 330) and unusual payment or billing procedures requested by the third party (page 331)."

The United Nations Security Council (UNSC) is authorized under the UN Charter to imposebinding sanctions measureson member states. These sanctions may target countries, entities, or individuals and can include arms embargoes, travel bans, asset freezes, and restrictions on trade or financial services.

Statement Ais correct:

Circumventing or evading UNSC sanctionsmay constitute a criminal offenseif the jurisdiction has incorporated UN obligations into domestic law. While the UNSC does not directly impose criminal penalties,member states must implement these measures locally, andmany jurisdictions have lawsthat make such violations criminal acts.

Statement Bis incorrect:

The UNSC is empowered toimpose broad restrictions, includingtrade bans beyond arms, such as on luxury goods, fuel, or specific commodities. Therefore, the idea that it cannot prohibit exports beyond arms is inaccurate.

Statement Cis correct:

Member countries of the United Nations are expected to implement and enforce UNSC sanctions, in accordance with their obligations under the UN Charter (specifically Chapter VII). Countries are responsible for transposing these sanctions into their national legal frameworks.

Statement Dis incorrect:

Although member countries are required to enforce sanctions,not all countries automatically consider breaches a criminal offense. Whether a violation is criminal depends on how each country enacts UN sanctions domestically.

The correct answer is B, C, and E, as these three present the highest anti-money laundering or sanctions risk and will require controls prior to launch. According to the FATF Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers1, P2P transactions pose significant challenges for AML/CFT compliance, as they may involve anonymous or pseudonymous parties, cross-border transfers, real-time settlement, and limited information on the beneficiaries. These factors increase the risk of money laundering, terrorist financing, and sanctions evasion, as well as the difficulty of detecting and reporting suspicious activity. Therefore, the institution should implement appropriate controls to mitigate these risks, such as:

Conducting enhanced due diligence on customers who use the P2P service, especially if they are located in high-risk jurisdictions or are involved in high-risk activities1.

Implementing transaction monitoring systems that can identify and flag unusual or suspicious patterns of behavior, such as large or frequent transfers, transfers to or from sanctioned entities or countries, or transfers that do not match the customer’s profile or expected activity12.

Applying the travel rule, which requires the originator and beneficiary VASPs (or financial institutions) to exchange and retain information on the parties involved in the transfer, such as their names, account numbers, addresses, and national identification numbers13.

Establishing information-sharing and cooperation mechanisms with other VASPs, financial institutions, and regulators, to facilitate the exchange of relevant data and intelligence on P2P transactions and customers14.

 1: Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers - FATF, page 13-16, 28-29, 32-33, 40-412: AML and Compliance Solution for The P2P Industry - Sanction Scanner3: P2P Money Laundering: How to Comply - ComplyAdvantage4: 2024 National Money Laundering Risk Assessment - U.S. Department of the Treasury, page 17.

A commission rogatory, also known as a letter rogatory or a letter of request, is a formal request from a court in one country to a court in another country for some type of judicial assistance, such as service of process, taking of evidence, or enforcement of judgments1. A commission rogatory would be used in the context of a mutual legal assistance treaty (MLAT) request, which is a bilateral or multilateral agreement that enables countries to cooperate and provide legal assistance to each other in criminal matters2. MLATs are one of the main gateways for obtaining information from another country, especially when the information is not available through other means, such as financial intelligence units (FIUs), supervisory authorities, or international organizations3. FIUs are national agencies that collect, analyze, and disseminate financial information related to money laundering and terrorist financing, and they can exchange information with their counterparts in other countries under the Egmont principles. Supervisory authorities are regulators that oversee the compliance of financial institutions and other entities with anti-money laundering and counter-terrorism financing (AML/CFT) obligations, and they can share information with their peers in other jurisdictions through supervisory channels, such as the Basel Committee on Banking Supervision. The Financial Action Task Force (FATF) is an inter-governmental body that sets standards and monitors the implementation of AML/CFT measures, and it can provide information and guidance to its members and other jurisdictions, but it does not have the authority to request or compel information from them.

1: Letters rogatory - Wikipedia

2: Mutual Legal Assistance Treaties and Letters Rogatory: A Guide for Judges | Federal Judicial Center

3: How US Authorities Obtain Foreign Evidence in Cross-Border Investigations | Global Investigations Review

What is an FIU? | Egmont Group of Financial Intelligence Units

Basel Committee on Banking Supervision | Bank for International Settlements

What is the FATF? | FATF

According to the Wolfsberg Principles on Private Banking, the bank should apply additional diligence to customers who present a higher risk of money laundering or other financial crimes. Some of the indicators for defining such customers are:

Persons residing in or having funds from countries with inadequate AML standards, sanctions, embargoes, or other measures that indicate a higher risk of money laundering or terrorist financing12.

Persons engaged in business activities known to be susceptible to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, art and antiquities, etc13.

Persons determined to be Politically Exposed Persons (PEPs), who are individuals who hold or have held positions of public trust or influence, or their family members or close associates, and who may pose a higher risk of corruption, bribery, or abuse of power14.

Persons who receive funds from a correspondent banking relationship are not necessarily required additional diligence, unless they fall under any of the above categories or other risk factors. Correspondent banking is a service provided by one bank to another bank to facilitate cross-border transactions, and it is subject to its own set of AML standards and due diligence measures5.

Wolfsberg Anti-Money Laundering Principles for Private Banking (2012) 1

FATF High-Risk and Other Monitored Jurisdictions

FATF Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals

FATF Guidance on Politically Exposed Persons (Recommendations 12 and 22)

FATF Guidance on Correspondent Banking Services

According to the ACAMS study guide, one of the red flags for money laundering in crowdfunding platforms is “projects that are fully funded within a very short period of time, especially if the funding comes from a small number of donors or from a single donor” (p. 222). This could indicate that the project is a front for laundering illicit funds or financing terrorism. The other options are not necessarily indicative of money laundering risk, as they could be explained by legitimate factors such as the popularity, urgency, or ambition of the project.

ACAMS. (2020). Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.

ESMA. (2015)Questions and Answers: Investment-based crowdfunding and money laundering/terrorist financing 1. Paris, France: ESMA.

According to the Certified Anti-Money Laundering Specialist (the 6th edition), Section 2.2.5 Suspicious Activity Reporting (SAR) Requirements, a Suspicious Activity Report (SAR) filing is required when a financial institution is aware of, or suspects, a possible violation of law or regulation, or any other suspicious activity related to money laundering, terrorist financing, or other unlawful activity. In this case, Answer A would require a Suspicious Activity Report filing as the deposits are made on a daily basis without providing a legitimate purpose.

According to the Financial Crimes Enforcement Network's (FinCEN) guidance, one example of a suspicious transaction is "frequent deposits of cash or monetary instruments in amounts under $10,000 to the same account, or a pattern of such deposits, unless the financial institution has a reasonable explanation for the pattern." (CAMS Manual, 6th Edition, Page 209)

A customer who is nervous, uneasy, or in a hurry to cash a large cashier’s check may be trying to launder money or evade reporting requirements. The teller should complete the transaction as normal, but also flag the customer’s account for further monitoring and review. The teller should look for any unusual or suspicious patterns of activity, such as frequent large cash transactions, transfers to or from high-risk jurisdictions, or transactions that do not match the customer’s profile or expected behavior. The teller should also document the transaction and the customer’s demeanor, and report any findings or concerns to the appropriate authority within the bank.

The teller should not confer with the bank’s account going forward, as this may alert the customer to the bank’s suspicion or compromise the investigation. The teller should not file a SAR on the customer, unless there are other grounds to suspect money laundering or terrorist financing, as this may be premature or unnecessary. The teller should not file a CTR on the customer by the end of the day, unless the transaction exceeds the threshold of $10,000, as this is a legal requirement for cash transactions in the US.

[ACAMS Study Guide for the CAMS Certification Examination, 6th Edition], Chapter 4: Conducting or Supporting the Investigation Process, pp. 103-104, 107-108.

Suspicious Activity Reporting - Overview, Federal Financial Institutions Examination Council, April 2018, pp. 1-2, 4-5.

Currency Transaction Reporting - Overview, Federal Financial Institutions Examination Council, April 2018, pp. 1-2, 4-5.

17 AML Analyst Interview Questions and Answers, CLIMB, July 15, 2022.

Economic sanctions are penalties imposed by one or more countries against another country, group, or individual for violatinginternational norms or threatening national interests1. The ultimate goal of economic sanctions is to protect national security by changing the behavior or policies of the target, or by weakening its capabilities or resources2. Sanctions can be used to advance various foreignpolicy objectives, such as counterterrorism, nonproliferation, democracy promotion, human rights protection, conflict resolution, and cybersecurity1. Sanctions can take different forms, such as travel bans, asset freezes, trade embargoes, arms restrictions, and aid reductions1. Sanctions can be applied unilaterally by one country, or multilaterally by a coalition of countries or an international organization, such as the United Nations or the European Union1.

1: What Are Economic Sanctions? | Council on Foreign Relatio

2: How Economic Sanctions Work - Investopedia

When implementing a risk-based approach related to casinos, the risks related to the customer as an individual are mainly based on the customer’s profile, behaviour, source of funds, and geographic location. Among the options given, B and D are the most relevant factors that could indicate a higher risk of money laundering or terrorist financing.

Casual customers are those who do not have a regular or established relationship with the casino, and who may visit the casino only once or occasionally. They may not provide sufficient or reliable identification information, or may use false or stolen identities. They may also engage in suspicious transactions, such as large cash purchases of chips, minimal or no gaming activity, or frequent transfers of chips between customers. Casual customers pose a higher risk of money laundering or terrorist financing because they are harder to verify, monitor, and trace by the casino operators.

Customer from a high-risk country is a customer who resides in, or has links to, a country that is subject to sanctions, embargoes, or similar measures, or that is identified by credible sources as having significant levels of corruption, or as being a source, transit, or destination of illicit funds. Such customers pose a higher risk of money laundering or terrorist financing because they may be involved in, or connected to, criminal or terrorist activities, or may be using funds that are derived from or intended for such activities.

= The main reference for this question is the document titled “FATF Guidance on the Risk-Based Approach for Casinos” published by the FATF in October 2008. You can access it by clicking here. You can also find more information about the risk-based approach and the customer risks for casinos on the Gambling Commission website and the Exam Answer website.

A: The purchase of high-value real estate using cash in multiple transactions—especially without clear economic justification—is a classic money laundering typology. The goal is typically to integrate illicit funds into the legitimate economy and obscure their origin.

“Large cash purchases of property without an obvious economic rationale are a significant red flag for money laundering in the real estate sector.”

This typology is highlighted in CAMS 6th Edition and the FATF’s guidance on real estate ML/TF risks.

An FIU is a central, national agency responsible for receiving, analyzing, and disseminating to the competent authorities disclosures of financial information concerning suspected proceeds of crime and potential financing of terrorism or required by nationallegislation or regulation1. FIUs play a crucial role in the detection and prevention of money laundering and terrorist financing by collecting, processing, and analyzing financial intelligence and sharing it with domestic and foreign counterparts2. FIUs may have different organizational structures, functions, and legal frameworks, but they all adhere tothe international standards and best practices set by the Egmont Group of FIUs3.

What We Do | FinCEN.gov

Financial Intelligence Units: An Overview (June 2004) - IMF, page 1

[Egmont Group of Financial Intelligence Units]

Concentration accounts are internal accounts used by financial institutions to aggregate funds from or for various clients or other accounts. They are also known as omnibus accounts or suspense accounts. The use of concentration accounts may obscure the audit trail and the identity of the clients involved in the transactions. Therefore, the Wolfsberg Principles on Private Banking, which are a set of voluntary guidelines for preventing money laundering and terrorist financing in the private banking sector, prohibit the use of concentration accounts in a way that would prevent appropriate monitoring or identification of the clients or their funds12.

1: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012), Section 4.3 2: The Wolfsberg Principles - an analysis, Journal of Money Laundering Control, Vol. 7 No. 3, 2004, pp. 237-240

Senior management bears the ultimate responsibility for approving a financial institution's relationship with a politically exposed person (PEP). The institution must ensure that appropriate measures are taken to manage the risks associated with a PEP, including conducting enhanced due diligence and applying appropriate mitigating measures. The relationship manager and the OKYC analyst may identify the risks associated with the PEP and recommend mitigating measures, but it is ultimately the responsibility of senior management to approve therelationship and ensure that the appropriate measures are taken. The enhanced due diligence compliance officer is responsible for ensuring that all due diligence requirements are met.

According to the Wolfsberg Group’s Statement on the Suppression of the Financing of Terrorism1, a compliance officer should include the following three procedures in revising an institution’s CTF efforts:

Consulting applicable lists and taking appropriate actions to determine if customers appear on such lists. This procedure is important to prevent terrorist organizations from accessing the financial services of the institution and to comply with the sanctions and regulations imposed by competent authorities. The compliance officer should implement procedures for checking the customers against the lists of known or suspected terrorists or terrorist organizations issued by relevant authorities and taking reasonable and practicable steps to verify the identity and status of the customers.

Reporting matches from lists of known or suspected terrorists to relevant authorities. This procedure is important to assist the authorities in their efforts to detect and disrupt terrorist financing and to fulfill the legal obligations of the institution. The compliance officer should report to the relevant authorities any matches from the lists of known or suspected terrorists or terrorist organizations consistent with the applicable laws and regulations regarding the disclosure of customer information.

Maintaining customer information to facilitate timely retrieval of such information. This procedure is important to enable the institution to respond promptly and effectively to the enquiries and requests from the authorities and to enhance the quality and accuracy of the customer data. The compliance officer should explore ways of improving the maintenance of customer information to facilitate the timely retrieval of such information.

Wolfsberg Statement on Anti-Terrorism Financing

UNUSUAL CUSTOMER IDENTIFICATION CIRCUMSTANCES

• Customer furnishes unusual or suspicious identification documents or declines to produce originals for verification."

This potential action is authorized by Section 319 of the USA PATRIOT ACT, which allows the U.S. government to seize funds from a foreign bank’s correspondent account in the U.S. if the foreign bank refuses to cooperate with a request for records relating to an investigation of money laundering or terrorist financing. The U.S. government can seize an amount equal to the funds in the account of the target of the investigation, regardless of whether those funds are actually in the correspondent account. In this case, the U.S. government can seize $1 million from Bank A’s correspondent account in the U.S. because Bank A holds $1 million in the account of the WTS, which is the target of the forfeiture action.

The other potential actions are not authorized by the USA PATRIOT ACT or other U.S. laws. The U.S. government cannot seize Bank A’s entire $5 million correspondent account in the U.S. because that would exceed the amount in the WTS’s account andwould violate the principle of proportionality. The U.S. government cannot seize the WTS’s $1 million account at the non-U.S. branch of Bank A because that would require the cooperation of the foreign jurisdiction where the branch is located, which may not be forthcoming. The U.S. government cannot seize $5 million from the non-U.S. branch of Bank A where the WTS’s account is located because that would also require the cooperation of the foreign jurisdiction and would exceed the amount in the WTS’s account.

CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: International Standards and Global Initiatives, pp. 67-68

CAMS Certifications: How to Get CAMS Certified | ACAMS, CAMS Study Guide, pp. 54-55

How Does the Patriot Act Affect Criminal Investigations? | Nolo, Section 319: Forfeiture of Funds in United States Interbank Accounts

The USA PATRIOT Act at 20: Sneak and Peek Searches - CRS Reports, Section 319: Forfeiture of Funds in United States Interbank Accounts

 According to the Anti-Money Laundering Specialist (the 6th edition) study guide, when a financial institution receives a law enforcement inquiry, it should cooperate as much as possible and respond to all formal requests for information, unless there is a valid objection that can and should be made1. The institution should also file a suspicious transaction report (STR) if the inquiry or the customer’s activity triggers any red flags or indicators of money laundering or other financial crimes2. Additionally, the institution should monitor the account for suspicious activity and review the money laundering risk posed by the account, as these are part of the ongoing due diligence and risk assessment processes3. Closing the account immediately is not a recommended action, as it may alert the customer or interfere with the investigation4.

1: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 121

2: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 122

3: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 123

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 124

According to the CAMS study guide, chapter 4, page 851, bearer shares are shares that do not have the name of the owner registered on them, and the ownership is transferred by the physical delivery of the share certificate. This means that the true beneficial owner of the company can be hidden or changed without any record or notification. Bearer shares are considered a high-risk factor for money laundering and terrorist financing, as they can facilitate the movement and concealment of illicit funds through anonymous corporate vehicles. Therefore, the company having bearer shares should cause the most suspicion of money laundering among the options given.

The other options are not necessarily indicative of money laundering, although they may have some risk implications depending on the context and the customer profile. Option A, the jurisdiction being a known tax haven, may suggest that the company is seeking to avoid or minimize taxes, but this does not imply that the company is involved in money laundering, as there may be legitimate tax planning or optimization purposes. Option C, the corporation director being a European citizen, may indicate that the company has some cross-border or international activities, but this does not imply that the company is involved in money laundering, as there may be valid business or personal reasons for the director’s nationality. Option D, no financial statements being filed for 3 years, maysuggest that the company is not complying with the accounting or reporting standards of the jurisdiction, but this does not imply that the company is involved in money laundering, as there may be other explanations or mitigating factors for the lack of financial statements.

1: ACAMS CAMS Study Guide - 6th Edition, Chapter 4, page 85: https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-4.pdf

A financial intelligence unit (FIU) is a national body or government agency that collects, analyzes, and disseminates financial information related to potential financial crimes, such as money laundering and terrorist financing. One of the core functions of an FIU is to receive disclosures filed by reporting entities, such as banks, money service businesses, casinos, and other obliged entities, that are required to report suspicious or unusual financial activity. These disclosures, also known as suspicious activity reports (SARs) or suspicious transaction reports (STRs), provide valuable intelligence for the FIU and other competent authorities to identify and investigate financial crimes and trace illicit funds. The other statements do not describe the duties of an FIU, but rather the roles of other agencies or bodies, such as the Office of Foreign Assets Control (OFAC) in the US, which administers and enforces economic and trade sanctions, or the Financial Action Task Force (FATF), which sets international standards for anti-money laundering and counter-terrorist financing (AML/CFT) supervision and regulation.

ACAMS CAMS Certification Video Training Course, Module 1: Risks and Methods of Money Laundering and Terrorist Financing, Lesson 1: The Financial Intelligence Unit

The Financial Intelligence Unit: Role of the FIU and International Cooperation, Financial Crime Academy

What We Do, Financial Crimes Enforcement Network (FinCEN)

The charity frequently withdrawing cash from the bank indicates possible terrorist financing, as cash transactions are often used to conceal the source, destination, and purpose of funds. Cash transactions also make it difficult to trace the flow of funds and identify the beneficiaries. Terrorist financiers may use charities as a cover to collect and distribute funds for their activities, and may exploit the cash-based nature of charitable donations to avoid detection12.

the Office of Foreign Assets Control (OFAC) has the authority to prohibit or reject any trade or financial transactions involving specified countries, entities, and individuals that are subject to U.S. economic sanctions, unless such transactions are authorized by a general or specific license issued by OFAC. This applies to transactions that occur within the U.S. territory, as well as transactions that involve U.S. persons, U.S. goods, or the U.S. financial system, regardless of where they take place. This is one of the key aspects of OFAC’s extraterritorial reach, which means that OFAC can enforce its sanctions programs beyond the U.S. borders.

Home | Office of Foreign Assets Control, section “Mission”: “The Office of Foreign Assets Control ("OFAC") of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.”

The Aggressive Extraterritorial Reach of U.S. Economic Sanctions: Foreign Company Exposure to OFAC Enforcement, section “A. Bases for OFAC jurisdiction over foreign parties”, paragraph 1: “One key aspect of the Office of Foreign Assets Control’s extraterritorial reach includes the blocking of certain non-United States initiated transactions for or through the United States (U.S.) for benefit of a restricted person or entity.”

The global reach of OFAC sanctions, section “The global reach of OFAC sanctions”, paragraph 1: “OFAC sanctions are trade and economic sanctions administered by The U.S. Treasury Department’sOffice of Foreign Asset Control (OFAC). They are often intended to have extra-territorial effect, meaning that they apply outside the U.S. territory. In some instances a connection with the U.S. territory is required.”

"Prohibit or reject unlicensed trade and financial transactions with specified countries,

entities, and individuals. "

On-line banking offers a significant money laundering risk to a financial institution because:

The nature of on-line banking can make it difficult to establish who is controlling the account. On-line banking allows customers to access their accounts remotely, without face-to-face contact with the financial institution. This can pose challenges for verifying the identity and legitimacy of the account holder, especially if the account is opened on-line or through a third-party intermediary. On-line banking can also facilitate the use of anonymous or fictitious identities, or the use of proxies or nominees to hide the true beneficial owner of the account.

The ease of access through the internet enables cross border movement of funds. On-line banking allows customers to transfer funds quickly and easily across different jurisdictions, without physical movement of cash or other instruments. This can increase the risk of money laundering, as funds can be moved to or from high-risk countries or regions, or through multiple accounts or financial institutions, to obscure the origin, destination, or purpose of the funds. On-line banking can also enable customers to access or use alternative payment systems or virtual currencies, which may have lower regulatory oversight or transparency standards than traditional banking systems.

The speed of electronic transaction enables execution of multiple complex transactions within short time frame. On-line banking allows customers to conduct transactions in real time, with minimal or no human intervention or verification. This can increase the risk of money laundering, as customers can execute multiple transactions in a short period of time, or use complex transaction structures or patterns, to avoid detection or reporting thresholds, or to conceal the source, nature, or ownership of the funds. On-line banking can also enable customers to use automated or algorithmic trading systems, which may generate large volumes of transactions that are difficult to monitor or analyze.

CAMS Study Guide - 6th Edition, Chapter 5, pages 139-140

CAMS Certification Exam Outline, Domain 2, Task 2.1, Skill 2.1.1

Online Banking and Money Laundering, ACAMS Today, September 2012

Havens for money laundering and terrorist financing are jurisdictions that offer a high degree of anonymity, secrecy, and protection to criminals who seek to conceal or move their illicit funds. These havens typically have the following three attributes12:

Limited types of institutions and persons covered by money laundering laws and regulations. This means that only a narrow range of financial activities or entities are subject to anti-money laundering (AML) and combatting the financing of terrorism (CFT) obligations, such as customer due diligence, record-keeping, reporting, and supervision. For example, some havens may exclude lawyers, accountants, trust and company service providers, or non-bank financial institutions from AML/CFT requirements.

Little enforcement of the laws, weak penalties or provisions that make it difficult to confiscate or freeze assets related to money laundering. This means that the authorities in these havens lack the political will, resources, or capacity to effectively implement and enforce the AML/CFT laws and regulations. They may also impose low sanctions or fines for non-compliance, or create legal barriers or obstacles for the confiscation or freezing of assets that are the proceeds of, or used in, or intended or allocated for use in, money laundering, terrorist financing, or other crimes.

Absence of an effective FIU. This means that these havens do not have a central agency that is responsible for receiving, analyzing, and disseminating financial intelligence related to money laundering, terrorist financing, and other crimes. An effective FIU is essential for facilitating domestic and international cooperation and information exchange, as well as for supporting investigations and prosecutions of money laundering and terrorist financing cases.

1: The IMF and the Fight Against Money Laundering and Terrorism Financing, 1 2: IX Special Recommendations, 2

According to the ACAMS CAMS Certification Study Guide (6th edition), the bank’s anti-money laundering officer is responsible for overseeing the implementation and maintenance of the bank’s anti-money laundering program, which includes reporting and escalating suspicious activities involving PEPs. The anti-money laundering officer should be informed of any unusual or potentially illicit transactions involving PEPs, and decide on the appropriate course of action, such as filing additional reports, conducting enhanced due diligence, or terminating the relationship with the PEP. The other options are not correct because they are either not directly involved in the anti-money laundering program, or not the appropriate authority to contact in this situation.

ACAMS CAMS Certification Study Guide (6th edition), page 77-78. 123456789

The decision of whether or not to file a suspicious transaction report (also known as a suspicious activity report or SAR in the United States) often involves weighing the aggravating and mitigating factors arising from the research conducted during the investigative process. The final decision should be documented and supported by the reasoning that was used to make the determination. The transaction has already been investigated which led to the requesting of the document. The document checked out and the question did not specify the document was suspicious, therefore we can conclude an STR does not need to be completed and thus should move to document the reason why an STR wasn't completed.

According to the ACAMS study guide, one of the best practices for dealing with law enforcement inquiries is to verify the identity and authority of the law enforcement officer before providing any information (p. 224). This is to ensure that the inquiry is legitimate and not a phishing attempt or a breach of confidentiality. The compliance officer should also document the inquiry and the information provided, and consult with legal counsel if necessary. The other options are not appropriate, as they may either violate the law, compromise the investigation, or create unnecessary work.

ACAMS. (2020). Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.

What Is An AML Officer1

shell banks are banks that have no physical presence in any country and are not affiliated with any regulated financial institution. They are often used by money launderers and terrorist financiers to hide their illicit activities and evade regulatory oversight. The USA PATRIOT Act prohibits US financial institutions from opening or maintaining correspondent accounts with shell banks, and requires them to take reasonable steps to ensure that their foreign correspondent banks do not provide services to shell banks12. Therefore, the US does not have jurisdiction over shell banks operating in foreign jurisdictions, unless they are involved in transactions that violate US laws or sanctions.

USA PATRIOT Act Section 313: Prohibition on U.S. Correspondent Accounts with Foreign Shell Banks1

Fact Sheet Regarding the Treasury Department’s Use of Sanctions Authorities to Combat Money Laundering and Terrorist Financing3

The best course of action for the FI in this scenario is to consider retaining qualified, experienced legal counsel. This is because the investigation request from the local law enforcement agency may involve complex legal issues, such as confidentiality, privacy, data protection, and cooperation obligations. The FI may need to balance the interests of the customer, the law enforcement agency, and the FI itself, and ensure that it complies with the applicable laws and regulations in responding to the request. The legal counsel can advise the FI on the scope, validity, and implications of the request, and help the FI to prepare and submit the required information in a timely and appropriate manner. The legal counsel can also protect the FI from any potential liability or litigation arising from the investigation.

1: Requests by Law Enforcement for Financial Institutions to Maintain Accounts and/or Conduct Transactions1

2: Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations2

3: ACAMS Study Guide for the CAMS Certification Examination3

this activity is unusual and inconsistent with the expected behavior of an accounting firm’s operational account. The account should normally receive fees from clients that are proportional to the services rendered and reflect the market rates. Receiving international payments that are substantially higher than other fees could indicate that the account is being used to launder money or finance terrorism by disguising illicit funds as legitimate income. This could trigger a red flag for the bank and prompt a comprehensive review of the account.

ACAMS Study Guide 6th Edition, Chapter 1, Section 1.6, page 24: “Methods to launder money used in banks and other deposit taking institutions”.

ExamTopics, Question 446: “An accounting firm opened an account at a bank that is intended to be used as the operational account for the business. After a few months, a comprehensive review of the account was triggered due to unusual activity on the account. Which most likely triggered the review?”

According to the Basel Committee on Banking Supervision (BCBS), a sound KYC program should contain four essential elements: (i) customer acceptance policy; (ii) customer identification; (iii) on-going monitoring of higher risk accounts; and (iv) risk management1. These elements correspond to the options B in the question, as customer identification involves verifying the identity and beneficial ownership of the customers, risk assessment involves determining the level of risk posed by the customers and their activities, customer screening involves checking the customers against relevant sanctions and watch lists, and monitoring involves reviewing the customers’ transactions and behavior for any anomalies or red flags.

Consolidated KYC Risk Management - Bank for International Settlements

A. Offering internal policies training: This is crucial. Employees need to understand the specific procedures and policies related to customer identification and verification. These internal policies ensure consistency and compliance.

B. Offering general background and history training: While historical context is valuable, it’s not the primary focus. AML training should prioritize practical knowledge and current best practices.

C. Offering periodic refresher training: Absolutely! Regular refresher training keeps employees up-to-date with evolving AML regulations and reinforces their understanding.

D. Offering tailored training for specific roles: This is essential. Different roles require different expertise. For example, investigators need to recognize red flags, while report writers must understand how to create effective suspicious activity reports.

Comprehensive Detailed Explanation:

Internal Policies Training: AML training should cover internal policies thoroughly. This includes customer identification and verification procedures, as well as other relevant policies specific to the organization. Employees need to understand how these policies translate into day-to-day practices.

General Background and History: While historical context can be interesting, it’s not the primary focus of AML training. Instead, the emphasis should be on practical knowledge, current best practices, and real-world scenarios.

Periodic Refresher Training: Regular refresher training is essential. AML regulations evolve, and employees need to stay informed. Annual or periodic refreshers reinforce knowledge and ensure compliance.

Tailored Training for Specific Roles: Different roles within an organization have distinct responsibilities related to AML. Tailored training ensures that employees understand their specific duties. For example, investigators need to recognize suspicious patterns, while report writers must know how to create effective reports.

A, C, D:

“Trust and asset management services can facilitate the concealment of the source of funds (A), provide a layer of anonymity to transactions (C), and obscure the true legal and beneficial owners (D). These are well-established ML/TF risks in the private wealth sector.”(CAMS 6th Edition, ML/TF Risks in Trust and Asset Management)

B and E are normal aspects of asset management and are not in themselves ML/TF risks unless combined with other suspicious behaviors.

OFAC-issued regulations apply to all U.S. persons, including U.S. banks, bank holding companies, and non-bank subsidiaries, regardless of where they are located. This means that foreign subsidiaries of U.S. banks and U.S. branches of a foreign bank are also subject to OFAC compliance. However, intermediaries transacting with U.S. banks, foreign banks with U.S. customers, and foreign import-export companies are not necessarily subject to OFAC regulations, unless they are involved in transactions that involve U.S. jurisdiction or U.S. persons.

Basic Information on OFAC and Sanctions

OFAC Consolidated Frequently Asked Questions

Office of Foreign Assets Control — Overview

According to the CAMS Study Guide, page 191, “Reloadable open-loop prepaid cards are a high-risk product for money laundering because they can be used to store and move large amounts of funds anonymously. They can also be used to access cash at ATMs or through cash-back transactions at merchants.” Therefore, option B is a red flag that may indicate money laundering, as a non-bank customer who regularly loads large amounts of cash onto several prepaid cards may be trying to avoid identification, verification, or transaction reporting requirements.

CAMS Study Guide, page 1911

According to the ACAMS CAMS Study Guide, one of the key elements of an effective anti-money laundering (AML) program is ongoing training for all relevant staff. Training should cover the legal and regulatory obligations, the risks and red flags of money laundering and terrorist financing, the procedures and controls for customer due diligence and transaction monitoring, the reporting and record-keeping requirements, and theroles and responsibilities of the staff and the management. Training should also be tailored to the specific functions and needs of the staff, and should be updated regularly to reflect the changes in the AML environment and the FI’s policies and procedures.

PEPs are considered high-risk customers for AML purposes, as they may abuse their positions of power and influence to commit or facilitate corruption, bribery, embezzlement, or other financial crimes. Therefore, it is essential that the FI’s staff are aware of the definition and categories of PEPs, the sources and methods to identify and verify PEPs, the enhanced due diligence measures and ongoing monitoring that apply to PEPs, and the escalation and reporting procedures for suspicious activities involving PEPs .

If an internal audit reveals that a large group of employees do not know how to handle PEPs, this indicates a serious gap in the FI’s AML training program, which could expose the FI to regulatory sanctions, reputational damage, and legal liabilities. Therefore, the next course of action that should be taken is to create a company-wide training program that covers the relevant aspects of PEPs, and to ensure that the training is delivered to all staff who deal with PEPs or have access to PEP-related information. The training should also be evaluated for its effectiveness and impact, and the results should be reported to the senior management and the board of directors.

ACAMS CAMS Study Guide, 6th Edition, Chapter 2: Developing an Effective Anti-Money Laundering Program, page 51-52

ACAMS CAMS Study Guide, 6th Edition, Chapter 3: Conducting Customer Due Diligence, page 75-78

FATF Guidance: Politically Exposed Persons (Recommendations 12 and 22), June 2013, 1

ACAMS CAMS Study Guide, 6th Edition, Chapter 4: Conducting Ongoing Monitoring, page 97-98

 According to the Basel Committee guidelines, banks should formulate a customer acceptance policy and a tiered customer identification programme that involves more extensive due diligence for higher risk customers12. The customer acceptance policy should be approved by senior management and include clear guidelines on the types of customers that are likely to pose a higher than average risk to the bank1. Senior management should also ensure that the bank has adequate resources and systems to effectively manage the risks associated with higher risk customers1. Therefore, senior management should determine whether or not to enter business relationships with higher risk customers, based on the bank’s risk appetite, policies, and procedures.

 Under USA PATRIOT Act Section 311, the U.S. government can impose special measures against a foreign jurisdiction, institution, or transaction that is of primary money laundering concern1. These measures can range from requiring additional recordkeeping and reporting to prohibiting or restricting the opening or maintaining of correspondent or payable-through accounts for the designated entity2. A payable-through account is a type of correspondent account that allows customers of a foreign bank to access the U.S. financial system by writing checks or making wire transfers from the foreign bank’s account at a U.S. bank3.

In this case, the U.S. government has enacted special measures against a designated entity that has a payable-through account with an EU bank, which in turn has a correspondent banking relationship with a U.S. bank. One of the possible actions that the U.S. bank might be required to take regarding the EU bank’s services for the designated entity is to obtain additional information about customers permitted to use this account. This is to ensure that the U.S. bank can identify and monitor the transactions and activities of the designated entity and its customers, and to prevent any money laundering or terrorist financing risks4.

The other actions listed are not likely to be required by the U.S. government under Section 311. Ensuring the designated entity’s confidential information is not shared with other entities is not a special measure, but a general obligation of any financial institution under privacy laws. Verifying that the EU bank serves the designated entity is not a relevant action, since the U.S. government has already designated the entity as a primary money laundering concern. Performing enhanced due diligence on the EU bank is not a specific action related to the payable-through account, but a broader requirement for any correspondent account under Section 312 of the USA PATRIOT Act5.

1: USA PATRIOT Act | FinCEN.gov1 2: 311 Actions | U.S. Department of the Treasury2 3: Overview of Correspondent Banking and “De Risking” Issues - CRS Reports3 4: U.S. TREASURY DEPARTMENT OFFICE OF PUBLIC AFFAIRS4 5: Fact Sheet: Overview of Section 311 of the USA PATRIOT Act5

According to the ACAMS CAMS Certification Study Guide (6th edition), one of the challenges of information sharing within a financial group is the compliance with privacy and data protection rules that may vary across jurisdictions. Therefore, before sharing information about a customer with an affiliate, a bank should consider whether such sharing is permitted by the applicable laws and regulations, and whether the customer has consented to it. The other options are not relevant factors for information sharing in the case of an investigation.

ACAMS CAMS Certification Study Guide (6th edition), page 971; ACAMS CAMS Certification Video Training Course, Module 4, Lesson 22

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, an effectiveanti-money laundering program should be subject to periodic independent testing by a qualified party, such as an internal or external auditor, a consultant, or a compliance professional1. This ensures that the program is compliant with the applicable laws and regulations, and that it meets the standards of sound risk management and internal controls2. The regulatory authorities, a member of senior management, or the anti-money laundering specialist may not have the necessary expertise, objectivity, or independence to conduct a thorough and unbiased evaluation of the program.

1: CAMS Study Guide, 6th Edition, Chapter 2, Section 2.3, page 51

2: CAMS Study Guide, 6th Edition, Chapter 2, Section 2.4, page 52

When seekinglegal evidence across borders,MLATsare themost formal and effective mechanism.

Option A (Correct):MLATsprovide alegal frameworkfor exchangingevidence in criminal investigations.

Option B (Incorrect):TheEgmont Secure Webfacilitatesintelligence sharing between FIUs, butnot legal evidence.

Option C (Incorrect):INTERPOL focuses on law enforcement cooperation, but not formalevidence gathering for prosecutions.

Option D (Incorrect):Direct requestsbetween anti-corruption authorities may not havelegal standing in court.

an employee who avoids taking periodic vacations despite having accrued vacation time may be trying to conceal fraudulent or illegal activities that would be exposed in their absence. This is a common red flag for internal fraud and money laundering, as it indicates a lack of segregation of duties, internal controls, and oversight. Employees who engage in such behavior may also exhibit other signs of stress, defensiveness, or secrecy.

Learn about red flags for internal fraud, section “An employee may be a higher internal fraud risk when a combination of the following red flags are present”, bullet point 1: “Unwilling to share duties or take leave.”

Money Laundering Red Flags | Key Behaviours and Indicators, section “Employee Red Flags”, bullet point 1: “Avoiding taking holidays or time off work.”

Top 10 AML Red Flags: Warning Signs and Financial Risks, section “AML Red Flags Categories”, sub-section “Employee Red Flags”, bullet point 1: “Avoiding taking vacations or sick leaves.”

The primary purposes of Financial Action Task Force (FATF)-Style Regional Bodies are to promote effective implementation of FATF recommendations and to provide expertise and input in FATF policy-making. (CAMS Manual, 6th Edition, Page 180)

According to the Anti-Money Laundering Specialist (the 6th edition) by ACAMS, an institution’s anti-money laundering program should be reassessed at least annually to ensure that it is current, effective, and compliant with the applicable laws and regulations. The reassessment should include a review of the institution’s risk assessment, policies and procedures, internal controls, training, and independent testing. The reassessment should also consider any changes in the institution’s products, services, customers, geographic locations, or business environment that may affect its exposure to money laundering and terrorist financing risks1.

The other options are not consistent with the best practices of maintaining an up-to-date anti-money laundering program. For example:

The program should be evaluated and updated at least every six months by the Board of Directors. While the Board of Directors has the ultimate responsibility for overseeing the institution’s anti-money laundering program, it is not required to evaluate and update the program every six months. This may be too frequent and impractical, especially for large and complex institutions. The Board of Directors should, however, approve the program and any significant changes, and ensure that senior management implements and enforces the program effectively1.

The program should be reviewed by a federal law enforcement officer for gaps in controls. While federal law enforcement agencies may conduct investigations or examinations of the institution’s anti-money laundering program, they are not responsible for reviewing the program for gaps in controls. This is the role of the institution’s internal audit function or an external independent party, who should conduct periodic testing of the program’s adequacy and effectiveness1.

The program should be sent to the institution’s government regulator on a periodic basis. While the institution’s government regulator may request or review the institution’s anti-money laundering program as part of its supervisory or enforcement activities, the institution is not obligated to send the program to the regulator on a periodic basis. The institution should, however, report any suspicious or unusual transactions or activities to the relevant authorities, such as the Financial Crimes Enforcement Network (FinCEN) or the Office of Foreign Assets Control (OFAC)1.

Anti-Money Laundering Specialist (the 6th edition) by ACAMS

Money laundering risks arise whentransaction patternsareinconsistent with a business’s expected activity.

Option D (Correct):Multiple cash deposits in different branchesis a knownstructuring (smurfing) technique, used toevade cash transaction reporting thresholds.

Option A (Incorrect):Depositing intoboth checking and savings accountsisnormal behavior.

Option B (Incorrect):Irregular incoming paymentsmay require further review but arenot inherently suspicious.

Option C (Incorrect):Industry-related expenses (e.g., conference tickets)arenormal business activity.

TheEU AMLD provides the legal framework, butmember states have discretionin implementation.

Option B (Correct):Countries canimpose stricter AML lawsthan theminimum EU requirements.

Option C (Correct):AMLDsset the foundation, and member statesimplement local laws.

Option A (Incorrect):EU law takes precedence, and national lawsmust alignwith it.

Option D (Incorrect):AMLDs and local AML regulations areinterlinked.

Option E (Incorrect):National AML rules do not have to be identicalacross all EU members.

Regulatory exams assess whether financial institutions comply with AML/CFT laws and have adequately addressed previous deficiencies.

Option C (Correct):Regulators may still issue remediation orders if the bank's improvements do not fully resolve prior AML compliance gaps.

Option D (Correct):If deficiencies persist, regulators may impose civil or criminal penalties.

Why Other Options Are Incorrect:

Option A (Incorrect):Secondary sanctions typically apply to institutions violating international sanctions laws, not AML program deficiencies.

Option B (Incorrect):Regulatory orders are not always confidential—major enforcement actions may be publicly disclosed.

Option E (Incorrect):Boards are responsible for AML oversight but are not always required to disclose corrective actions publicly.

Best Practices for Addressing AML Exam Findings:

Document all remediation efforts with clear implementation timelines.

Demonstrate a culture of compliance through leadership and training.

Ensure sustained improvements, not just short-term fixes.

The FATF’s core role is to enhance international cooperation against money laundering and terrorist financing through setting global standards (“Recommendations”) and issuing guidance.

“The FATF is an intergovernmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing.”

The FATF does not have authority to oversee FIUs, nor does it regulate financial markets directly.

A: The first step in any suspicious activity investigation is to review the transaction history and other relevant account information to establish context, identify patterns, and determine if the behavior is consistent with known typologies of money laundering.

“The initial phase of an AML investigation is to review relevant account information and transaction activity to assess whether a SAR filing is warranted.”

This approach ensures that any subsequent decisions, such as escalation, SAR filing, or customer outreach, are based on a comprehensive understanding of the facts.

The potential client is attempting to commit the illegal activity of using insider information to trade securities. Insider information is any material, non-public information that could affect the price or value of a security, such as earnings reports, mergers, acquisitions, or regulatory actions. Insider trading is the act of buying or selling securities based on insider information, which gives the trader an unfair advantage over other investors who do not have access to such information. Insider trading violates the principles of market integrity, fairness, and transparency, and can undermine investor confidence and trust. Insider trading is also a form of market abuse and financial crime, and is subject to civil and criminal penalties.

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorism Financing, Section 1.3: Financial Crime, Subsection 1.3.3: Market Abuse, pp. 25-26

ACAMS CAMS Certification Video Training Course, Module 1: Risks and Methods of Money Laundering and Terrorism Financing, Lesson 1.3: Financial Crime, Sublesson 1.3.3: Market Abuse, Video Time: 2:00-3:30

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 12, Answer C

When investigating an AML event, the following techniques would be used to investigate suspected mule accounts:

A. Determine if the suspected accounts are being accessed by a common person, telephone number, or device. This can help identify if the accounts are controlled by the same person or group, or if they are part of a larger network of mules. It can also help detect if the accounts are opened using synthetic identities or stolen credentials12.

B. Reconcile the stated purpose of the account with actual transaction history and compare with peer groups. This can help assess if the account activity is consistent with the customer profile, risk rating, and expected behavior. It can also help identify anomalies, such as sudden changes in transaction patterns, large or frequent transfers, or transactions with high-risk jurisdictions or entities12.

E. Establish the frequency with which the funds are moved in and out of the accounts. This can help measure the velocity and volume of the funds flowing through the accounts, which can indicate if the accounts are used for layering or integration of illicit funds. It can also help detect if the accounts are used for smurfing, which is a technique of breaking down large amounts of cash into smaller deposits to avoid detection or reporting thresholds13.

 The compliance officer should provide regular updates of corrective action to the designated board committee, as they are ultimately responsible for the oversight of the organization’s anti-money laundering program. The board committee should be informed of the audit findings, the corrective action plan, the progress and challenges, and the completion of the remediation. This will help ensure that the board committee is aware of the risks and issues, and can provide guidance and support to the compliance officer and the management.

=

ACAMS CAMS Certification Study Guide 6th Edition, Chapter 2, page 671

ACAMS CAMS Certification Exam Outline, Domain 2, Task 2.52

ACAMS CAMS Certification Flashcards, Question 893

The board of directors has the ultimate responsibility within a bank for ensuring that the bank has a comprehensive and effective BSA/AML program and oversight framework that is reasonably designed to ensure compliance with applicable regulations. According to the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual, the board of directors must approve the BSA/AML compliance program, which includes the BSA/AML policy, internal controls, independent testing, designatedBSA/AML compliance officer, and training1. The board of directors must also provide sufficient resources, ensure qualified staff, and hold senior management accountable for implementing and adhering to the BSA/AML compliance program1.

1: FFIEC BSA/AML Examination Manual, Board of Directors and Senior Management Oversight

Money laundering can have negative effects on a country’s currencies and interest rates, as it distorts the allocation of resources and the demand and supply ofmoney. According to the IMF1, money laundering can also adversely affect currencies and interest rates as launderers reinvest funds where their schemes are less likely to be detected, rather than where rates of return are higher. This can create artificial fluctuations and imbalances in the exchange and interest rates, and undermine the effectiveness of monetary policy. For example, if launderers invest in low-yield assets such as government bonds or real estate, they may drive up the prices and lower the yields of these assets, while reducing the availability of funds for more productive investments. This can also affect the inflation and growth prospects of the country.

1: Macroeconomic Implications of Money Laundering by Peter J. Quirk, IMF Working Paper, 1996

2: Understanding Money Laundering: How It Impacts the Global Economy by Tookitaki, 2019

3: Money Laundering by U.S. Department of the Treasury, 2021

4: The Consequences of Money Laundering and Financial Crime by John McDowell and Gary Novis, U.S. Department of State, 2001

Economic sanctions are a tool that governments and multi-national bodies can use to prevent the proliferation of weapons of mass destruction (WMDs) by imposing restrictions on trade, financial transactions, travel, or other activities with targeted countries, entities, or individuals that are involved or suspected of being involved in WMD programs. Economic sanctions aim to disrupt the supply chains, funding sources, and incentives for developing or acquiring WMDs, as well as to deter and punish any violations of international norms and obligations regarding WMDs. Economic sanctions can be imposed unilaterally by a country or multilaterally by a group of countries or an international organization, such as the United Nations, the European Union, or the Financial Action Task Force.

ACAMS CAMS Certification Video Training Course, Module 4: Preventing the Proliferation of Weapons of Mass Destruction, Lesson 4.2: Sanctions1

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4: Preventing the Proliferation of Weapons of Mass Destruction, Section 4.2: Sanctions2

Verified Answer: = A. Collect further customer reference data and determine what must be screened and at which frequency. and C. Deploy an independent risk-based test to ensure the screening on this customer is effective.

Comprehensive Detailed Explanation: = When an existing customer changes its business scope and jurisdictions, banks need to manage sanctions compliance risk effectively. Here are the steps they should take:

1. Collect Further Customer Reference Data: Obtain updated information about the customer’s new business activities, locations, and counterparties. Understand the nature of their transactions and assess the associated risks. Determine what specific data elements need to be screened (e.g., names, addresses, beneficial owners) and establish the appropriate screening frequency.

2. Deploy an Independent Risk-Based Test: Conduct a comprehensive risk assessment tailored to the customer’s changes. This assessment should consider factors such as the customer’s industry, geographic exposure, and transaction volume. The risk assessment helps identify high-risk areas that require enhanced scrutiny.

3. Screen Directors and Ultimate Beneficial Owners: Perform sanctions screening not only on the customer but also on their directors and ultimate beneficial owners. This ensures that any potential risks associated with these individuals are identified and mitigated.

4. Perform Politically Exposed Person (PEP) and Negative Media Screenings: Continue to screen the customer and related parties against PEP lists and negative media sources. This helps detect any adverse information related to politically exposed individuals or entities.

By following these steps, banks can proactively manage sanctions compliance risk and safeguard their institution’s reputation while adhering to regulatory requirements12.

A: Selling assets at a significant loss, especially shortly after purchase, is a classic red flag for asset laundering and value manipulation, which can be used to disguise the true nature of proceeds.

C: Transactions involving individuals from high-risk jurisdictions, as identified by the EU and FATF, warrant heightened scrutiny due to increased ML/TF risk.(CAMS 6th Edition, Red Flags for Complex Asset Transactions; EU List of High-Risk Third Countries)

B and D may contribute to complexity but are not the primary red flags in this scenario.

The anti-money laundering officer should advise the account-opening officer to verify the identity of all the partners as an initial step. This is because opening a bank account for an offshore company with multiple owners from different jurisdictions poses a high risk of money laundering and terrorist financing. Therefore, the bank should apply enhanced due diligence measures to ensure that the offshore company and its owners are legitimate and not involved in any criminal activities. One of the key measures is to verify the identity of all the partners, not just the one who presents the power of attorney. This will help the bank to establish the beneficial ownership and control structure of the offshore company, as well as to detect any possible fraud, forgery, or coercion in the power of attorney document. The bank should also verify the authenticity and validity of the power of attorney, and the scope and purpose of the authority granted to the partner who requests the account opening.

The other options are less important or irrelevant as initial steps. Verifying the source of the deposit is also a part of the enhanced due diligence process, but it should be done after verifying the identity of the partners and the offshore company. Filing a suspicious transaction report with the appropriate Financial Intelligence Unit or the Egmont Group is a possible action that the bank may take if it detects any indicators of money laundering or terrorist financing in the account opening process, but it is not an initial step. The Egmont Group is an international network of Financial Intelligence Units that facilitates information exchange and cooperation, but it is not a reporting authority.

ACAMS Study Guide, Chapter 3: Customer Identification and Verification, 1

ACAMS Study Guide, Chapter 4: Customer Risk Assessment, 2

ACAMS Study Guide, Chapter 5: Ongoing Monitoring, 3

Powers of attorney: opening a bank account, 4

https://egmontgroup.org/en/content/about

"The Egmont Group is a united body of 165 Financial Intelligence Units (FIUs). The Egmont Group provides a platform for the secure exchange of expertise and financial intelligence to combat money laundering and terrorist financing (ML/TF). This is especially relevant as FIUs are uniquely positioned to cooperate and support national and international efforts to counter terrorist financing and are the trusted gateway for sharing financial information domestically and internationally in accordance with global Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) standards.

FIUs act as central hubs for financial crime intelligence, receiving and analyzingSuspicious Activity Reports (SARs)and other data to support law enforcement.

Option A (Correct):FIUscollect, analyze, and disseminate financial intelligencerelated tomoney laundering and terrorist financing.

Option B (Incorrect):FIUsdo not prosecute cases—they refer cases tolaw enforcement agenciesfor prosecution.

Option C (Incorrect):FIUs analyze financial crime data butdo not develop surveillance technology.

Option D (Incorrect):FIUs share intelligencewith law enforcement and regulatory bodies, not directly with private companies.

Types of FIUs and Their Roles:

A screenshot of a web page Description automatically generated

Key FIU Responsibilities:

Collect Suspicious Activity Reports (SARs)from financial institutions.

Analyze financial transactionsto identify money laundering patterns.

Disseminate intelligence to law enforcement and regulatory authorities.

According to the Anti-Money Laundering Specialist (the 6th edition) by ACAMS, the independent testing of an institution’s anti-money laundering program should be conducted by a person who reports directly to the Board of Directors or a Board Committee. This ensures that the person conducting the testing has the necessary authority, independence, and objectivity to evaluate the program’s adequacy and effectiveness, and to report any findings or recommendations to the senior management1. The person conducting the testing should also have the appropriate knowledge, skills, and experience in the anti-money laundering field, and should be familiar with the institution’s products, services, customers, and risks2.

The other options are not necessarily suitable or qualified to perform the independent testing of an institution’s anti-money laundering program. For example:

A certified specialist in the anti-money laundering field may have the relevant expertise and credentials, but may not have the required independence or reporting line to conduct the testing. For instance, if the certified specialist is an employee of the institution who is involved in the implementation or operation of the anti-money laundering program, then there may be a conflict of interest or a lack of objectivity in the testing process1.

A former anti-money laundering officer from a similar institution may have the relevant experience and background, but may not have the current knowledge or familiarity with the institution’s anti-money laundering program, policies, procedures, or systems. Moreover, the formeranti-money laundering officer may have a personal or professional relationship with the institution or its staff, which may compromise the independence or integrity of the testing process1.

A retired government regulator or federal law enforcement officer may have the relevant authority and credibility, but may not have the specific skills or qualifications to conduct the testing. For instance, the retired regulator or law enforcement officer may not be well-versed in the latest anti-money laundering standards, regulations, or best practices, or may not be able to apply them to the institution’s unique risk profile, products, services, or customers1.

Anti-Money Laundering Specialist (the 6th edition) by ACAMS

What Is An AML Compliance Program? | ComplyAdvantage

Understanding the source and origin of assets (C):According to the CAMS 6th Edition (Chapter: Customer Due Diligence and Enhanced Due Diligence) and the EU 4th & 5th AML Directives, regulated entities are required to take adequate measures to understand the source of funds and the origin of assets of their customers, especially when there are higher risk factors such as large transactions or PEPs.“Firms must identify the source and origin of assets to ensure they are not the proceeds of crime or corruption, particularly for higher-risk customers.”(CAMS 6th Edition, CDD/EDD Requirements; EU Directive 2015/849, Article 20)

Performing negative news checks of prospective customers (D):Adverse media screening is an essential part of the onboarding process for identifying potential risks related to money laundering, terrorist financing, or reputational harm.“Negative news or adverse media checks form a vital component of the due diligence process, helping organizations detect links to criminal or suspicious activities.”(CAMS 6th Edition, CDD/EDD Requirements)

Incorrect Options:

A: Onboarding interviews may be part of EDD, but are not a standard or required AML control.

B: PEPs are not to be automatically rejected; instead, enhanced due diligence should be applied.

E: Producing financial stability reports is not an AML control, but may be relevant for credit or investment assessment.

The Black Market Peso Exchange (BMPE) is a trade-based money laundering technique commonly used by narcotics traffickers based in Colombia and Mexico. The central feature is the use of a money trader to ensure that the revenue from drug sales in the U.S.doesn’t actually cross any borders. Instead, those dollars are used to purchase any number of legitimate commodities from unsuspecting businesses on behalf of legitimate South American businesspersons, whose legitimate imports are used to obtain pesos for the drug cartels12. The BMPE involves six distinct steps:

Obtaining criminal proceeds: The drug cartels sell drugs for dollars in the U.S.

Involvement of intermediary services: The drug cartels sell the dollars to black market peso exchangers in Colombia at a discounted rate.

Identification of complicit companies: The black market peso exchangers identify exporting companies in the U.S. and importing companies in South America that are willing to participate in the scheme.

Placement of funds: The black market peso exchangers deposit the dollars into U.S. bank accounts or use money service businesses or other methods to transfer the funds.

Layering of funds: The black market peso exchangers use the funds to purchase monetary instruments such as checks, money orders, or wire transfers, or to pay for the goods ordered by the South American importers.

Integration of funds: The South American importers receive the goods or the monetary instruments and use them to pay for their imports or to sell them for pesos in the local market.

1: Black Market Peso Exchange in Money Laundering - Financial Crime Academy

2: Overview - FinCEN.gov

Using self-hosted wallets, or wallets that are stored on the user’s computer, is one of the tactics that may be used to finance terrorism with virtual assets such as Bitcoin. By creating many different donation addresses that are updated continuously, law enforcement will have a harder time tracing transactions. It is also important to note that using the same donation address across multiple donation campaigns and media types, as well as forming relationships with virtual asset service providers that have strong KYC processes in place, can draw attention from law enforcement and should be avoided.

QUEAccording to the ACAMS Study Guide, one of the skills of an effective AML investigator is to conduct investigative interviews using appropriate techniques and methods1. One of the techniques is to use open-ended questions that elicit detailed responses from the interviewee, and to avoid leading or suggestive questions that may reveal the investigator’s assumptions or suspicions1. Therefore, the best option is to ask question of a material nature about the suspected false statements without revealing the suspected deception, as this would allow the investigator to gather more information and evidence, and to test the consistency and credibility of the interviewee’s answers.

The other options are not advisable or effective, because:

A. Informing the suspect that deception is obvious and continuing the interview is not a good strategy, because it may antagonize the suspect and make them less cooperative or more defensive. It may also alert the suspect to the investigator’s knowledge and sources, and give them an opportunity to change or modify their story2.

B. Advising the suspect that the interview will be terminated if there is suspicion of deception is not a good strategy, because it may create a negative impression of the investigator and the investigation, and it may discourage the suspect from providing any useful information. It may also imply that the investigator has insufficient evidence or authority to pursue the case2.

C. Directing the interview in another direction until there is better rapport before returning back to the troubling question is not a good strategy, because it may waste time and resources, and it may lose the focus and momentum of the investigation. It may also signal to thesuspect that the investigator is not confident or competent, and it may give the suspect a chance to prepare or rehearse their answers2.

1: ACAMS Study Guide, 6th Edition, Chapter 4: Conducting and Supporting the Investigation, page 105. 2: 46 AML Investigator Interview Questions (And Sample Answers)

STION NO: 96

A bank employee recently opened an account for a new restaurant. Daily cash deposits over a three-month

period are close to $9,500.

What are two red flags that indicate possible money laundering or terrorist financing? (Choose two.)

A. The restaurant is located in a different city

B. The daily cash deposits are so close in amount

C. It is a new account that has daily cash deposits

D. The new account demonstrates a steady flow of income

Answer:BD

These two options are potential red flags for money laundering or terrorist financing because they could indicate an attempt to avoid the reporting threshold of $10,000 for cash transactions, or to conceal the source or origin of the funds. According to the ACAMS Study Guide, some common indicators of money laundering are:

Transactions structured to avoid recordkeeping or reporting requirements

Transactions inconsistent with the customer’s profile or business activity

Transactions involving the use of multiple accounts or locations

Transactions involving high-risk jurisdictions or entities

Transactions involving cash or complex crypto assets

The other two options are not necessarily red flags by themselves, as they could have legitimate explanations. For example, the restaurant could be located in a different city because of market demand, or the new account could demonstrate a steady flow of income because of the success of the business.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, one of the essential elements of an effective AML program is the establishment of a written AML policy that sets out the bank’s commitment to comply with the applicable AML laws and regulations, as well asthe roles and responsibilities of the board of directors, senior management, and staff in implementing the AML program. The AML policy should also include the bank’s risk assessment, customer due diligence, transaction monitoring, record keeping, reporting, training, and audit procedures. The AML policy should be approved by the board of directors and communicated to all staff from the top down. The other options are not incorrect, but they are not the primary responsibility of the board of directors in demonstrating commitment to AML compliance.

 Mutual Legal Assistance Treaties (MLATs) are agreements between two or more countries that provide the legal framework for the exchange of information and evidence in criminal and related matters. MLATs enable law enforcement authorities and prosecutors to obtain evidence, information, and testimony abroad in a form admissible in the courts of the requesting state. MLATs also establish the procedures and channels for making and receiving requests for assistance, as well as the grounds and conditions for granting or denying such requests. MLATs are an important tool for international cooperation and information exchange to combat transnational crimes, such as money laundering, terrorist financing, fraud, and corruption.

1: Treaties and Agreements - U.S. Department of State

2: Mutual legal assistance treaty - Wikipedia

3: International Exchange of Information Manual - GOV.UK

4: Convention on Mutual Administrative Assistance in Tax Matters

 According to the Anti-Money Laundering Specialist (the 6th edition) resources, the FATF mutual evaluation process is a peer review mechanism that assesses the level of compliance of a country with the FATF 40 recommendations and the effectiveness of its anti-money laundering and counter-terrorist financing system. The mutual evaluation report identifies the strengths and weaknesses of the assessed country and provides recommendations for improvement. The assessed country needs to address the shortcomings identified in the report and agree to post-assessment monitoring by FATF, which involves regular follow-up reports and actions to remedy the deficiencies. The other options are not correct, as they do not reflect the FATF mutual evaluation process or the obligations of the assessed country.

The compliance officer should recommend an audit for cash transactions since the last compliance review, as this would help to identify the extent of the problem, the root causes, and the potential risks involved. The audit would also provide evidence for corrective actions and remedial measures to prevent future occurrences of non-compliance. The compliance officer should not recommend terminating or suspending the teller’s employment, as this would be premature and disproportionate without a thorough investigation and due process. The compliance officer should not recommend formally reprimanding the branch manager, as this would not address the underlying issues and could create a hostile work environment.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 5, page 1251

ACAMS CAMS Certification Video Training Course, Module 5, Lesson 12

ACAMS CAMS Certification Exam Outline, Domain 5, Task 33

D

When considering sharing information across the institution or within the same jurisdiction, the key legal issue that poses challenges to sharing customer-related information is data protection and privacy laws. Data protection and privacy laws exist in most countries and can vary significantly from jurisdiction to jurisdiction. These laws place restrictions on how customer data can be used, shared, and stored, and can limit the ability of financial institutions to share customer-related information with each other. Additionally, these laws may also require financial institutions to take additional steps to ensure the protection of customer data.

A compliance officer should communicate with regulatory and law enforcement authorities in line with applicable local laws during an ongoing investigation into a client’s activities by a competent authority. This is because the compliance officer has a duty to cooperate with the authorities and provide relevant information and documents as requested, while also protecting the confidentiality and privacy of the client and the institution. The compliance officer should not restrict the communication to senior management only, as this could hinder the investigation or create a perception of obstruction. The compliance officer should not communicate only in writing, as this could limit the effectiveness and timeliness of the communication. The compliance officer should not limit the communication to the absolute minimum, as this could imply a lack of cooperation or transparency.

=

CAMS Certification Package - 6th Edition | ACAMS1

CAMS Certifications: How to Get CAMS Certified | ACAMS2

ACAMS CAMS Certification Video Training Course - Exam-Labs3

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)4

An internal investigation log is primarily intended to track the status of investigations into unusual activity. This is to ensure that the investigations are conducted in a timely, thorough, and consistent manner, and that the results and recommendations are documented and communicated to the relevant parties12. An internal investigation log can also help the organization to identify any trends, patterns, or gaps in its anti-money laundering (AML) compliance program, and to measure its effectiveness and efficiency3.

An internal investigation log is not intended to provide training on investigations to the anti-money laundering officer and Financial Intelligence Unit (FIU), report status of investigations to the Board of Directors, or detect and monitor possible suspicious activity. These are separate functions that may involve the use of the internal investigation log, but are not its primary purpose.

1: How to Conduct Effective AML Investigations - Blog | Unit211 2: BSA/AML Internal Audit: PwC2 3: Anti-Money Laundering: 5 Steps to Conduct an Audit3

 A beneficial owner is the natural person who ultimately owns or controls a legal entity or arrangement, such as a company, a trust, or a foundation. Identifying the beneficial owner is essential for preventing and detecting money laundering, terrorist financing, tax evasion, and other illicit activities that may involve the misuse of corporate vehicles. However, some individuals or entities may attempt to conceal the true beneficial ownership of a company by using various techniques, such as complex ownership structures, shell companies, bearer shares, or nominees. A nominee is a person or an entity that acts on behalf of another person or entity, usually for a fee or a commission, without disclosing the identity of the real owner or controller. Nominees can be used to protect or conceal the identity of the beneficial owner and controller of a company or asset. A nominee can help overcome jurisdictional controls on company ownership and circumvent directorship bans imposed by courts and government authorities. While the appointment of nominees is lawful in most countries, the use of nominees for money laundering purposes is illegal and a red flag for suspicious activity. Therefore, the person filling out an application on the company’s behalf indicating that a beneficial owner is a nominee for another person not named in the company’s documentation is an indicator that there is an attempt to conceal the company’s true beneficial ownership12.

The other options are not necessarily indicators of concealment of beneficial ownership, as they may have legitimate explanations or reasons. The company having a subsidiary in another jurisdiction with a local investor as a beneficial owner may be a normal business practice or a strategic decision, as long as the ownership information is transparent and accurate. Recent changes to the company’s ownership structure may reflect the company’s growth, development, or adaptation to market conditions, as long as they are documented and reported to the relevant authorities. Beneficial ownership information from the time that the company was formed several years ago not matching the current information may be due to natural changes in the company’s shareholders, directors, or managers, as long as they are updated and verified periodically.

This is the correct answer because the institution must ensure that the beneficiaries of the transfers are not on a terrorist watch list, such as the United Nations Security Council Consolidated List, the U.S. Treasury Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons List, or the European Union Terrorism List. These lists contain the names of individuals, entities, and groups that are subject to sanctions or other measures due to their involvement or association with terrorism or terrorist financing. The institution must screen the beneficiaries of the transfers against these lists and report any matches or hits to the relevant authorities. Failing to do so may expose the institution to legal, regulatory, or reputational risks, as well as facilitate the financing of terrorism.

ACAMS CAMS Certification Video Training Course1, Module 3: International AML/CTF Standards, Lesson 3.2: International AML/CTF Standards

ACAMS CAMS Study Guide, 6th Edition2, Chapter 3: International AML/CTF Standards, Section 3.2: International AML/CTF Standards, pp. 57-58

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 3: International AML/CTF Standards, Section 3.2: International AML/CTF Standards, Slide 12

According to the Certified Anti-Money Laundering Specialist (CAMS) Manual , 6th edition, if a bank's transaction surveillance system triggers an alert for a deposit of 250.000 USD into a client's account, the bank should take the following actions:

Request information and documentation from the client on the background of the transaction (CAMS Manual, 6th edition, page 46).

Contact the client advisor to learn if he has any insight on the transaction background (CAMS Manual, 6th edition, page 47).

Review the transaction background in the bank's transaction platform (CAMS Manual, 6th edition, page 47).

Discarding the alert as a false positive hit and reviewing the alert if the deposit is made in cash should not be done.

The bank should request additional information and documentation from the client to better understand the nature of the transaction. Additionally, the bank should reach out to the client advisor to learn if they have any insight on the transaction background. Finally, the bank should review the transaction background in the bank's transaction platform to determine if any additional alerts or anomalies are present. (CAMS Manual, 6th Edition, Pages 117-118)

RegularKYC reviewsensure that high-risk customersare monitored for potential changes in their risk profile.

Option D (Correct):TheKYC manager must determine why the required review was missed and implement corrective measures to prevent future failures.

Option A (Incorrect):A missed reviewdoes not necessarily indicate suspicious activity, so filing a SAR at this stage isnot appropriate.

Option B (Incorrect):Removing a customer from the high-risk list without reassessment is a compliance violation.

Option C (Incorrect):Suspending account access without due processmay belegally questionable.

Best Practices for KYC Compliance Management:

Ensure automated KYC review tracking to avoid missed reviews.

Conduct risk-based periodic reviews on high-risk customers.

Implement escalation protocols for overdue KYC reviews.

TheUSA PATRIOT Actincludes provisions allowingthe U.S. government to seize assets linked to financial crime, even when held in foreign financial institutions.

Option A (Correct):Section 319(a) of the USA PATRIOT Actprovides U.S. regulators with the authority toseize funds deposited in U.S. correspondent accounts of foreign banks if linked to illicit activity.

Option B (Incorrect):Section 314(a)focuses oninformation sharing between law enforcement and financial institutions.

Option C (Incorrect):Section 319(b)enables U.S. authorities toseize funds linked to foreign correspondent banking accounts, but319(a) specifically deals with extraterritorial forfeiture.

Option D (Incorrect):Section 314(b)allowsfinancial institutions to voluntarily share AML-related information.

Why This Matters:

Foreign banks using U.S. correspondent accounts can be subject to U.S. jurisdiction.

Helps U.S. law enforcement disrupt global money laundering networks.

Encourages financial institutions to enhance correspondent banking due diligence.

The correct answer is C, as mapping scenarios are helpful in mitigating the weakness of not generating alerts when activity is consistently abnormal over a long period of time. Mapping scenarios are used to compare a customer’s activity with their expected activity based on their profile, risk rating, or historical behavior1. By using mapping scenarios, the organization can identify customers whose activity deviates significantly from their normal or expected patterns, and flag them for further investigation. Mappingscenarios can also help detect changes in customer behavior over time, and alert the organization of any potential money laundering or terrorist financing risks.

 1: AML Scenarios: Transaction Monitoring Challenges - Unit21, page 1.

The most concerning trading pattern for a compliance officer when a new customer has been onboarded in a securities firm is the customer accumulating securities of a low volume counter in small increments on a weekly basis. This type of behavior could indicate that the customer is attempting to obscure their identity or the true purpose of their trading activity, which can be indicative of money laundering or other suspicious activity. (CAMS Manual, 6th Edition, Page 170).

'https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/wolfsberg-standards/8.%20Wolfsberg-Correspondent-Banking-Principles-2014.pdf - page 6 Monitoring and Reporting of Suspicious Activities The institution shall implement bank-wide policies and procedures to detect and investigate unusual or suspicious activity and report any such activity as required by applicable law. These will include guidance on what is considered to be unusual or suspicious and give examples thereof. The policies and procedures shall include appropriate monitoring of the Correspondent Bank’s activity, incorporating due diligence results such as customer risk rating and other factors considered meaningful in the assessment of transaction activity risk. In turn, the results of suspicious activity monitoring shall be factored into the periodic review of the client’s file, particularly when the results of transaction monitoring indicate elevated risk levels.