CAMS Sample Questions Answers

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.

References:

• 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 bank teller should not provide any information to the police officer without consulting the compliance officer first. The compliance officer is responsible for ensuring that the bank follows the applicable laws and regulations regarding customer privacy, data protection, and anti-money laundering. The compliance officer can verify the authenticity and validity of the request, determine the appropriate response, and obtain any necessary approvals or authorizations before releasing any information. The bank teller should not reject the request outright, as this could be seen as uncooperative or obstructive. The bank teller should also not provide the information after management approval, as this could bypass the compliance officer’s role and expose the bank to legal or regulatory risks.

References:

• Bank Records and Financial Privacy Laws - FindLaw1
• Anti-Money Laundering (AML) Risk Assessment | ACAMS2
• What is the Difference Between Smurfing and Structuring?3

The primary international authoritative body that designates sanctions is the United Nations (UN). The UN Security Council has the power to impose sanctions under Chapter VII of the UN Charter, which deals with threats to the peace, breaches of the peace, and acts of aggression. The UN sanctions are legally binding on all UN member states and aim to maintain or restore international peace and security. The UN sanctions can target individuals, entities, groups, sectors, or countries, and can include measures such as arms embargoes, travel bans, asset freezes, trade restrictions, or diplomatic isolation. The UN sanctions are implemented and enforced by the member states, with the assistance of the UN Secretariat and other specialized agencies. The UN sanctions are periodically reviewed and adjusted by the Security Council, based on the reports of the sanctions committees and expert panels.

References:

• 1: UN Sanctions1
• 2: UN Charter, Chapter VII2
• 3: ACAMS Study Guide for the CAMS Certification Examination3

 Enhanced due diligence (EDD) is a set of additional measures that must be applied by financial institutions (FIs) in higher-risk situations, such as when dealing with customers or transactions from high-risk third countries, customers who are politically exposed persons (PEPs), or customers who present a higher risk of money laundering or terrorist financing. EDD may include obtaining more information on the customer’s identity, source of funds, source of wealth, business relationships, and purpose of the transaction, as well as conducting more frequent and intensive ongoing monitoring of the customer’s activities.

However, EDD may be bypassed for certain situations where the risk of money laundering or terrorist financing is low, and where the customer is subject to adequate supervision and regulation in the EU or the US. According to the CAMS Study Guide - 6th Edition1, one such situation is when on-boarding a casino that is part of an international hotel chain, provides less than 50% of overall revenue and that fully complies with group-wide policies and procedures. This is because such a casino is likely to have a low risk profile, as it is not the main source of income for the hotel chain, and it adheres to the same standards and controls as the rest of the group. Therefore, EDD may not be necessary for this situation, and the FI may apply simplified due diligence (SDD) instead.

The other situations listed in the question are not eligible for bypassing EDD, as they involve higher-risk factors, such as dealing with customers or entities from high-risk third countries, customers with complex ownership structures, or customers who are PEPs. These situations require FIs to apply EDD measures to mitigate the risk of money laundering or terrorist financing.

References:

• CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 84
• White Paper on KYC — Enhanced Due-Diligence, page 2
• Anti-money laundering – a guide to customer due diligence, page 3
• Enhanced Due Diligence for High-risk Customers, page 1

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.

References: 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

The inherent level of anti-money laundering risk across the entire organization depends on various factors, such as the nature, size, complexity, and structure of the business, the customers, the products and services, and the countries or jurisdictions involved. Among the four options given, the transaction monitoring program and the customer due diligence program are not factors that determine the inherent risk, but rather measures that mitigate the risk. Therefore, they are not relevant for the compliance officer’s purpose. The countries that the bank operates in and the products and services offered by the bank are important factors that affect the inherent risk, as they may expose the bank to different levels of money laundering threats, vulnerabilities, and regulatory requirements. For example, some countries or jurisdictions have high levels of corruption, unstable governments, or are known as money laundering havens1. They could also have inadequate AML/CFT regulatory and judicial frameworks, or be subject to economic sanctions2. Similarly, some products and services may pose higher risks than others, such as those that involve cash transactions, cross-border transfers, anonymous or non-face-to-face customers, or complex or innovative features34.

References: =

• 1: AML risk-rating models | McKinsey
• 2: Money laundering and terrorist financing risks - Financial Action Task Force (FATF)
• 4: AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage
• 5: Anti Money Laundering Risk Assessment - Financial Crime Academy

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.

References:

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

 This involves breaking down large amounts of cash into smaller transactions that are below the reporting threshold of $10,000 in the United States, in order to avoid detection and reporting by the financial institution. Structuring is a red flag for money laundering and should be reported to the authorities as a suspicious activity. The other options are not necessarily indicative of money laundering, as they could have legitimate explanations. For example, the customers may have a family or business connection to the same recipient in Country B, or they may have a regular need to send money three times a week.

References:

• ACAMS CAMS Certification Video Training Course, Chapter 2: Money Laundering Risks and Methods, Section 2.2: Common Money Laundering Techniques
• Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 91
• CAMS Certification Package - 6th Edition, Study Guide, Chapter 2: Money Laundering Risks and Methods, Page 38

The customer’s wire transfers to high-risk jurisdictions and the large volume of activity with low month-end balance are two facts that should be considered during the course of an investigation into possible money laundering. These facts may indicate that the customer is trying to move funds from or to countries that have weak anti-money laundering (AML) controls, or that are known to be a source or destination of illicit funds12. They may also suggest that the customer is using a technique called “smurfing” or “structuring”, which involves breaking down large amounts of cash into smaller transactions to avoid detection or reporting34. The other two facts are not necessarily indicative of money laundering, as the customer may have a legitimate reason to have a long-standing account at the bank or to be on the exempt list for currency transaction reporting requirements.

References: 1: FFIEC BSA/AML Examination Manual, Appendix F: Money Laundering and Terrorist Financing Red Flags, Geographic Concerns, 5; 2: AML Red Flags – What are the Top 10 Indicators?, ComplyAdvantage, 6; 3: FFIEC BSA/AML Examination Manual, Appendix F: Money Laundering and Terrorist Financing Red Flags, Transaction Has Unusual Features, 5; 4: Money Laundering Red Flags | Key Behaviours and Indicators, High Speed Training, 7.

One of the key components of an effective anti-money laundering (AML) program is customer due diligence (CDD), which involves verifying the identity of the customer, understanding the nature and purpose of the customer’s relationship with the financial institution (FI), and assessing the risk of money laundering or terrorist financing that the customer poses. CDD is essential for preventing and detecting the misuse of the FI’s services by criminals, and for complying with the relevant laws and regulations.

However, CDD can be challenging for FIs that offer online services to customers, as there is a greater difficulty in matching the customer with the provided identification documentation. Unlike face-to-face interactions, online services rely on electronic or remote methods of identification and verification, such as scanned copies of documents, biometric data, digital signatures, or third-party verification services. These methods may not be as reliable or secure as physical verification, and may expose the FI to the risk of identity fraud, document forgery, or impersonation. Moreover, online services may attract customers from different jurisdictions, which may have different standards and requirements for identification and verification, and may pose different levels of risk.

Therefore, FIs that offer online services to customers should implement enhanced due diligence (EDD) measures to mitigate the risk of money laundering, such as obtaining additional information or documentation from the customer, applying more stringent verification procedures, conducting more frequent and intensive monitoring of the customer’s transactions and behavior, and restricting or limiting the types or amounts of transactions that the customer can perform online.

References:

• CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 82
• Anti-Money Laundering in a Nutshell, Chapter 4, Section 4.2, page 63
• Guidance on Digital Identity, Section 2, page 8
• Anti-Money Laundering, The Basics: Installment 1, Section 3.2, page 5

Wire stripping is the process of removing or altering the identifying information associated with a wire transfer to make it difficult to trace the origin or destination of the funds. This technique is commonly used in money laundering schemes to conceal the illicit source of funds and avoid detection by authorities or sanctions screening systems. In this case, the bank’s operations team deliberately removed the reference to the sanctioned company from the wire transfer message, thus violating the FinCEN “Travel Rule” and facilitating the evasion of sanctions.

References:

• Wire Stripping in Anti Money Laundering Parlance
• Wire Transfer Red Flags: Understanding Money Laundering and Fraud Risks
• Wire Stripping

 The best option for the compliance officer is to follow the financial institution’s established STR reporting policy, which should include procedures for reporting suspicious activity involving senior management or board members. This would ensure that the compliance officer acts in accordance with the bank’s internal controls and governance, and avoids any potential conflicts of interest or breaches of confidentiality. The other options are not advisable because they could either compromise the integrity of the STR filing, expose the compliance officer to legal or reputational risks, or alert the subject of the investigation.

References:

• ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 4, page 1401
• ACAMS CAMS Certification Video Training Course, Module 4, Lesson 22
• ACAMS CAMS Certification Practice Exam, Question 843

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.

References:

• 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 specialist should inform the bank’s senior legal advisor of the situation and seek guidance on how to handle the legal request and the internal memos. The specialist should not take any action that could compromise the integrity of the legal request, the bank’s anti-money laundering program, or the specialist’s own professional obligations. The specialist should not place the memos in his personal files, as this could be seen as hiding or tampering with evidence. The specialist should not ask the bank president to document his instructions, as this could create a conflict of interest or a perception of undue influence. The specialist should not call the law enforcement agent and suggest he modify the legal request, as this could be seen as interfering with the investigation or tipping off the account holder.

References:

• Legal Sector Affinity Group (LSAG) Anti-Money Laundering Guidance for the Legal Sector (January 2021) p. 1321
• ACAMS: Certified Anti-Money Laundering Specialist | ACAMS2
• Anti-Money Laundering – The Law Society of Singapore3

 According to the ACAMS Study Guide, an effective AML program should include four key elements: internal controls, independent testing, designated compliance officer, and training1. Internal controls are policies, procedures, and processes that help prevent, detect, and report money laundering and terrorist financing activities. One of the essential components of internal controls is customer due diligence (CDD), which involves identifying and verifying the customer, understanding the nature and purpose of the customer relationship, and conducting ongoing monitoring of customer transactions and risk profiles2. Ongoing monitoring is crucial for detecting and reporting suspicious activities, updating customer information, and reassessing customer risk ratings3.

In this case, the bank’s written AML program does not address monitoring of customer account activity, which is a significant gap in its internal controls. The bank serves high-income, high net-worth clients who include non-residents and offshore businesses, which are considered high-risk customers for AML purposes4. The bank should have enhanced due diligence (EDD) measures for these customers, such as obtaining additional information, conducting more frequent reviews, and applying stricter transaction limits5. The fact that the consultant and the bank have mutual clients does not affect the risk rating or the due diligence requirements of those customers. Therefore, the consultant should recommend the bank to revise its procedures to better assess ongoing customer activity and comply with the AML standards.

References:

• 1: ACAMS Study Guide, Chapter 2: Developing an Effective Anti-Money Laundering Program
• 2: ACAMS Study Guide, Chapter 3: Conducting Customer Due Diligence
• 3: ACAMS Study Guide, Chapter 4: Ongoing Monitoring and Suspicious Activity Reporting
• 4: ACAMS Study Guide, Chapter 5: Identifying High-Risk Customers
• 5: ACAMS Study Guide, Chapter 6: Applying Enhanced Due Diligence Measures

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.

References:

• 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

Before sharing customer records within the same jurisdiction, an FI should consider the legal and regulatory framework that governs the protection of personal data and the disclosure of client information. Different jurisdictions may have different laws and rules regarding the privacy and confidentiality of customer data, the consent and notification requirements for data sharing, the purposes and scope of data sharing, and the safeguards and accountability measures for data protection. An FI should ensure that it complies with the applicable restrictions and obligations when sharing customer records within the same jurisdiction, and that it does not violate the rights and expectations of its customers.

References:

• CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 83
• CAMS Dumps Certified Anti-Money Laundering Specialist (the 6th edition), Question 352, page 8
• CAMS Dumps Certified Anti-Money Laundering Specialist (the 6th edition), Question 352, page 8

A subpoena is a legal order that requires a person or an entity to produce documents, information, or testimony related to a legal matter. A financial intelligence unit (FIU) is a specialized unit within a financial institution that is responsible for detecting, analyzing, and reporting suspicious activities and transactions. When a bank receives a subpoena regarding one of its clients, the FIU should review the subpoena and perform a transaction review to determine if there is any evidence of money laundering, terrorist financing, fraud, or other criminal activity involving the client. The FIU should also respond fully to the subpoena by providing the requested information and documents, unless there is a valid reason to object or seek a protective order. The FIU should not adjust the client’s risk score, file a SAR, or close the client’s account based solely on the receipt of the subpoena, as these actions may be premature, inappropriate, or illegal. Adjusting the client’s risk score may require further investigation and due diligence. Filing a SAR may be unnecessary or misleading if the subpoena does not indicate any suspicious activity. Closing the client’s account may violate the bank’s contractual obligations, customer service standards, or anti-discrimination laws. Moreover, these actions may alert the client or the subject of the investigation to the existence of the subpoena, which may interfere with the legal process or jeopardize the safety of the bank or its employees.

References:

• Subpoena Responses for Financial Institutions
• Requests by Law Enforcement for Financial Institutions to Maintain Accounts
• SUBPOENA COMPLIANCE UPDATE
• [ACAMS Study Guide, 6th Edition, Chapter 5, p. 140]

 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 part of 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.

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

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

'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.

One of the main challenges and risks for online banks is the verification of customer identity and the prevention of identity fraud. Online banks are more vulnerable to money laundering and terrorist financing because they do not have face-to-face contact with their customers and may rely on third-party sources or digital methods to verify customer information. Therefore, the most important recommendation for the anti-money laundering expert to make is that the online bank ensures that prospective new customers can be properly identified and that their identity documents and information are verified using reliable and independent sources. This is also in line with the international standards and best practices for anti-money laundering and counter-terrorist financing, such as the FATF Recommendations, the Basel Committee on Banking Supervision principles, and the EU’s Fifth Anti-Money Laundering Directive123

The other options are less important or less effective than ensuring customer identification. Limiting the amount that can be processed per transaction may reduce the exposure to large-scale money laundering, but it does not prevent the use of multiple transactions or accounts to launder smaller amounts. Setting up automated programs to analyze transactions for money laundering activity may enhance the detection and reporting of suspicious transactions, but it does not address the root cause of money laundering, which is the concealment of the source and ownership of illicit funds. Ensuring that a firewall is set up to protect the transactions may improve the security and confidentiality of the online banking system, but it does not prevent the misuse of the system by money launderers who have legitimate access to the system123

References:

• 1: Anti-Money Laundering Guide for Digital Banks by sanctions.io, 2022
• 2: The fight against money laundering: Machine learning is a game changer by McKinsey, 2021
• 3: FATF Guidance on Digital Identity, 2020

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 a possible 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.

References:

• 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.”

 The key goal of EU Directives on money laundering is to establish a consistent regulatory environment across the EU to prevent money laundering and terrorist financing, and to align EU policy with international standards and best practices. EU Directives are legal acts that set out the objectives and principles that member states must achieve, but leave the choice of methods and measures to the national authorities. EU Directives on money laundering aim to harmonize the rules and obligations for FIs and other obliged entities in the areas of customer due diligence, record-keeping, reporting, supervision, and sanctions. They also aim to address the emerging threats and vulnerabilities of the financial system, such as the use of virtual assets, prepaid cards, high-risk third countries, and beneficial ownership. By creating a consistent regulatory environment across the EU, the Directives seek to enhance the effectiveness and cooperation of the AML/CFT regime, and to protect the integrity and stability of the internal market and the financial system.

References:

• 1: Guide to EU Anti Money Laundering Directives (AMLD) - ComplyAdvantage1
• 2: Directive - 2015/849 - EN - Fourth Anti-Money Laundering Directive - EUR-Lex2
• 3: EU context of anti-money laundering and countering the financing of terrorism3

as there's NO mitigating control, the temporary control system must be developed and implemented until the permanent mitigating control is developed and implemented.

Economic sanctions are penalties imposed by a country or a group of countries on another country, entity, or individual for foreign policy or security purposes. There are different types of economic sanctions, depending on the scope, objective, and mechanism of the sanctions. Some of the common types are:

• Targeted sanctions: These are sanctions that aim to minimize the adverse effects on the general population and the environment, and focus on specific individuals, entities, sectors, or activities that are responsible for or involved in the undesirable behavior or conduct. Targeted sanctions can include travel bans, asset freezes, arms embargoes, and trade restrictions on certain goods or services. For example, the United States and the European Union have imposed targeted sanctions on various officials, entities, and sectors in Russia, Iran, Syria, Venezuela, and other countries for human rights violations, nuclear proliferation, terrorism, corruption, and other reasons.
• Sectoral sanctions: These are sanctions that target a specific sector or industry of the economy of the sanctioned country, such as energy, finance, defense, or transportation. Sectoral sanctions aim to disrupt the economic activity and revenue of the targeted sector, and to create pressure on the government or regime to change its policies or behavior. For example, the United States has imposed sectoral sanctions on Iran’s oil, gas, petrochemical, and automotive industries, as well as its central bank and other financial institutions, to curb its nuclear program and support for regional proxies.
• Comprehensive sanction: These are sanctions that impose a total or near-total ban on trade, investment, and other economic relations with the sanctioned country. Comprehensive sanctions are the most severe and broadest form of economic sanctions, and they aim to isolate the country from the global market and cause severe economic hardship and social unrest. Comprehensive sanctions are often accompanied by diplomatic isolation and military intervention. For example, the United States has maintained a comprehensive embargo on Cuba since 1962, prohibiting most trade, travel, and financial transactions with the island nation, as well as supporting its political opposition and dissidents.

References:

• What Are Economic Sanctions?, Council on Foreign Relations
• Types of Economic Sanctions, Profolus
• Economic sanctions, Wikipedia
• How Economic Sanctions Work, Investopedia
• CAMS Certification Package - 6th Edition, ACAMS
• CAMS Certifications: How to Get CAMS Certified, ACAMS

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 it may 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.

References:

• 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 methods that are typically used to launder money using insurance companies are:

• The policy holder overpays the policy and moves the funds out of the policy despite paying early withdrawal penalties. This method involves placing large amounts of illicit funds into an insurance policy, usually a life insurance or an annuity, and then requesting a refund or a surrender of the policy. The policy holder may incur some fees or penalties for the early withdrawal, but they will receive a check or a wire transfer from the insurance company that appears to be a legitimate source of income. This method allows the launderer to layer and integrate the funds into the financial system.
• The policy holder uses an offshore company to pay the insurance installments. This method involves setting up a shell company or a trust in a jurisdiction with low or no tax and weak or no anti-money laundering regulations. The launderer then uses the offshore entity to purchase an insurance policy or a bond from a reputable insurance company. The offshore entity pays the premiums or the installments using the illicit funds, and the launderer can claim the benefits or the returns from the policy or the bond as clean money. This method allows the launderer to hide the true ownership and origin of the funds.

The other options are not typical methods of money laundering using insurance companies, because:

• The policy holder enters a sibling as a beneficiary of the insurance policy rather than themselves. This method does not involve any movement or disguise of the illicit funds, and it does not generate any income or return for the launderer. The beneficiary of the policy will only receive the payout upon the death of the policy holder, and the insurance company will conduct due diligence on the beneficiary before releasing the funds.
• The policy holder purchases a bond and redeems it at a discount prior to its full term. This method does not make sense for a money launderer, because it involves losing money rather than gaining money. A bond is a fixed-income instrument that pays a regular interest and a principal amount at maturity. If the bond is redeemed before its full term, the bond holder will receive less than the face value of the bond, and will also forfeit the future interest payments. This method does not help the launderer to conceal or legitimize the source of the funds.
• The policy holder is strongly interested in how many costs are incurred when taking out an insurance policy. This method does not indicate any money laundering activity, but rather a prudent and rational behavior of a potential customer. The policy holder may want to compare different insurance products and providers, and to understand the fees, charges, commissions, and taxes associated with the policy. This method does not involve any placement, layering, or integration of the illicit funds.

References:

• ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorism Financing, Section 1.2: Methods of Money Laundering, Subsection 1.2.5: Insurance Products, pp. 19-20
• AML in Insurance: How to Detect & Combat Money Laundering, Section: Common Money Laundering Methods in Insurance, Paragraphs 1-3
• Discuss Acams CAMS Exam Topic 1 Question 43, Suggested Answer by Deeanna at May 04, 2022, 10:16 PM

 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.

References:

• 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

The Financial Action Task Force (FATF) 40 Recommendations are the international standards for combating money laundering and terrorist financing, and they apply to all countries and financial institutions. The Customer Due Diligence for Banks issued by the Basel Committee on Banking Supervision provides guidance on how banks should conduct CDD and KYC procedures, and how they should manage the risks of correspondent banking and wire transfers. The Egmont Group Statement of Purpose outlines the objectives and functions of the Egmont Group, which is an international network of financial intelligence units (FIUs) that exchange information and cooperate in the fight against money laundering and terrorist financing. These three materials are relevant and useful for the bank’s expansion plans, as they cover the main aspects of AML/CFT compliance in different jurisdictions and sectors.

The USA PATRIOT Act is a US-specific legislation that enhances the powers and obligations of US authorities and financial institutions in relation to AML/CFT, but it may not be applicable or appropriate for other countries where the bank intends to operate. Therefore, it is not a necessary reference material for the bank’s international department.

References:

• FATF 40 Recommendations
• Customer Due Diligence for Banks
• Egmont Group Statement of Purpose

An institution should incorporate on-going training, periodic audits, and ability to incorporate relevant legislative and regulatory AML changes in its AML policies and procedures. These are essential elements of an effective AML program, as they ensure that the staff are aware of their roles and responsibilities, the institution is compliant with the applicable laws and regulations, and the AML program is updated and adapted to the changing risks and environment.

References: =

• 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

By delivering the same annual refresher training to all employees, the compliance officer could miss the opportunity to update the staff on any new trends, developments, or risks that have emerged in the anti-money laundering field. For example, new typologies, indicators, technologies, or best practices could be relevant for the staff to be aware of and apply in their daily work. Moreover, the compliance officer could also miss the chance to share any links to enforcement actions identifying violations in other financial institutions that could serve as lessons learned or case studies for the staff to avoid similar mistakes or gaps in their compliance program.

References:

• ACAMS CAMS Certification Video Training Course, Module 5: Risk Management, Lesson 5.4: Training1
• ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 5: Risk Management, Section 5.4: Training2

Q  Law enforcement may be given access to a financial institution customer’s financial records if they serve a legal summons or subpoena, or if they have circumstantial evidence to suspect money laundering. These are two of the exceptions to the general rule that financial institutions must protect the privacy of their customers’ financial information under the Right to Financial Privacy Act (RFPA) of 19781. The RFPA also allows access to customer records in other situations, such as with the customer’s consent, in response to judicial orders, or for certain intelligence or counterintelligence purposes1.

Option A is incorrect because a suspicious transaction report (STR) does not automatically grant law enforcement access to the customer’s financial records. The STR is a confidential document that is filed by the financial institution to the Financial Intelligence Unit (FIU) of the country, and the FIU may decide to share the information with law enforcement if it deems appropriate2. However, law enforcement still needs to follow the RFPA procedures to obtain the customer’s records from the financial institution.

Option C is incorrect because the investigation of a customer being made public in the media does not give law enforcement the right to access the customer’s financial records. The media exposure may raise the public interest or the urgency of the investigation, but it does not override the RFPA requirements. Law enforcement still needs to obtain a legal summons, subpoena, or other valid authorization to access the customer’s records from the financial institution.

References:

1: Right to Financial Privacy Act of 1978, 12 U.S.C. §§ 3401-3422 2: 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), p. 47

UESTION NO: 86

Findings from a regulatory examination report states that the job descriptions of personnel outside of the

compliance department do not include references to anti-money laundering responsibilities.

Which action should the firm take?

A. Update all job descriptions to include anti-money laundering responsibilities

B. Respond that only compliance personnel have anti-money laundering responsibilities

C. Send an email to all staff stating that personnel must observe the anti-money laundering policy

D. Reply that a description of anti-money laundering responsibilities is included in the annual training

Answer: A

According to the ACAMS Study Guide, one of the essential elements of an effective anti-money laundering (AML) program is to assign clear roles and responsibilities to all staff members, regardless of their position or department1. This ensures that everyone is aware of their obligations and expectations in relation to AML compliance, and that they receive appropriate training and guidance. Therefore, the firm should update all job descriptions to include references to AML responsibilities, such as identifying and reporting suspicious activity, conducting customer due diligence, and adhering to AML policies and procedures.

The other options are not sufficient or correct, because:

• B. Responding that only compliance personnel have AML responsibilities is incorrect, because AML compliance is not only the responsibility of the compliance department, but of the entire organization1. All staff members should be involved in the AML program and contribute to its effectiveness.
• C. Sending an email to all staff stating that personnel must observe the AML policy is not sufficient, because it does not specify what the AML policy entails, or how it applies to different roles and functions. An email is also not a permanent or formal way of communicating AML responsibilities, and it may not reach all staff members or be taken seriously.
• D. Replying that a description of AML responsibilities is included in the annual training is not sufficient, because it does not address the issue of the job descriptions, which should reflect the AML responsibilities of each position. Moreover, annual training may not be frequent or comprehensive enough to cover all aspects of AML compliance, and it may not be tailored to the specific needs and risks of each role or department.

References:

1: ACAMS Study Guide, 6th Edition, Chapter 2: Developing an Effective Anti-Money Laundering Program, page 49.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, an AML training program should include the requirement that new staff receive training during employee orientation or shortly thereafter on bank procedures. This is because new staff need to be aware of the bank’s policies and procedures for complying with the money laundering regulations, such as customer due diligence, transaction monitoring, record-keeping, and reporting of suspicious activities. Training new staff as soon as possible also helps to reduce the risk of human errors or oversights that could facilitate money laundering or terrorist financing.

References:

• : ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 143
• : ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 144
• : Technical factsheet Anti-money laundering (AML) training: frequently asked questions, page 1

According to the FATF Guidance on Private Sector Information Sharing, FIs should establish sufficient safeguards concerning the confidentiality of information shared for AML purposes, both within the same financial group and between FIs not belonging to the same group. These safeguards include ensuring that the information is shared only with authorized personnel who have a need to know, that the information is used only for the intended AML purpose, and that the information is protected from unauthorized access, disclosure, or misuse. FIs should also comply with the applicable legal and regulatory requirements on data protection and privacy, and respect the rights and interests of the customers whose information is shared1.

References:

• 1: FATF Guidance on Private Sector Information Sharing1

The compliance officer should inform the bank’s legal counsel and follow their instructions when informed of the regulator’s notice. This is the most prudent and professional course of action, as it ensures that the compliance officer acts in accordance with the bank’s policies and procedures, as well as the applicable laws and regulations. The compliance officer should also document the communication and cooperation with the legal counsel and the regulator, and preserve all relevant records and evidence relating to the matter. The compliance officer should not take any action that could compromise the integrity or confidentiality of the investigation, such as destroying records, insisting on the president’s resignation, or informing the president of the suspicions.

References:

• ACAMS CAMS Certification Study Guide, 6th Edition, page 47
• ACAMS CAMS Certification Exam Outline, 6th Edition, Domain 2, Task 2.4
• ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.4
• Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 337

The payment received from an account in an offshore jurisdiction and the lack of beneficial ownership details for the originating account are two money laundering red flags. Offshore jurisdictions are often used by money launderers to hide the source and destination of their funds, as they typically have low transparency and weak regulatory oversight. The absence of beneficial ownership information makes it difficult to identify the true owners and controllers of the funds, and to assess the legitimacy and risk of the transaction. These factors increase the possibility that the payment is related to money laundering, tax evasion, or other illicit activities.

References:

• ACAMS CAMS Certification Study Guide, 6th Edition, page 33
• ACAMS CAMS Certification Exam Outline, 6th Edition, Domain 1, Task 1.2
• ACAMS CAMS Certification Video Training Course, Module 1, Lesson 1.2
• Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 315

account opening documents and account statements are examples of supporting documentation that can help the law enforcement agency to verify the identity, profile, and activity of the customer involved in the suspicious transaction. These documents can provide useful information such as the customer’s name, address, date of birth, identification number, occupation, source of funds, transaction history, and beneficiaries. These documents can also help to establish the baseline of normal and expected activity for the customer, and to identify any deviations or anomalies that may indicate money laundering, fraud, or other criminal activities.

References:

• Suspicious Activity Report Supporting Documentation, section “What Constitutes Supporting Documentation”, paragraph 2: “Supporting documentation may include, for example, transaction records, new account information, tape recordings, e-mail messages, and correspondence.”
• Documentation Requirements: Suspicious Activity Report Supporting Documentation, section “SARs Documentation Requirements”, paragraph 2: “Keep all documents with evidence of the background, the purpose of the transactions, the trigger, the investigation carried out, and all findings and conclusions.”
• BSA/AML Manual, section “Assessing the BSA/AML Compliance Program - BSA Compliance Officer”, paragraph 3: “The BSA compliance officer is responsible for ensuring that the bank’s BSA/AML compliance program is implemented effectively, including timely updates in response to changes in regulations or business activities, and for managing all aspects of the BSA/AML compliance program. The BSA compliance officer is also responsible for ensuring that the bank’s BSA/AML compliance program is communicated to all personnel and that adequate training is provided to appropriate personnel.”

According to the ACAMS CAMS Study Guide (the 6th edition), FIUs are central agencies that receive, analyze, and disseminate financial intelligence to support the detection and prevention of money laundering, terrorist financing, and other financial crimes1. FIUs have different legal powers and functions depending on their type and jurisdiction, but generally they can use various investigative techniques, such as requesting additional information from reporting entities, accessing databases, conducting analysis, and issuing guidance12. FIUs also have access to a wide range of financial information, such as suspicious activity reports, currency transaction reports, cross-border cash declarations, and other relevant data sources, to identify and assess potential illicit activities13. Moreover, FIUs can cooperate and exchange information with domestic and foreign counterparts, subject to certain legal and operational safeguards, to facilitate cross-border investigations and prosecutions of financial crimes14.

References:

• ACAMS CAMS Study Guide (the 6th edition), Chapter 5: The Role of the Financial Intelligence Unit in Combating Money Laundering and Terrorist Financing, pages 153-1631
• What are Financial Intelligence Units (FIUs)? | Dow Jones
• Financial Intelligence Units - Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism - MONEYVAL - Coe
• The role of financial intelligence units in combating money laundering (Chapter 6) - Money Laundering

 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.

References:

• 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.

 Reciprocity is one of the high-level principles that govern the relationship between the FATF and the FSRBs. It means that both the FATF and the FSRBs should respect and acknowledge each other’s work, such as standard setting, mutual evaluations, and follow-up processes. Reciprocity also implies that the FATF and the FSRBs should have similar mechanisms or practices for ensuring effective participation of their members in their activities.

References: = The main reference for this question is the document titled “High-Level Principles and Objectives for FATF and FATF-style regional bodies” published by the FATF in February 2019. You can access it by clicking here. You can also find more information about the FSRBs and their roles on the FATF website and the Sygna blog.

Section 319(b) of the USA PATRIOT Act authorizes the U.S. government to subpoena records from any foreign bank that maintains a correspondent account in the U.S., regardless of whether the foreign bank has a physical presence in the U.S. or not. The subpoena may request any records relating to the correspondent account or any account at the foreign bank, including records maintained outside the U.S. If the foreign bank fails to comply with the subpoena, the U.S. government may direct any U.S. financial institution to terminate its correspondent relationship with the foreign bank and impose civil penalties.

References:

• Bank Records Related to Anti-Money Laundering Programs, FinCEN, accessed February 2024.

• How Patriot Act Affects Financial Institutions?, Sanction Scanner, November 2020.

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 the jurisdiction 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.

References:

• 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 Financial Action Task Force (FATF), the global standard-setter for anti-money laundering and counter-terrorist financing, two channels that can be utilized during a cross-border money laundering investigation to assist in gathering information are contacting existing liaison officers in the foreign jurisdiction and exchanging information between national law enforcement agencies. These are two of the methods that the FATF recommends in its guidance on international cooperation1. The FATF states that liaison officers can facilitate the exchange of information and intelligence, provide operational support, and coordinate joint investigations1. The FATF also encourages the use of bilateral or multilateral agreements or arrangements to enable the exchange of information and intelligence between national law enforcement agencies, as well as the use of informal networks or mechanisms, such as the Egmont Group of Financial Intelligence Units1.

Option C is incorrect because contacting the potential suspect or their family members to request information is not a recommended channel for cross-border money laundering investigations. This method may alert the suspect of the investigation, compromise the confidentiality of the information, or violate the legal rights of the suspect or their family members. Moreover, the information obtained from the suspect or their family members may not be reliable or admissible in court.

Option D is incorrect because submitting only formal requests for information to a financial intelligence unit (FIU) is not a sufficient channel for cross-border money laundering investigations. While FIUs play an important role in collecting, analyzing, and disseminating financial information, they are not the only source of information for cross-border investigations. The FATF guidance states that investigators should also seek information from other competent authorities, such as law enforcement, supervisory, or judicial authorities, depending on the nature and purpose of the information sought1. Furthermore, the FATF guidance advises investigators to use both formal and informal channels of communication, as formal requests may take longer or face legal obstacles1.

References:

1: FATF, International Co-operation Review Group, Guidance on Investigating and Prosecuting Money Laundering and the Financing of Terrorism, October 2012, pp. 13-18.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the situation that is the highest risk for money laundering and terrorist financing activity is A. A customer purchases casino chips, using small denomination bank notes, but does not engage in game play before redeeming the chips for a casino check. This is because this situation may indicate some red flags of money laundering, such as:

• Using small denomination bank notes, which may be an attempt to avoid detection or reporting by the casino or the authorities, as large amounts of cash are usually associated with criminal activity1.
• Not engaging in game play, which may indicate a lack of interest in gambling and a sole purpose of exchanging cash for a casino check, which is a more legitimate and less traceable form of payment2.
• Redeeming the chips for a casino check, which may be a way of laundering the cash through the casino, as the check can be deposited into a bank account or cashed at another location, without revealing the source of the funds3.

The other three options are less risky because:

• B. A customer purchases casino chips and engages in significant game play before requesting a casino check for the remainder is less risky, as it may indicate a genuine interest in gambling and a legitimate source of funds. However, this situation may still require further investigation and verification, as some money launderers may use gambling as a cover for their illicit activities, or may use the casino check as a way of transferring funds to another jurisdiction or person4.
• C. A customer purchases casino chips using a credit card and engages in minimal game play before redeeming the chips for a casino check is less risky, as it may indicate a low level of funds involved and a traceable source of funds. However, this situation may still require further investigation and verification, as some money launderers may use credit cards to obtain cash advances from the casino, or may use the casino check as a way of repaying their credit card debt or transferring funds to another jurisdiction or person.
• D. A customer purchases casino chips using credit from an account at an affiliated casino and engages in significant game play before redeeming the chips for a casino check is less risky, as it may indicate a regular and loyal customer of the casino and a legitimate source of funds. However, this situation may still require further investigation and verification, as some money launderers may use credit from an affiliated casino to avoid carrying cash or using credit cards, or may use the casino check as a way of transferring funds to another jurisdiction or person.

References:

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 106 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110

 According to the CAMS Study Guide, the most commonly used risk criteria for assessing the money laundering and terrorist financing risks are country risk, customer risk, and product and service risk. These criteria are based on the FATF Recommendations and the Basel Committee’s guidance on sound management of risks related to money laundering and financing of terrorism.

Country risk refers to the level of exposure to potential money laundering and terrorist financing activities in a specific jurisdiction, based on factors such as the quality of its AML/CFT regime, its level of corruption, its political and economic stability, its involvement in illicit activities, and its cooperation with international bodies.

Customer risk refers to the level of exposure to potential money laundering and terrorist financing activities associated with a specific customer or customer segment, based on factors such as the nature and purpose of the business relationship, the source and destination of funds, the type and volume of transactions, the customer’s profile and behavior, and the customer’s geographic location.

Product and service risk refers to the level of exposure to potential money laundering and terrorist financing activities associated with a specific product or service offered by a financial institution, based on factors such as the complexity, transparency, anonymity, and accessibility of the product or service, the delivery channels and payment methods used, and the degree of oversight and monitoring applied.

Reputation risk is not a risk criterion for assessing the money laundering and terrorist financing risks, but rather a potential consequence of failing to manage those risks effectively. Reputation risk refers to the potential damage to the public trust and confidence in a financial institution due to its involvement or association with money laundering and terrorist financing activities, whether directly or indirectly.

References:

• CAMS Study Guide, 6th Edition, Chapter 2: Risk Assessments, pp. 41-461
• FATF Recommendations, Recommendation 1: Assessing Risks and Applying a Risk-Based Approach2
• Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 2017, pp. 9-143

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.

References:

• 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.

References:

• CAMS Study Guide, page 1911

A financial institution should examine the country or location where the customer is from or does business, the type and size of the business the customer runs, and the legal structure of the customer’s business, because these factors can indicate the level of money laundering risk associated with the customer. For example, some countries or locations may have weak anti-money laundering laws or high levels of corruption, some types or sizes of businesses may be more prone to generating or concealing illicit funds, and some legal structures may be more complex or opaque than others, making it harder to identify the beneficial owners or controllers of the customer.

References:

• ACAMS CAMS Certification Video Training Course1, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 2: Know Your Customer (KYC) and Customer Due Diligence (CDD)
• ACAMS CAMS Certification Study Guide2, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.2: Know Your Customer (KYC) and Customer Due Diligence (CDD), Pages 42-44

The Wolfsberg Principles for Private Banking are a set of guidelines for private banking relationships that aim to prevent and detect money laundering and terrorist financing risks. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners in certain circumstances that may indicate a higher risk of money laundering or terrorist financing. Among the options given, A, B, and C are the correct choices that reflect the circumstances listed in the Principles.

Foreign jurisdictions are countries or territories other than the one where the bank operates or where the client or beneficial owner resides. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are connected to foreign jurisdictions, especially those that have weak or inadequate anti-money laundering standards, or that are subject to sanctions, embargoes, or similar measures.

High Risk Countries are countries or territories that are identified by credible sources, such as the Financial Action Task Force (FATF), as having inadequate anti-money laundering standards, or as being a source, transit, or destination of illicit funds. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are connected to high risk countries, and apply enhanced measures to mitigate the risks.

High Risk activities are activities that involve clients and beneficial owners whose source of wealth or funds originates from sectors or industries that are known to be vulnerable to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, or art and antiquities. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are engaged in high risk activities, and verify the legitimacy and origin of their wealth and funds.

References: = The main reference for this question is the document titled “Wolfsberg Anti-Money Laundering Principles for Private Banking (2012)” published by the Wolfsberg Group. You can access it by clicking here. You can also find more information about the Wolfsberg Principles and their application on the Wolfsberg Group website and the Lexology website.

Financial Intelligence Units (FIUs) are national agencies that collect, analyze, and disseminate information on suspicious or unusual financial activity, such as money laundering and terrorist financing, to relevant authorities. One of their main functions is to disseminate the results of their analysis to law enforcement agencies in a timely manner, so that they can initiate investigations or prosecutions. This is also one of the standards set by the Financial Action Task Force (FATF), the global body that sets the anti-money laundering and counter-terrorist financing (AML/CFT) policies and recommendations. The other options are not the primary responsibilities of FIUs, although they may perform them as part of their mandate or in cooperation with other agencies.

References:

• What are Financial Intelligence Units (FIUs)? | Dow Jones
• Financial Intelligence Units: An Overview - IMF
• Financial Intelligence Units - Egmont Group
• FATF Recommendation 29 - Financial Intelligence Units (page 17)

According to the ACAMS Study Guide, 6th Edition, page 184, “The decision to close an account should be made in consultation with the institution’s legal counsel and AML compliance officer, and in accordance with the institution’s policies and procedures.” Closing an account may not always be the best option, as it may trigger the customer’s suspicion, interfere with law enforcement investigations, or expose the institution to legal risks. Therefore, the institution should carefully weigh the pros and cons of closing an account, and follow its own internal guidelines.

References:

• ACAMS Study Guide, 6th Edition, page 184
• What steps should the institution take? - Exam4Training
• Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR) | AML-CFT

The Third European Union Money Laundering Directive (3MLD) is a legal framework that aims to prevent the use of the financial system for the purposes of money laundering and terrorist financing. It was adopted in 2005 and repealed by the Fourth European Union Money Laundering Directive (4MLD) in 2015. The 3MLD applies to a range of entities that are considered to be exposed to the risk of money laundering and terrorist financing, such as:

• Financial institutions, which include credit institutions, financial intermediaries, insurance companies, investment firms, and payment service providers.
• Casinos, which include both online and offline gambling services that involve wagering a stake with monetary value.
• Real estate agents, which include both natural and legal persons that act as intermediaries in the buying and selling of real property or rights over it.

The 3MLD requires these entities to implement a number of measures to prevent and detect money laundering and terrorist financing, such as:

• Conducting customer due diligence, which involves identifying and verifying the customer and the beneficial owner, understanding the purpose and nature of the business relationship, and applying enhanced or simplified measures depending on the level of risk.
• Keeping records of customer and transaction data for at least five years after the end of the business relationship or the execution of the transaction.
• Reporting suspicious transactions or activities to the competent authorities without delay and without tipping off the customer.
• Establishing internal policies, procedures, and controls to ensure compliance with the 3MLD, and providing adequate training and awareness to staff.
• Cooperating with the relevant supervisory and regulatory authorities and financial intelligence units.

The 3MLD does not apply to defense attorneys, as they are not considered to be obliged entities under the directive. However, the 3MLD does apply to other legal professionals, such as notaries, lawyers, and accountants, when they perform certain activities on behalf of their clients, such as:

• Buying and selling of real property or business entities
• Managing of client money, securities, or other assets
• Opening or managing bank, savings, or securities accounts
• Organizing contributions for the creation, operation, or management of companies
• Creating, operating, or managing trusts, companies, foundations, or similar structures

References:

• THE THIRD EU DIRECTIVE ON MONEY LAUNDERING AND TERRORIST FINANCING, page 11-12
• Anti-money laundering and countering the financing of terrorism legislative package, page 1
• CAMS Study Guide - 6th Edition, Chapter 1, Section 1.2, page 11

V

 According to the AML Directive of the EU, obliged entities, such as banks and other financial institutions, are required to apply enhanced vigilance in business relationships and transactions involving high-risk third countries, which are those identified by the Commission as having strategic deficiencies in their anti-money laundering and countering the financing of terrorism regimes1. The types of enhanced vigilance requirements are basically extra checks and control measures which are defined in article 18a of the Directive1. However, these requirements are not exhaustive, and obliged entities should also implement additional mitigating measures that are complementary to the enhanced customer due diligence procedures, in accordance with a risk based approach1. This means that obliged entities should assess the level of risk posed by each customer, product, service, transaction, or delivery channel, and apply appropriate measures to mitigate those risks2. The additional mitigating measures may include, for example, obtaining additional information on the customer and the beneficial owner, applying additional elements of enhanced monitoring, increasing the frequency and intensity of transaction testing, or requiring the first payment to be carried out through an account in the customer’s name with a bank subject to similar customer due diligence standards1.

References:

• 1: Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (Text with EEA relevance)
• 2: Guidance on Risk Factors, EBA, 2021

Reviewing parameter settings based on the latest risk assessment should be included in the evaluation of system settings for anti-money laundering alert surveillance. This is because parameter settings determine the thresholds and criteria for generating alerts based on the risk profile of the customers, products, services, channels, and jurisdictions involved in the transactions. A risk assessment is a periodic and comprehensive analysis of the potential money laundering and terrorist financing risks faced by an organization, and it should inform the design and implementation of an effective anti-money laundering program, including the alert surveillance system. By aligning the parameter settings with the risk assessment, an organization can ensure that the system is capturing the most relevant and high-risk transactions, and reducing the number of false positives or irrelevant alerts.

References:

• CAMS Study Guide 6th Edition, page 37-38.
• Implementing AML Transaction Monitoring Systems: Critical Considerations, page 2-3.
• 3 techniques to improve AML transaction monitoring strategies, page 2.

Wash trading is the term for trading through multiple accounts, where an individual generates offsetting profits and losses and transfers of positions through accounts that do not appear to be commonly controlled. Wash trading is a form of market manipulation that creates artificial trading activity and volume, and may be used to evade taxes, inflate prices, or launder money. Wash trading can also involve the use of third parties or intermediaries to conceal the true identity and source of funds of the trader.

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

• The document titled “Money Laundering and Terrorist Financing Typologies and Trends in Canadian Securities Dealers” published by the Investment Industry Regulatory Organization of Canada (IIROC) in December 2019. You can access it by clicking here. This document states that “Wash trading is a form of market manipulation where an individual simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. Wash trading is illegal under securities law because it misleads investors and regulators about the true supply and demand of the securities involved. Wash trading can also be used to evade taxes, inflate prices, or launder money.”
• The document titled “Market Manipulation” published by the Financial Industry Regulatory Authority (FINRA). You can access it by clicking here. This document states that “Wash sales are a form of market manipulation in which an investor simultaneously sells and buys the same security to create misleading, artificial activity in the marketplace. Wash sales are illegal under Section 9(a)(1)(A) of the Securities Exchange Act of 1934. Wash sales can be used to manipulate the price of a security, evade taxes, or launder money.”

 According to the Egmont Group of Financial Intelligence Units, which is a global network of FIUs that promotes information exchange and cooperation, FIUs making requests to another FIU should disclose the reason and purpose for the request, and provide feedback on how the information was used12. These actions are intended to enhance mutual trust, transparency, and accountability between FIUs, and to facilitate the effective use of financial intelligence and information for combating money laundering, terrorist financing, and other financial crimes12. FIUs making requests should also respect the confidentiality and data protection requirements of the FIU receiving the request, and avoid imposing unreasonable or unduly restrictive conditions12.

FIUs making requests should not send the same request to all FIUs, as this would be inefficient, unnecessary, and potentially harmful. FIUs should only send requests to FIUs that are relevant and competent to provide the information they need, based on the nature and scope of the case12. Sending the same request to all FIUs could overload the system, create duplication, and compromise the security and confidentiality of the information12. FIUs making requests should also make best efforts to provide complete and factual information, but this is not an action they should take when submitting a request, but rather when responding to a request from another FIU12.

References:

• Egmont Group of Financial Intelligence Units Operational Guidance for FIU Activities and the Exchange of Information
• Principles for Information Exchange Between Financial Intelligence Units

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.

References:

• 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’s Office 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. "

According to the ACAMS CAMS Study Guide, one of the common methods of money laundering and terrorist financing is to structure transactions to avoid reporting or record keeping requirements. Structuring involves breaking down a large amount of cash into smaller transactions that fall below a specified threshold, or using different accounts, agents, locations, or days to conduct the transactions. Therefore, the fact that the two customers remit the same amount of funds, $2,500, each week to the same recipient in a high-risk country is a red flag for possible money laundering or terrorist financing activity, as it suggests that they are trying to evade the record keeping threshold of $3,000 for money transmitters in the United States12.

References:

• ACAMS CAMS Study Guide, 6th Edition, page 27
• FFIEC BSA/AML Appendices - Appendix F – Money Laundering and Terrorist Financing Red Flags1
• AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage2

International wire transfers are considered to be of highest money laundering risk because they can facilitate the rapid and anonymous movement of funds across borders and jurisdictions, making it difficult for law enforcement and regulators to trace the origin and destination of the funds, and to identify the beneficial owners and controllers of the accounts involved. International wire transfers can also be used to layer and integrate illicit proceeds into the legitimate financial system, by disguising the source, ownership, and purpose of the funds. International wire transfers can involve multiple intermediaries, complex payment chains, and inconsistent or incomplete information, which can increase the risk of money laundering and terrorist financing. Therefore, international wire transfers are subject to enhanced due diligence, record-keeping, and reporting requirements under various anti-money laundering and counter-terrorist financing (AML/CTF) regulations and standards, such as the Financial Action Task Force (FATF) Recommendations1, the European Union (EU) Funds Transfer Regulation2, and the United States (US) Bank Secrecy Act3.

References:

1: FATF (2012), International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, FATF, Paris, France, Recommendation 16 and Interpretive Note to Recommendation 16. 2: Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1) 4 3: 31 U.S.C. §§ 5311-5330 and 31 C.F.R. Chapter X

V

You cannot make international money transfers unless the money is credited to the account. So first priority saving account, subsequent risk international wire transfer

"A savings account, as well as a checking account, can be one of the riskiest financial instruments for money laundering operations given the ease with which it can be opened and operated".

According to the FATF Recommendations, the competent authority that should directly receive suspicious or unusual transaction reports is the financial intelligence unit (FIU). The FIU is a central, national agency responsible for receiving, analyzing and disseminating information related to money laundering and terrorist financing. The FIU should have operational independence and autonomy, and should be able to exchange information with other domestic and foreign authorities. The FIU should also provide feedback to the reporting entities on the use and value of their reports.

References: =

• 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
• FATF Recommendations, Recommendation 29: Financial Intelligence Units

http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf

According to the Basel Committee’s paper on Customer Due Diligence for Banks1, banks should review their existing customer relationships on a regular basis, especially for higher risk categories of customers or business relationships. This includes identifying whether the customer or the beneficial owner is a PEP, either at the account opening stage or later, as a result of a change in the customer’s circumstances or profile. The paper also states that banks should apply a risk-based approach to determine the appropriate level and type of due diligence depending on the risk profile of the customer or the beneficial owner.

References:

• Basel Committee on Banking Supervision, Customer due diligence for banks, October 20011
• FATF Guidance: Politically Exposed Persons (Recommendations 12 and 22), June 20132
• ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 4

A money remittance business will most likely attract money launderers because it deals primarily in cash transactions, engages in international transactions, and conducts transactions for walk-in customers. These factors make money remittance businesses vulnerable to money laundering risks, such as:

• Cash transactions: Cash is the preferred medium of exchange for money launderers, as it is anonymous, untraceable, and easily convertible. Money remittance businesses often deal with large amounts of cash, which can be used to place, layer, or integrate illicit funds into the financial system. Cash transactions also pose challenges for customer identification, record keeping, and transaction monitoring.
• International transactions: Money remittance businesses facilitate cross-border transfers of funds, which can be used to move illicit funds from one jurisdiction to another, or to obscure the origin, destination, or purpose of the funds. International transactions also involve exposure to different legal, regulatory, and cultural environments, which may create inconsistencies or gaps in anti-money laundering (AML) and counter-terrorism financing (CTF) standards and practices.
• Walk-in customers: Money remittance businesses often serve walk-in customers, who may not have an established relationship with the business, or who may use false or incomplete identification documents. Walk-in customers also increase the volume and complexity of transactions, which may make it difficult to detect suspicious or unusual activity, or to apply risk-based due diligence measures.

References:

• 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. 37-38
• 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 16

According to the Basel Committee on Banking Supervision’s Customer Due Diligence for Banks, the compliance function should provide an evaluation of a bank’s policies and procedures independent from its management. The compliance function is responsible for ensuring that the bank adheres to the relevant laws, regulations, and standards on customer due diligence, anti-money laundering, and combating the financing of terrorism. The compliance function should also monitor the implementation and effectiveness of the bank’s customer due diligence policies and procedures, identify and report any breaches or deficiencies, and recommend corrective actions or improvements. The compliance function should have sufficient authority, independence, resources, and access to information to perform its duties effectively.

References:

• Customer due diligence for banks, Basel Committee on Banking Supervision, October 2001, paragraphs 55-56
• CAMS Study Guide - 6th Edition, Chapter 6, page 172
• CAMS Certification Exam Outline, Domain 3, Task 3.1, Skill 3.1.2
• Anti-Money-Laundering Guidance: Basel Committee Consultative Paper …, Office of the Comptroller of the Currency, February 2001, page 2

Money laundering through real estate is a common method of disguising the source and ownership of illicit funds. Real estate transactions often involve large amounts of money, complex legal structures, and cross-border transfers, which can obscure the true nature and origin of the funds. The new business customer in this scenario raises several red flags that warrant enhanced due diligence, such as:

• The business was established five years ago but has a vague website and no physical presence in the state where it is registered.
• One of the principals has an international phone number and lives abroad, which could indicate a foreign shell company or a politically exposed person.
• The other principal works out of a recreational vehicle, which could suggest a lack of legitimate business activity or income.
• The business claims to be a real estate business, but does not provide any details about its projects, clients, or partners.

These factors suggest that the business may be involved in money laundering through real estate, either by purchasing properties with illicit funds, using properties to generate illegal income, or selling properties to launder money. Therefore, the financial institution should conduct enhanced due diligence to verify the identity, background, and source of funds of the business and its principals, as well as the purpose and nature of the account relationship.

References:

• ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 2: Money Laundering Risks and Methods, pp. 46-47
• Enhanced Due Diligence in Construction and Real Estate, by James Swenson, Ethixbase 360
• Due Diligence & Legal Considerations in Commercial Real Estate, by Justia

The correct answer is A and C. Law enforcement should determine who are the signatories on the account and examine the flow of money from the company to the individual in an effort to determine if it is legitimate. These steps would help to identify the source and destination of the funds, the purpose and nature of the transactions, and the possible involvement of money laundering or other financial crimes. Asking the bank for the history of the multi-level marketing company (B) may not be relevant or useful, as the company may have a legitimate business model or a false front. Examining possible Suspicious Activity Report information received from the local Financial Intelligence Units (D) may be helpful, but it is not a necessary step, as the bank may not have filed any reports or the reports may not contain sufficient information.

References:

• ACAMS CAMS Certification Video Training Course1, Module 4: Conducting or Supporting the Investigation Process, Lesson 1: Investigating Techniques for Law Enforcement
• ACAMS CAMS Certification Study Guide2, Chapter 4: Conducting or Supporting the Investigation Process, Section 4.1: Investigating Techniques for Law Enforcement, pp. 125-126

The first thing the anti-money laundering specialist should do is to conduct a risk assessment of the bank’s international electronic fund transfer activity. This is to identify and measure the potential money laundering and terrorist financing risks associated with the bank’s products, services, customers, and geographic locations. A risk assessment can help the anti-money laundering specialist to:

• Understand the nature and extent of the bank’s exposure to money laundering and terrorist financing threats and vulnerabilities.
• Establish a risk-based approach to the design and implementation of the anti-money laundering compliance program, including policies, procedures, controls, monitoring, reporting, and training.
• Allocate appropriate resources and prioritize actions to mitigate the identified risks and enhance the effectiveness of the anti-money laundering compliance program.
• Demonstrate to the regulators and auditors that the bank has a sound and comprehensive anti-money laundering compliance program that is commensurate with its risk profile and business activities.

References:

• CAMS Study Guide - 6th Edition, Chapter 6, pages 167-168
• CAMS Certification Exam Outline, Domain 3, Task 3.1, Skill 3.1.1
• Anti-Money Laundering Bulletin November 2021 - Central Bank of Ireland, pages 4-5
• Money Laundering through Money Remittance and Currency Exchange Providers, FATF, June 2010, pages 7-8
• REGULATIONS - FIU, Part III, Regulation 9, pages 9-10

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.

References:

• 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

it describes a reason why trusts established in certain offshore jurisdictions make good vehicles to layer money, which is names of the settlor and beneficiaries are not publicly available. This means that the true owners and controllers of the funds or assets held by the trust are hidden from the public and the authorities, and can only be accessed by the trustee or the protector, who may be complicit or unaware of the money laundering scheme. This creates a high level of anonymity and secrecy for the money launderers, who can use the trust to move, disguise, or conceal the origin and destination of their illicit funds.

The other options are not necessarily reasons why trusts established in certain offshore jurisdictions make good vehicles to layer money, although they may have some advantages or disadvantages depending on the circumstances and the risk profile of the customers and countries involved. Option B describes a possible motive for setting up a trust in an offshore jurisdiction, which is to minimize taxes, but this does not imply that the trust is used to layer money, as there may be legitimate tax planning or optimization purposes. Option C describes a possible challenge or obstacle for setting up a trust in an offshore jurisdiction, which is offshore jurisdictions are unfamiliar with trust, but this does not imply that the trust is used to layer money, as there may be other legal or financial vehicles available in those jurisdictions. Option D describes a possible characteristic or feature of a trust, which is trusts may hold assets of significant size, but this does not imply that the trust is used to layer money, as there may be valid reasons or sources for the large assets.

References:

• 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 4, pages 86-87

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

The board of directors is ultimately responsible for ensuring that the financial institution has an effective anti-money laundering program that complies with the applicable laws and regulations. If the institution receives a regulatory enforcement action, the board should take prompt and corrective actions to address the deficiencies and mitigate the risks of further violations or penalties. One of the most important actions is to instruct the compliance officer to develop a plan to remediate the institution’s anti-money laundering program, which should include a root cause analysis, a gap assessment, a timeline, and a budget. The board should also monitor the implementation and progress of the remediation plan, and communicate with the regulators on a regular basis.

The other options are not appropriate actions for the board of directors to take in response to a regulatory enforcement action. Terminating the compliance officer and staff may not solve the underlying issues of the anti-money laundering program, and may create more disruption and instability. Purchasing and installing a new suspicious activity monitoring system may not be necessary or sufficient to address the deficiencies, and may entail additional costs and challenges. Hiring an attorney to protest the enforcement action may not be in the best interest of the institution, and may antagonize the regulators and escalate the situation.

References:

• CAMS Certification Package - 6th Edition | ACAMS, Chapter 5: Risk Management, Section 5.2: Regulatory Examinations and Enforcement Actions, pp. 171-174.
• CAMS Certifications: How to Get CAMS Certified | ACAMS, CAMS Examination Preparation Guide, Section 3: Regulatory Compliance, pp. 23-24.

U.S. law requires that assets and accounts of an OFAC-specified country, entity, or individual be blocked when such property is located in the United States, is held by U.S. individuals or entities, or comes into the possession or control of U.S. individuals or entities.

For example, if a funds transfer comes from offshore and is being routed through a U.S. bank to an offshore bank, and there is an OFAC-designated party to the transaction, it must be blocked. The definition of assets and property is broad and is specifically defined within each sanction program. Assets and property includes anything of direct, indirect, present, future, or contingent value (including all types of bank transactions). Banks must block transactions that:

• Are by or on behalf of a blocked individual or entity;

• Are to or go through a blocked entity; or

• Are in connection with a transaction in which a blocked individual or entity has an interest.

 these are the essential components of an effective anti-money laundering program for any financial institution, especially an offshore one. According to the CAMS Study Guide, 6th Edition, an anti-money laundering program should include the following elements1:

• A risk assessment that identifies and evaluates the money laundering and terrorist financing risks faced by the institution, and the measures taken to mitigate them.
• A compliance program that establishes policies, procedures, and controls to prevent, detect, and report money laundering and terrorist financing activities, and to comply with the applicable laws and regulations of the host and chartering countries.
• A designated compliance officer who is responsible for overseeing the implementation and maintenance of the compliance program, and for liaising with the relevant authorities and stakeholders.
• A training program that provides regular and appropriate education and awareness to senior management and staff on their roles and responsibilities in relation to anti-money laundering and terrorist financing, and on the latest trends and typologies in these areas.
• An independent audit function that reviews and tests the adequacy and effectiveness of the compliance program, and reports the findings and recommendations to senior management and the board of directors.

The Basel Committee on Banking Supervision’s capital adequacy requirements for the host country (answer A) are not directly related to anti-money laundering, but rather to the prudential regulation and supervision of banks. They are important for ensuring the financial soundness and stability of banks, but they are not sufficient to prevent or combat money laundering and terrorist financing2.

References:

1: CAMS Study Guide, 6th Edition, Chapter 5: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), page 139-140. 2: Basel Committee on Banking Supervision, Bank for International Settlements.

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 37, one of the red flags of money laundering or terrorist financing is the use of nominees, trusts, or third parties to hide the identity, ownership, or control of the funds or assets involved in the transaction. Nominees are individuals or entities that act on behalf of the actual or beneficial owners of a company, trust, or account, and may be used to conceal the source, destination, or purpose of the funds or assets. Nominees may also be used to evade taxes, sanctions, or regulatory requirements.

In this case, the compliance officer is unable to verify the identity of the beneficial owners of the company, and only information on the nominee owners was provided. This raises the suspicion that the company may be involved in money laundering or terrorist financing activities, and that the nominee owners may be acting as fronts or intermediaries for the actual or beneficial owners. The compliance officer should conduct further due diligence on the company, the nominee owners, and the beneficial owners, and report any suspicious or unusual activity to the relevant authorities.

References:

• ACAMS Study Guide 6th Edition, Chapter 2, page 37
• Beneficial Ownership Meaning and Regulation - Investopedia
• What is a nominee shareholder? | LawBite

According to section 312 of the USA PATRIOT Act, U.S. financial institutions that maintain correspondent accounts for foreign financial institutions must apply due diligence to such accounts. The due diligence must include obtaining information relating to the foreign bank’s anti-money laundering program, as well as the identity of any person who owns 10% or more of the foreign bank, unless the foreign bank is publicly traded. These requirements are intended to prevent the use of correspondent accounts by foreign shell banks or other entities that may pose a high risk of money laundering or terrorist financing.

References:

• USA PATRIOT Act | FinCEN.gov
• FACT SHEET for Section 312 of the USA PATRIOT Act Final Regulation and Notice of Proposed Rulemaking | FinCEN.gov
• US PATRIOT ACT | State Street
• CAMS Exam: USA PATRIOT Act Requirements for Opening a Correspondent Account

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.

References:

• 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.

According to 18 U.S.C. § 1956, the money laundering statute, the property involved in a financial transaction must represent the proceeds of some form of unlawful activity, which is defined as a specified unlawful activity (SUA). SUAs include over 250 crimes in six categories, such as RICO predicate offenses, certain offenses against foreign nations, acts constituting a criminal enterprise under the Controlled Substances Act, and federal health care offenses. Therefore, in order to pursue a money laundering conviction, the government must prove that at least one SUA was committed and that the property involved in the transaction was derived from that SUA.

References:

• 18 U.S. Code § 1956 - Laundering of monetary instruments, (a)(1) and ©(7).
• 957. Money Laundering—18 U.S.C. §§ 1956 & 1957, first paragraph.
• Specified Unlawful Activities (SUA), first paragraph.

The USA PATRIOT Act imposes several requirements on U.S. financial institutions when dealing with foreign financial institutions, especially those that pose a high risk of money laundering or terrorist financing. Two of these requirements are:

• Performing enhanced due diligence on shell banks: A shell bank is a bank that has no physical presence in any country and is not affiliated with a regulated financial group. The USA PATRIOT Act prohibits U.S. financial institutions from opening or maintaining correspondent accounts for shell banks, and requires them to take reasonable steps to ensure that their correspondent accounts are not being used by shell banks indirectly12.
• Performing due diligence on correspondent accounts: A correspondent account is an account established by a financial institution to receive deposits from, make payments on behalf of, or handle other financial transactions for a foreign financial institution. The USA PATRIOT Act requires U.S. financial institutions to collect and verify certain information about the foreign financial institution, such as its ownership, licensing, and anti-money laundering policies, and to assess the risk of money laundering or terrorist financing associated with the correspondent account13.

References:

• CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pages 82-84
• CAMS Certifications: How to Get CAMS Certified | ACAMS, Candidate Handbook, page 14
• ACAMS CAMS Certification Video Training Course - Exam-Labs, Video 3.4: Correspondent Banking and Money Laundering Risks

The method of purchasing chips with cash and redeeming them for a check is used to launder money in casinos. This is because the check can be deposited into a bank account or cashed at another location, creating a paper trail that appears to be legitimate. The check can also be used to conceal the source and amount of the cash, as well as the identity of the person who obtained it. This method is also known as “chip washing” or “chip dumping” and is one of the common ways that money launderers exploit casinos12.

References:

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and Methods, p. 32-33 2: FATF Report: Money Laundering through the Physical Transportation of Cash, October 2015, p. 28-29, http://www.fatf-gafi.org/media/fatf/documents/reports/money-laundering-through-transportation-cash.pdf

The Egmont Group’s 100 Cases1, the Financial Action Task Force Typologies2, and FinCEN’s SAR Activity Review3 are all sources of information related to money laundering trends, methods, and risks. They provide examples, analysis, and guidance on how to detect, prevent, and report money laundering and other financial crimes. The Wolfsberg Principles4, on the other hand, are a set of global standards for the prevention of money laundering in the correspondent banking and private banking sectors. They are not intended to provide information on money laundering trends, but rather to establish best practices and minimum requirements for financial institutions to comply with anti-money laundering regulations and expectations.

References:

• Egmont Group’s 100 Cases1
• Financial Action Task Force Typologies2
• FinCEN’s SAR Activity Review3
• The Wolfsberg Principles4

Structuring is the intentional evasion of a reporting or recordkeeping requirement by breaking down a large transaction into smaller ones, or by using multiple accounts, institutions, or persons to avoid triggering the threshold for reporting or recordkeeping. Structuring is also known as smurfing, and it is a common technique used by money launderers to conceal the source, ownership, or control of illicit funds.

References: =

• ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2, Section 2.1.1, page 511
• ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.1, video time 7:00-8:002
• ACAMS CAMS Certification Practice Exam, Question 134, page 2853

 A U.S. bank must block or reject an international funds transfer when there is an OFAC designated party to the transaction, regardless of the beneficiary or the correspondent bank. This is because the U.S. bank is prohibited from dealing with any person or entity that is on the Specially Designated Nationals and Blocked Persons List (SDN List) or subject to any other OFAC sanctions program1. The SDN List includes individuals, groups, and entities, such as terrorists and narcotics traffickers, that are designated under programs that are not country-specific2. The U.S. bank must also report any blocked or rejected transactions to OFAC within 10 business days3.

References: 1: FFIEC BSA/AML Office of Foreign Assets Control - Office of Foreign … 2: Specially Designated Nationals And Blocked Persons List (SDN) Human … 3: [Reporting Blocked Transactions | Office of Foreign Assets Control]

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, designated BSA/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.

References:

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

"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. Financial institutions should draft procedures that document the factors to consider when determining whether a suspicious transaction report (STR) is appropriate."

Bringing $15,000 worth of chips into the casino is a red flag because it could indicate that the customer is trying to avoid the currency transaction reporting (CTR) requirement for cash transactions over $10,0001. Requesting a wire transfer to an unrelated third party is another red flag because it could indicate that the customer is trying to conceal the source or destination of the funds, or transfer them to a high-risk jurisdiction2.

References:

1: ACAMS CAMS Certification Video Training Course, Module 3: Casinos and Gaming, Section 3.1: Regulatory Requirements, Slide 8 2: ACAMS CAMS Certification Video Training Course, Module 3: Casinos and Gaming, Section 3.2: Money Laundering Methods and Red Flags, Slide 11

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 enhanced due 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 that does not affect the compliance with the anti-money laundering and counter-terrorist financing standards12

References:

• 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

According to the FATF typology report 2000-20011, lawyers can provide a range of functions that can be useful to a potential money launderer, such as:

• Creating complex legal arrangements, such as trusts, foundations, or corporations, that can obscure the identity and ownership of the beneficial owners or the origin and destination of the funds.
• Buying and selling property, such as real estate, art, or jewelry, that can be used to transfer or store illicit proceeds or to provide a legitimate cover for the source of funds.
• Performing financial transactions on behalf of a client, such as opening bank accounts, transferring funds, issuing checks, or exchanging currencies, that can facilitate the movement or concealment of illicit funds.

Providing legal advice, on the other hand, is not a function that can be directly exploited by a money launderer, unless the advice is related to the above functions or to the avoidance or evasion of anti-money laundering laws and regulations.

References:

1: FATF Terrorist Financing Typologies Report - Financial Action Task Force2

Physical certificates are documents that represent ownership of securities, such as stocks or bonds, that are issued by a company or a government. Physical certificates present a money laundering risk to broker-dealers for two reasons:

• The trade information on a physical certificate can be easily altered, such as the name of the owner, the date of issuance, or the number of shares. This can facilitate the concealment or falsification of the origin, ownership, or value of the securities, and enable the laundering of illicit funds through the purchase or sale of the securities.
• Physical certificates may be provided to nominees for deposit or settled in off-market transactions, such as private placements, bearer bonds, or direct transfers. This can bypass the normal reporting or recordkeeping requirements of the broker-dealer, and avoid the scrutiny or verification of the identity, source of funds, or beneficial ownership of the securities.

References:

• Two Reasons Physical Certificates Pose Money Laundering Risks to Broker …
• CAMS Certifications: How to Get CAMS Certified | ACAMS
• ACAMS Online Certificates | ACAMS

 The financial institution should perform further investigation to verify the legitimacy of the tour guide’s explanation and the source of funds. If the investigation reveals any suspicious or unusual activity, such as inconsistent cash flow patterns, involvement of high-risk customers or jurisdictions, or indications of money laundering or terrorist financing, the financial institution should report the activity to the authorities and consider terminating the relationship. The financial institution should also document the investigation and its findings, and update the customer’s risk profile accordingly.

References:

• CAMS Study Guide - 6th Edition, Chapter 4, page 112
• CAMS Certification Exam Outline, Domain 1, Task 1.2, Skill 1.2.2
• ACAMS MoneyLaundering.com, Article: “How to Conduct Effective Customer Due Diligence”

The Financial Action Task Force (FATF) 40 Recommendations address the transparency and beneficial ownership of legal persons (such as companies, foundations, associations, etc.) and legal arrangements (such as trusts, fiducies, anstalts, etc.) in Recommendations 24 and 25. These recommendations aim to prevent the misuse of legal persons and arrangements for money laundering, terrorist financing and other illicit purposes, by requiring countries to ensure that accurate and up-to-date information on the natural persons who ultimately own or control them (the beneficial owners) is available to the competent authorities in a timely manner.

References:

• CAMS Study Guide - 6th Edition, Chapter 4, page 112
• CAMS Certification Exam Outline, Domain 1, Task 1.2, Skill 1.2.2
• Guidance on Transparency and Beneficial Ownership, FATF, October 2014
• Recommendation 24: Transparency and beneficial ownership of legal persons, FATF
• [Recommendation 25: Transparency and beneficial ownership of legal arrangements], FATF

Screening customers at onboarding and quarterly thereafter is not sufficient to ensure compliance with economic sanctions, as sanctions lists may change frequently and the financial institution may not be aware of the latest updates. Screening should occur promptly after list updates to ensure that the financial institution is not dealing with a sanctioned individual or entity, or facilitating a prohibited transaction. This is recommended by the international guidance from the Financial Action Task Force (FATF) and the Wolfsberg Group12. Screening and performing enhanced due diligence on new relationships is also important, but not the only step to ensure compliance.

References:

• CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Sanctions, page 86
• The Wolfsberg Group Correspondent Banking Due Diligence Questionnaire 2014, Section 5: Sanctions Policy, page 12
• ACAMS CAMS Certification Video Training Course - Exam-Labs, Video 3.1: Sanctions
• Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 109

The European Union Fourth Anti-Money Laundering Directive (4th AMLD) is a legal framework that aims to prevent the use of the Union’s financial system for the purposes of money laundering and terrorist financing. One of the provisions of the 4th AMLD is to lower the currency threshold for cash payments from €15,000 to €10,000. This means that any person who makes or receives cash payments of €10,000 or more, whether in a single transaction or in several linked transactions, is subject to customer due diligence and record-keeping obligations. The 4th AMLD also extends its applicability to providers of gambling services, which are now listed as ‘obliged entities’.

References:

• Directive - 2015/849 - EN - Fourth Anti-Money Laundering Directive - EUR-Lex, Article 11 and Recital 23.
• EUR-Lex - 02015L0849-20210630 - EN - EUR-Lex, Article 11 and Recital 23.
• Key elements of the 4th EU Anti-Money Laundering Directive, Section: Cash payments.
• Anti-money laundering and countering the financing of terrorism legislative package, Section: New EU AML/CFT Regulation.

QUE According 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 the suspect that the investigator is not confident or competent, and it may give the suspect a chance to prepare or rehearse their answers2.

References:

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.

References:

• ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 2, page 41-42
• FFIEC BSA/AML Appendices - Appendix F – Money Laundering and Terrorist Financing Red Flags, page 1-2
• 4 Red Flags of Money Laundering or Terrorist Financing, page 1
• Money Laundering Red Flags | Key Behaviours and Indicators, page 1

Enhanced due diligence (EDD) is a higher level of customer due diligence that is required for customers or accounts that pose a higher risk of money laundering or terrorist financing. According to the FATF Recommendations, EDD measures may include obtaining additional information on the customer, the beneficial owner, the intended nature and purpose of the business relationship, the source and destination of funds, and the reasons for transactions. EDD is also required for customers or accounts that are from or in countries that do not have adequate AML/CFT systems or are subject to sanctions or embargoes.

Among the four categories of customers or accounts listed in the question, lawyers, foreign exchange dealers, and precious metal dealers are considered as high-risk by the FATF and other international standards, and therefore require EDD. Lawyers may be involved in transactions that conceal the origin or ownership of illicit funds, such as creating shell companies, trusts, or foundations. Foreign exchange dealers may facilitate the movement of illicit funds across borders or jurisdictions, or provide anonymous or pseudonymous services. Precious metal dealers may deal with high-value goods that are easily convertible into cash, or may be used to launder proceeds of crime or evade sanctions.

Retail account holders, on the other hand, are generally considered as low-risk customers or accounts, unless they exhibit unusual or suspicious behavior or transactions. Therefore, they do not require EDD by default, but only when there are specific indicators of higher risk.

References:

• [ACAMS Study Guide for the CAMS Certification Examination, 6th Edition], Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pp. 75-76, 79-80.
• FATF Guidance on Correspondent Banking Services, October 2016, pp. 7-8, 12-13.
• Customer Due Diligence - Overview, Federal Financial Institutions Examination Council, April 2018, pp. 1-2, 5-6.
• Customer due diligence, The Law Society, accessed on February 9, 2024.
• Anti-Money Laundering (AML) Source Tool for Broker-Dealers, U.S. Securities and Exchange Commission, May 16, 2022, pp. 1-2, 5-6.

Assessing AML/CFT is an ongoing and evolving component of maintaining a compliant AML/CFT program. Evaluating the risk-scoring model and conducting the risk assessment itself may need to be performed annually, every 18 to 24 months, before the launch of a new product or when an acquisition of another financial institution occurs.

According to the ACAMS CAMS Certification Video Training Course1, one of the red flags for money laundering is “transferring funds to or from foreign countries or jurisdictions that are known to have weak anti-money laundering standards or are considered high-risk for money laundering or terrorist financing” (Module 2, Lesson 3, Part 2). This is also consistent with the suspicious activity report (SAR) criteria, which require financial institutions to report transactions that “involve funds derived from illegal activity or are intended or conducted to hide or disguise funds or assets derived from illegal activity” or “involve the use of the financial institution to facilitate criminal activity” (31 CFR § 1020.320(a)(2)). Therefore, the customer’s request to transfer funds to accounts in three different foreign jurisdictions should be the focus of the SAR, as it may indicate an attempt to launder money or finance terrorism.

References:

• ACAMS CAMS Certification Video Training Course
• [31 CFR § 1020.320 - Reports by banks of suspicious transactions]

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.

References:

• 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 Article 1(3) of Directive (EU) 2015/849 (4th Anti-Money Laundering Directive, 4AMLD), “knowledge, intent or purpose” required as an element for money laundering may be inferred from objective factual circumstances. This means that the prosecution does not need to prove the actual state of mind of the offender, but can rely on the evidence of the surrounding facts and circumstances that indicate the offender’s awareness or intention to launder money. This is consistent with the approach of the Financial Action Task Force (FATF), which defines money laundering as the intentional act of concealing or disguising the origin of criminal proceeds.

References:

• Directive - 2015/849 - EN - Fourth Anti-Money Laundering Directive - EUR-Lex, Article 1(3).
• Preventing abuse of the financial system for money laundering and terrorist financing, Summary.
• New Directive on Criminalisation of Money Laundering - eucrim, Introduction.

 The correct answer is B, because it describes a method of money laundering known as structuring or smurfing. This is when a customer or a group of customers break down large amounts of illicit funds into smaller transactions that are below the reporting threshold, and then send them to another customer or entity, often in another country. This way, they avoid triggering any suspicion or regulatory reporting by the bureau de change or money services business (MSB) that processes the wire transfers. Structuring or smurfing is a common technique used by money launderers to move funds across borders and disguise their origin and destination.

The other options are not necessarily indicative of money laundering, although they may require further investigation depending on the circumstances and the risk profile of the customers and countries involved. Option A describes a regular and small wire transfer that may be legitimate, such as a remittance to a family member or a friend. Option C describes a large volume of wire transfers that may be related to a seasonal or business activity, such as a holiday or a trade event. Option D describes a series of small wire transfers that may be coincidental or random, and do not necessarily add up to a significant amount.

References:

• 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 2, pages 36-37

https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-2.pdf

The Wolfsberg Anti-Money Laundering Principles for Private Banking require new clients to be approved by at least one person other than the private banker. This is because the private banker may have a conflict of interest or be influenced by the client’s wealth or reputation. The approval process should involve a senior manager or a compliance officer who can independently assess the client’s risk profile and suitability for the institution’s services12.

References:

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and Methods, p. 37 2: The Wolfsberg Group, The Wolfsberg Anti-Money Laundering Principles for Private Banking, June 2000, p. 3, https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/Wolfsberg-AML-Principles-for-Private-Banking-June-2000.pdf

 The Financial Action Task Force (FATF) Recommendation that should cause an anti-money laundering specialist the most concern is B: Financial institutions should not keep anonymous accounts. This is because anonymous accounts are accounts that are opened or maintained without verifying the identity of the customer or the beneficial owner, or with fictitious or incomplete information. Anonymous accounts pose a high risk of money laundering and terrorist financing, as they can be used to conceal the origin, destination, and purpose of illicit funds, and to evade the detection and reporting of suspicious transactions. Therefore, the FATF Recommendation 10 requires financial institutions to identify and verify the identity of their customers and the beneficial owners, and to prohibit the opening or maintaining of anonymous accounts or accounts in obviously fictitious names1.

The other options are also FATF Recommendations, but they are less relevant or applicable to the scenario. Option A: Financial institutions should not warn their customers when information relating to them is being reported to the competent authorities, is the FATF Recommendation 21, which aims to prevent tipping-off, i.e., alerting the customer that they are being investigated or reported for money laundering or terrorist financing. However, this does not directly address the issue of identity verification or anonymous accounts2. Option C: Financial institutions should maintain all necessary suspicious transaction report records on transactions, both domestic and international, for at least 5 years, is the FATF Recommendation 11, which aims to ensure that financial institutions have adequate and consistent records of their customers and transactions, and that these records are available to the competent authorities when needed. However, this does not prevent the opening or maintaining of anonymous accounts in the first place3. Option D: If financial institutions suspect that funds stem from criminal activity, they should be required to close the account, is not a FATF Recommendation, but rather a possible action that financial institutions may take in accordance with their risk assessment and policies. However, the FATF does not mandate or recommend the closure of accounts as a general rule, and advises that financial institutions should consult with the competent authorities before taking such action, as it may alert the customer or compromise the investigation4.

References:

1: FATF Recommendation 10: Customer due diligence, 1 2: FATF Recommendation 21: Tipping-off and confidentiality, 2 3: FATF Recommendation 11: Record keeping, 3 4: Frequently Asked Questions (FAQs) related to Suspicious Transaction Reporting, 5

 According to the ACAMS study guide, one of the insurance products that is particularly vulnerable to money laundering is annuity, which is “a contract that provides a series of payments over a specified period of time, usually for the life of the annuitant” (p. 223). Annuities can be used by money launderers to deposit large sums of illicit funds in a single transaction, or to receive regular payments from a legitimate source after paying the premiums with dirty money. Annuities can also be surrendered or transferred to third parties, making it difficult to trace the origin and destination of funds.

References:

• ACAMS. (2020). Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.
• ComplyAdvantage. (2023)AML in Insurance: How to Detect & Combat Money Laundering 1. Retrieved from https://complyadvantage.com
• Financial Crime Academy. (2023)Anti Money Laundering (AML) In Insurance Industry In 2021 2. Retrieved from https://financialcrimeacademy.org

Dealers in antiques, precious metals, precious stones, jewelry, and art are advised to follow these practices to reduce the element of money laundering risk:

• Verify the identities of all new vendors and customers and conduct due diligence on them. This is to ensure that the dealers know who they are dealing with and can assess the risk level of each customer or vendor. Due diligence may include obtaining and verifying identification documents, checking against sanctions lists or watchlists, obtaining information on the source and purpose of funds, and applying a risk-based approach to the level and frequency of due diligence.
• Avoid accepting cash payment from the buyers. This is to prevent the dealers from being used as a conduit for laundering illicit cash or facilitating cash smuggling. Cash transactions are more difficult to trace and may indicate attempts to evade reporting or record-keeping requirements. Dealers should encourage the use of non-cash payment methods, such as bank transfers, cheques, or credit cards, and keep records of all payment transactions.
• Insist all vendors submit an appropriate license issued by enforcement agencies authorizing the sale. This is to ensure that the dealers are not involved in the trade of stolen, smuggled, or counterfeit goods, which may be linked to money laundering or other criminal activities. Dealers should verify the authenticity and validity of the licenses and keep copies of them for record-keeping purposes.

References:

• FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones, pages 9-10, 13-14, 17-18, 21-22
• AML-CFT Handbook for Dealers in Precious Metals and Stones, pages 25-26, 37-38, 52-53
• The anti-money laundering framework for precious stones and metals dealers in Singapore, pages 7-8, 11-12, 15-16
• Dealers in Precious Metals, Stones or Jewels Required to Establish Anti-Money Laundering Programs, pages 2-3, 6-7, 10-11

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, an effective anti-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.

References:

• 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

This is a common red flag of money laundering that involves layering, which is the process of moving funds through multiple accounts or entities to conceal their origin and ownership. Layering often involves cross-border transfers, especially to high-risk jurisdictions, and rapid movement of funds to avoid detection or tracing. A compliance officer should prioritize this red flag for investigation, as it may indicate a complex money laundering scheme or the financing of terrorism or proliferation.

References:

• AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage, section “Red flags related to transaction patterns”
• AML 101: The 10 Most Common Red Flags - KYC-Chain, section “Red flag indicators related to geographical risks”
• Anti-money laundering red flags, page 2, bullet point 5

 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.

References:

• 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.

A. Promoting the record-keeping obligations of banks to the maximum amount of data necessary for the purposes of AML investigations: "The Fifth AML Directive emphasizes that record-keeping obligations of banks must extend to the maximum amount of data necessary for the purposes of anti-money laundering investigations" (CAMS Manual, 6th Edition, page 79).

C. Extending AML rules to entities that provide virtual currency services: "The 5AMLD expands the scope of the EU’s anti-money laundering rules to include virtual currency exchange platforms and custodian wallet providers" (CAMS Manual, 6th Edition, page 80).

Top of Form

Bottom of Form

A country that does not have strong predicate offenses and is lax in prosecuting AML cases could suffer increased organized crime and corruption as a social/economic consequence. "Weaknesses in the AML/CFT regime can lead to a range of economic and social consequences, including...increased crime and corruption." (CAMS Manual, 6th Edition, page 32)

 According to the Anti-Money Laundering Specialist (the 6th edition) study guide, a risk-based approach for EDD means that the FI applies more or less stringent measures depending on the level of risk posed by each client1. This allows the FI to allocate its resources more efficiently and effectively, and to focus on the clients that pose the highest risk of money laundering or terrorist financing2. Applying EDD for every new client, regardless of their risk profile, may not be the best use of the FI’s resources, and may not reflect the proportionality and relevance of the EDD measures3.

References:

• 1: CAMS Study Guide, 6th Edition, Chapter 3, Section 3.2, page 69
• 2: CAMS Study Guide, 6th Edition, Chapter 3, Section 3.3, page 70
• 3: CAMS Study Guide, 6th Edition, Chapter 3, Section 3.4, page 71

 Submitting the concern anonymously to the bank’s internal Compliance Hotline is the most appropriate action that a bank CEO’s assistant should take when the bank CEO expenses large sums of money to a charitable organization run by the bank CEO’s direct family member. This is because this action would allow the assistant to report a potential case of fraud, conflict of interest, or misuse of funds without fear of retaliation or reprisal from the bank CEO. The Compliance Hotline is a confidential and secure channel for employees to raise any concerns or suspicions about unethical or illegal activities within the bank. The Compliance Hotline would then forward the concern to the relevant authorities or departments for further investigation and action.

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

• The document titled “Anti-Fraud Policy” published by the World Bank Group. You can access it by clicking here. This document states that "The World Bank Group has established a Compliance Hotline to receive reports of suspected fraud or corruption in World Bank Group-financed projects or activities, or in the World Bank Group’s corporate procurement or administrative activities. The Compliance Hotline is available to all staff and external parties, such as contractors, consultants, beneficiaries of World Bank Group-financed projects, and the general public.

A lack of information about beneficial owners is a red flag for potential money laundering or terrorist financing. It is important to identify who the actual owners of the company are to understand their potential risk exposure.

Confusing details about the proposed business activity and lack of knowledge about the proposed business are also red flags for potential money laundering or terrorist financing. This could indicate that the proposed business activity is not legitimate and is being used to conceal illegal activities.

Therefore, these two observations should be escalated to the compliance officer for further investigation.

The anti-money laundering specialist should recommend a financial institution to investigate the source of funds, identify people and companies that are clearly related, and identify a person fully, including their political history, when dealing with individuals holding important public positions. These are essential steps to conduct enhanced due diligence based on public information, as they can help to assess the risk profile, the legitimacy, and the transparency of the customer relationship. The Basel Committee on Banking Supervision’s list of public officials is not a reliable source of public information, as it is not comprehensive, updated, or verified. Therefore, it is not a sufficient criterion to check the background of potential customers.

References:

• ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4, page 971
• ACAMS CAMS Certification Video Training Course, Module 4, Lesson 32
• ACAMS CAMS Certification Exam Outline, Domain 4, Task 23

Retail banks typically have a high inherent risk of money laundering due to their provision of cash services. This is because cash is a preferred medium of exchange for criminals and terrorists, and retail banks provide a convenient way for them to move large sums of money without detection. Retail banks are also vulnerable to money laundering through the use of false identities and other deceptive practices. (CAMS Manual, 6th Edition, Page 8).

The activity described in the question raises several red flags for money laundering, such as large and frequent cash deposits, transfers to offshore jurisdictions, and involvement of a charitable organization that could be a front for illicit funds. The Compliance Officer should file a suspicious transaction report (STR) with the competent authority, such as the Financial Intelligence Unit (FIU), as soon as possible, and provide all the relevant information and documentation to support the suspicion. Filing an STR is a legal obligation for financial institutions and does not require the consent or notification of the customer. The Compliance Officer should also follow the bank’s internal policies and procedures for handling such cases, which may include freezing the account, conducting further investigation, or escalating the matter to senior management.

References:

• ACAMS CAMS Certification Study Guide1, Chapter 4: Conducting or Supporting the Investigation, Section 4.4: Reporting, pp. 137-139
• ACAMS CAMS Certification Video Training Course2, Module 4: Conducting or Supporting the Investigation, Lesson 4.4: Reporting
• ACAMS CAMS Certification Exam Outline3, Domain 4: Conducting or Supporting the Investigation, Task 4.4: File internal and external reports, p. 18

According to the web sources I found, FATF Recommendation 18 requires financial institutions to implement group-wide programmes against money laundering and terrorist financing that include policies and procedures for sharing information within the group for AML/CFT purposes12. These programmes should also include compliance management arrangements, screening procedures for hiring employees, an independent audit function and ongoing employee training1.

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.

References: 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.

----

this situation requires enhanced due diligence actions according to the AML principles of the Wolfsberg group. The Wolfsberg group is an association of 13 global banks that aims to develop standards and best practices for AML and CFT in the private banking sector. The group has issued a set of principles and guidance on how to conduct due diligence on private banking customers, especially those who pose higher risks, such as politically exposed persons (PEPs), customers from high-risk countries, and customers with complex or opaque structures. According to the Wolfsberg group, private banks should apply a risk-based approach to customer due diligence and perform enhanced measures for high-risk customers, such as obtaining senior management approval, verifying the identity and source of wealth of the customer and the beneficial owner, understanding the purpose and nature of the relationship, and conducting ongoing monitoring and review.

References:

• ACAMS Study Guide 6th Edition, Chapter 4, Section 4.5, page 118: “The Wolfsberg Group”.
• ExamTopics, Question 466: “Which private banking situation requires due diligence actions to be implemented according to the AML principles of the Wolfsberg group?”

According to the Certified Anti-Money Laundering Specialist (CAMS) Sixth Edition manual, elements that can trigger a review of the existing relationship during the opening of a new account include recent adverse media on the client (page 60) and incoming transfers from high-risk jurisdictions (page 61). The other elements listed, such as regular checks on the flow of funds, a false positive result for name screening, and an estimated total income decrease, are not triggers for a review.

 A deferred prosecution agreement (DPA) is a type of enforcement action that allows a financial institution to avoid criminal prosecution if it admits to wrongdoing, pays a fine, and agrees to remediate its AML program deficiencies within a specified period of time1. A cease and desist order (C&D) is another type of enforcement action that requires a financial institution to stop engaging in unsafe or unsound practices or violations of law, and to take corrective actions to address its AML program weaknesses2. Both of these actions are commonly used by regulators to address serious or systemic AML program failures by financial institutions, as evidenced by recent cases345.

References:

• 1: Deferred Prosecution Agreement - Wikipedia
• 2: FFIEC BSA/AML Appendices - Appendix R – Enforcement Guidance
• 3: FinCEN Announces $15 Million Civil Money Penalty against Bancrédito International Bank for Willful Violations of the Bank Secrecy Act
• 4: Lessons From The Seven Largest AML Bank Fines In 2021
• 5: Fines for AML Compliance Failures - ACAMS Today

An offshore company is a legal entity that is incorporated or registered in a foreign jurisdiction, usually with low or no taxes, high confidentiality, and minimal regulation1. Offshore companies are often used to hide beneficial ownership, as they can create complex and opaque structures that obscure the identity and control of the real owners and beneficiaries of the assets or transactions involved2. Offshore companies can also use nominee directors and shareholders, trust and company service providers, and shell companies to further conceal beneficial ownership3. According to the web search results, offshore companies are among the most common vehicles for money laundering, tax evasion, corruption, and other illicit activities4 .

References:

• 1: What is an offshore company? - ACAMS
• 2: Guidance on Transparency and Beneficial Ownership - FATF
• 3: Concealment of Beneficial Ownership - FATF-Egmont Group
• 4: What’s a Beneficial Owner and Why Does it Matter? - Dun & Bradstreet
• : The Panama Papers: Exposing the Rogue Offshore Finance Industry - ICIJ

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)."

According to the Certified Anti-Money Laundering Specialist (the 6th edition), the financial institution (Fl) should take the following actions:

A. Review the client's activity, determine if suspicious activity exists, and report accordingly. The Fl should assess the risk of the situation and determine if there is any suspicious activity that needs to be reported to the appropriate authorities. This would involve conducting a review of the client's account activity and transactions to determine if there are any indicators of money laundering or terrorist financing.

D. Inform local LEA and regulator of the request for awareness. The Fl should inform the local law enforcement agency and regulator of the request from the foreign jurisdiction to raise awareness of the situation and determine if any further actions need to be taken.

The product type that is subject to US extra jurisdictional reach over non-US banks and non-US persons under the USA PATRIOT Act is Correspondent Banking. According to the Certified Anti-Money Laundering Specialist (the 6th edition) Study Guide, "The USA PATRIOT Act extends the reach of the Bank Secrecy Act and other anti-money laundering statutes to non-U.S. banks and non-U.S. persons. This extra jurisdictional reach includes, but is not limited to, correspondent banking."

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.

References:

• 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.

According to the USA PATRIOT Act, US authorities do have the power to subpoena records from foreign banks that maintain correspondent accounts with US banks. This is known as a "section 314(a) request," which allows law enforcement to obtain information related to suspected terrorist financing or money laundering.

However, US authorities are not limited to seizing only funds transferred under OFAC sanctions if there is an equivalent UN sanctions regime that has been contravened. The US government can impose its own sanctions that are independent of the UN, and can seize funds or take other actions to enforce those sanctions.

Therefore, the correct answers to the question are A and C:

A. If the funds are seized, then the foreign bank would be within its rights to dispute such seizure. C. The USA PATRIOT Act authorizes the Secretary of the Treasury or the Attorney General to subpoena records from the foreign bank that maintains a correspondent account with a US bank.

Money laundering can have serious consequences for financial institutions. They may face increased investigation costs and fines from regulators and law enforcement agencies for failing to detect or prevent money laundering activities. Additionally, money laundering can result in a loss of profitable business as customers and counterparties may no longer want to do business with the institution due to its reputation for being associated with illicit activity.

The two most relevant measures for a professional dealer in precious metals and stones to reduce the risk of being misused for money laundering purposes are:

B. Stop accepting payments from persons other than the beneficiary: This measure can help to ensure that the source of funds is legitimate and can be traced back to the customer.

D. Limit the acceptance of purchases without adequate customer identification information: Adequate customer identification information is necessary for the purpose of identifying and verifying the customer's identity and determining whether the customer is a politically exposed person (PEP) or has any other risk characteristics that may require enhanced due diligence measures.

According to the Wolfsberg Group, a global association of leading banks that develops guidance and standards for the management of financial crime risks, both private and correspondent banks should monitor account and transactional activity after the proper identification and verification of customers, as part of their anti-money laundering and counter-terrorist financing (AML/CTF) measures12. This is consistent with the FATF Recommendation 10, which requires financial institutions to conduct ongoing due diligence on their business relationships, including scrutinising transactions to ensure that they are consistent with the customer’s risk profile and source of funds3. Monitoring account and transactional activity is a key component of the risk-based approach, as it enables banks to detect and report suspicious or unusual transactions, identify changes in customer behaviour or circumstances, and update customer information and risk assessments accordingly4.

References:

• 1: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012)
• 2: Wolfsberg Correspondent Banking Due Diligence Questionnaire (2017)
• 3: The FATF Recommendations - Financial Action Task Force
• 4: Risk-Based Approach for the Banking Sector - Financial Action Task Force

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.

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)

Arms and related materials embargo is a type of sanction that prohibits the supply, sale, transfer, or export of arms and related materials to a targeted country, entity, or individual. This type of sanction is most likely to be used in order to avoid escalating violent conflicts and/or proliferation of weapons, as it aims to reduce the availability and access of weapons and ammunition that could fuel violence and instability. Arms and related materials embargo can also prevent the transfer of weapons of mass destruction and their delivery systems to non-state actors or rogue states. According to the UN, arms and related materials embargo is one of the most common and effective forms of sanctions that the Security Council imposes to address threats to international peace and security12.

References:

• 1: Different types of sanctions - Consilium1
• 2: UN Sanctions and the Prevention of Conflict - United Nations University2

 A financial institution should consult with its legal counsel before responding to a grand jury subpoena regarding a customer, as such subpoenas may involve complex legal issues and potential conflicts of interest. A grand jury subpoena is a legal order issued by a federal or state grand jury that compels a person or entity to produce documents, testify, or both, in connection with a criminal investigation. A financial institution that receives a grand jury subpoena should not disclose its existence or contents to the customer or any third party, unless authorized by law or the court, as doing so may constitute obstruction of justice or violate the secrecy rules of the grand jury. A financial institution should also assess and review all relevant information it has about the customer that is the subject of the subpoena, in accordance with its risk-based AML program, and consider filing a SAR if it identifies any suspicious activity.

References:

• 1: This article provides an overview of the legal and practical considerations for financial institutions when responding to subpoenas, including the types of subpoenas, the rules that apply, the confidentiality and privilege issues, and the procedural steps to follow.
• 2: This document provides answers to frequently asked questions regarding SARs and other AML considerations, including the question of how to handle grand jury subpoenas and other law enforcement inquiries.

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 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.

References:

• 1: Risk-Based Approach to Compliance Management2
• 2: A Risk-Based Approach to Regulatory Compliance1

A National Financial Intelligence Unit (FIU) has three primary functions: receiving, analyzing, and disseminating information related to suspicious financial activities. The FIU's main focus is to identify and investigate suspicious activities, such as money laundering, terrorist financing, and other financial crimes. The FIU also works with other organizations and agencies to develop effective and efficient financial crime prevention strategies. The FIU is tasked with developing an effective system for receiving, analyzing, and disseminating information related to suspicious financial activities. The information collected is then used to identify, investigate, and prosecute financial crimes.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the main challenges of providing on-line services to customers is the verification of their identity and the authentication of their transactions1. The lack of face-to-face contact and the use of electronic documents increase the risk of identity fraud, impersonation, and account takeover2. Therefore, financial institutions offering on-line services need to implement robust customer due diligence (CDD) measures, such as using multiple sources of information, verifying biometric data, and applying risk-based monitoring3.

References:

• 1: CAMS Study Guide, 6th Edition, Chapter 4, Section 4.1, page 103
• 2: CAMS Study Guide, 6th Edition, Chapter 4, Section 4.2, page 104
• 3: CAMS Study Guide, 6th Edition, Chapter 4, Section 4.3, page 105

 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

References: 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 section 313 of the USA PATRIOT Act, a covered financial institution (generally any U.S. bank or broker dealer in securities) is prohibited from establishing, maintaining, administering, or managing a correspondent account in the U.S. for, or on behalf of, a foreign shell bank. A foreign shell bank is defined as a foreign bank that does not have a physical presence in any country. The only exception to this prohibition is if the foreign shell bank is a regulated affiliate of a depository institution, credit union, or foreign bank that maintains a physical presence in the U.S. or a foreign country, respectively. In that case, the U.S. financial institution must obtain a written certification from the foreign bank that it does not provide banking services to any other foreign shell banks.

References:

• Here’s Why A Process Agent Is Required Under a Certification by a Foreign Bank, Cogency Global, September 2020.
• Definition of “Foreign Shell Bank” and “Foreign Bank”, FinCEN, April 2003.
• USA PATRIOT Act, FinCEN, accessed February 2024.

An employee who witnesses suspicious activity from a coworker should not confront the coworker or discuss the activity with their supervisor. Instead, they should report the activity to their employer's conflict line or compliance department, who can investigate the matter and take the appropriate action. It is important to remember that employees are legally obligated to report any suspicious activity they witness.

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).

The Egmont Group is a global network of 170 financial intelligence units (FIUs) that facilitate the exchange of information and cooperation among member FIUs to combat money laundering, terrorist financing, and associated predicate offences12. FIUs are national agencies that collect, analyze, and disseminate financial intelligence to relevant authorities3. The Egmont Group supports the implementation of international standards and best practices for FIUs, provides training and technical assistance, and promotes the development of secure and effective communication channels12.

References:

• Egmont Group website
• Egmont Group of Financial Intelligence Units - Wikipedia
• ACAMS CAMS Study Guide (the 6th edition), Chapter 5: The Role of the Financial Intelligence Unit in Combating Money Laundering and Terrorist Financing, page 1532

Export and import restrictions are sanctions imposed by countries to limit or prevent the import or export of certain goods and services. Export and import restrictions are typically used in order to protect a country's economic or political interests, or to prevent the proliferation of weapons or other dangerous materials. Export and import restrictions are often the first type of sanctions used in order to avoid escalating violent conflicts and/or proliferation of weapons. Examples of export and import restrictions include embargoes, quotas, or tariffs.

The main objective when a financial institution (FI) conducts an investigation is to track the movement of the money. Money laundering is a process of disguising the proceeds of criminal activity to make them appear legitimate. The movement of money is an essential element in the process of money laundering. Therefore, tracking the movement of funds is a crucial step in identifying and preventing money laundering. A financial institution must be able to recognize suspicious transactions and report them to the relevant authorities. An investigation is conducted to gather evidence and establish a clear understanding of the transaction flow, the parties involved, and the nature of the activity. This information is used to determine if the transaction is suspicious and if it violates any laws or regulations.

While keeping policies and procedures updated, keeping documentation, and knowing the customer are essential components of a comprehensive anti-money laundering (AML) program, these activities are not the primary objective of an investigation. Policies and procedures need to be updated to reflect changes in regulatory requirements and emerging money laundering risks. Documentation must be retained to provide evidence of the investigation process and outcomes. Knowing the customer is essential to identify and verify the customer’s identity and assess the risk associated with the relationship.

References:

• ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 3: AML Programs, Section 3.2: AML Program Components, Subsection 3.2.4: Transaction Monitoring and Investigation, pp. 87-88
• Main Objective of Conducting Investigations - exam-answer.com

The rules imposed by the Office of Foreign Assets Control (OFAC) for legal entities and persons related to the US are:

• Nationals of the US must comply with OFAC rules, regardless of where they are located in the world. This means that US citizens, permanent residents, and entities organized under US law are subject to OFAC sanctions and prohibitions, even if they operate or reside outside the US12.
• Any foreign corporation is also penalized if it conducts transactions with sanctioned countries under OFAC rules. This means that non-US entities that engage in trade or financial dealings with OFAC-designated countries, entities, or individuals are liable to face civil or criminal penalties, as well as secondary sanctions that could restrict their access to the US market or financial system34.

The other options are not correct, because:

• A subsidiary of a legal entity of the US, which is formally registered in a foreign country, is not exempt from OFAC rules. This means that foreign-incorporated entities that are owned or controlled by US persons or entities are also subject to OFAC sanctions and prohibitions, unless they are specifically authorized or licensed by OFAC12.
• A foreign individual visiting the US for a short vacation is not obligated to follow OFAC rules. This means that non-US persons who are temporarily present in the US are not subject to OFAC sanctions and prohibitions, unless they are involved in transactions that have a US nexus or violate other US laws.
• The head office of a foreign legal entity which has a branch in the US does not need to comply with OFAC rules. This means that non-US entities that have a presence or operation in the US are not subject to OFAC sanctions and prohibitions, unless they are involved in transactions that have a US nexus or violate other US laws.

References:

• ACAMS CAMS Certification Video Training Course - Exam-Labs3
• Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)4
• ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 147: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-7.pdf
• ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 148: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-7.pdf
• ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 149: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-7.pdf

The Egmont Group of Financial Intelligence Units (FIUs) is a global network of FIUs that facilitates and promotes the exchange of information, knowledge, and cooperation among its members to combat money laundering, terrorist financing, and other financial crimes1. The Egmont Group has developed operational guidance for international cooperation and information exchange among FIUs, which includes channels, procedures, and forms for making and receiving requests2. Filing a request under Egmont guidelines is therefore a common and effective way for a regulatory body to obtain international assistance in a money laundering inquiry, as it ensures that the request is made through the appropriate and secure channel, and that it meets the standards and expectations of the requested FIU.

References:

• 1: Home - Egmont Group
• 2: EGMONT GROUP OF FINANCIAL INTELLIGENCE UNITS OPERATIONAL GUIDANCE FOR …

One of the main challenges of online banking is verifying the identity of customers who open accounts or conduct transactions remotely, without face-to-face interaction. This poses a higher risk of money laundering, as criminals may use false or stolen identities, or hide behind shell companies or nominees, to move illicit funds through online platforms. Therefore, online banking providers must implement robust and risk-based customer due diligence (CDD) measures, such as verifying identity documents, using biometric or digital verification methods, screening customers against sanctions and watchlists, and monitoring customer behavior and transactions for any red flags or anomalies.

References:

• 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 2.2: Customer Due Diligence (CDD) and Know Your Customer (KYC), p. 32-35.
• eWallets: AML Risks & How to Comply1

 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.

References:

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 4: International Standards and Global Initiatives, page 97.

FATF, Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems, February 2013, updated October 2019, 1.

FATF, Procedures for the FATF Fourth Round of AML/CFT Mutual Evaluations, October 2019, 2.

IT expanded the definition of criminal activity to all serious crimes. The first EU Directive on Money Laundering, adopted in 1990, was the first major international agreement to combat money laundering. It expanded the definition of criminal activity to all serious crimes and established drug trafficking as a predicate offense of money laundering. The Directive also extended the scope of money laundering beyond drug-related crimes, making it applicable to all serious crimes. This was a major step forward in the fight against money laundering, as it made it easier for law enforcement to investigate and prosecute money laundering cases.

Correspondent banking is a service that allows banks to access financial services in different jurisdictions through intermediary banks, known as correspondent banks. Correspondent banking can facilitate cross-border transactions, foreign exchange, and other financial activities for banks and their customers. However, correspondent banking also poses various risks, such as money laundering, terrorist financing, fraud, corruption, tax evasion, and sanctions evasion. Correspondent banks may have no direct relationship with the customers of the respondent banks, making it difficult to verify their identity and monitor their transactions. Correspondent banks may also rely on the compliance programs of the respondent banks, which may not meet the standards of the correspondent banks’ jurisdictions.

One of the risk factors that increases the risk for a correspondent bank is being a major service provider to money service businesses (MSBs). MSBs are entities that provide money transmission, currency exchange, check cashing, prepaid cards, and other similar services. MSBs are often considered high-risk customers, because they may serve as conduits for illicit funds, especially if they operate in jurisdictions with weak anti-money laundering regulations or oversight. MSBs may also have a large and diverse customer base, making it challenging to conduct customer due diligence and transaction monitoring. Therefore, correspondent banks that provide services to MSBs may face higher exposure to money laundering and other financial crimes, and may need to apply enhanced due diligence and risk mitigation measures.

References:

• Understanding Risk in Correspondent Banking
• GUIDANCE ON CORRESPONDENT BANKING SERVICES
• Correspondent Bank: Definition and How It Works
• Correspondent banking – why it’s important to understand the risks

The financial institution should freeze the funds or assets of designated persons and entities once this decision is approved by the Board. This is to comply with the obligation to implement targeted financial sanctions imposed by the United Nations Security Council (UNSC) or other relevant authorities. Freezing means preventing any access, use, transfer, or disposal of the funds or assets by the designated persons and entities or by any other person on their behalf. The financial institution should also report the freezing action to the competent authority and the relevant sanctions committee12.

Option A is not a sufficient step to comply with sanctions requirements, but rather a tool to facilitate compliance. Adopting automatic screening systems to detect designated persons and entities can help the financial institution to identify potential matches and flag them for further investigation. However, screening systems are not infallible and may generate false positives or false negatives. Therefore, the financial institution should also conduct manual checks and verification of the screening results13.

Option B is not a relevant step to comply with sanctions requirements, but rather a measure to mitigate money laundering and terrorist financing risks. Conducting enhanced due diligence for prohibited entities on the sanctions list may be useful to obtain more information about the nature and purpose of the business relationship, the source and destination of the funds, and the beneficial ownership and control structure of the entity. However, enhanced due diligence does not replace the obligation to freeze the funds or assets of the designated persons and entities14.

Option C is not an appropriate step to comply with sanctions requirements, but rather a violation of the obligation to freeze the funds or assets of the designated persons and entities. Changing the risk profile to “high-risk” if an existing customer becomes a sanctioned entity and continuing to monitor further transactions may expose the financial institution to legal and reputational risks, as well as potential sanctions evasion or circumvention. The financial institution should terminate the business relationship with the designated person or entity and freeze their funds or assets without delay1 .

References: 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.  47-49. 2: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.1. 3: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.2.  4: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.3. : ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.4.

Cryptocurrency is a digital or virtual currency that uses cryptography to secure and verify transactions. Cryptocurrencies are decentralized and operate outside the control of any central authority, such as a government or a bank. This makes them attractive for money launderers, who can use them to transfer funds anonymously, quickly, and globally, without leaving a trace or being subject to regulation. Cryptocurrencies pose more risk of money laundering than other sources of money, such as wire transfers, credit cards, or money service businesses, which are subject to more oversight, verification, and reporting requirements.

References:

• CAMS Study Guide, 6th Edition, Chapter 1, Section 1.9, page 37
• CAMS eLearning Course, Module 1, Lesson 9
• ACAMS Crypto Hub

 The anti-money laundering officer (AML officer) is responsible for overseeing the implementation and effectiveness of the anti-money laundering (AML) program of a financial institution. The AML officer should have sufficient authority, independence, and access to resources to perform this role. Reporting to the Sales Director may compromise the independence and objectivity of the AML officer, as the Sales Director may have conflicting interests or incentives that could influence the AML officer’s decisions or actions. The AML officer should report to a senior management level that is independent of business functions and has direct access to the board of directors or a relevant committee. This would ensure that the AML officer can communicate any AML issues or concerns to the board without any interference or undue influence from the business functions.

References: = Some of the references that support this answer are:

• ACAMS Study Guide for the CAMS Certification Examination, Chapter 2, Section 2.2.1, page 41: “The AML officer should report to a senior management level that is independent of the business line and has direct access to the board of directors or a relevant committee.”
• Money Laundering Reporting Officer: The Role Of MLRO, Section “Role Of Money Laundering Reporting Officer”: “The MLRO should have independent monitoring and should be able to connect directly with people who make business decisions, such as senior management or the board of directors.”
• Money Laundering Reporting Officer (MLRO)? | Dow Jones, Section “What is a Money Laundering Reporting Officer (MLRO)?”: “A Money Laundering Reporting Officer (MLRO) is tasked with overseeing a firm’s compliance with the Financial Conduct Authority’s (FCA) rules on money laundering. … The MLRO should have sufficient authority and independence within the firm to carry out their responsibilities effectively.”

Broker-dealers cannot have correspondent accounts with a foreign bank that does not have a physical presence in any country. The USA PATRIOT Act has an extraterritorial effect in that it prohibits broker-dealers from having correspondent accounts with foreign banks that do not have a physical presence in any country. This rule is designed to help prevent money laundering and terrorist financing by making it more difficult for funds to be moved to or through jurisdictions with less stringent anti-money laundering laws.

The principles of the Egmont Group of Financial Intelligence Units (FILLs) aimed at maximizing cooperation between FILLs to more effectively combat money laundering are [1]:

B. Information exchange should take place informally, without too many formal prerequisites. (CAMS Manual, 6th Edition, Page 55)

E. It is within an FlU's authority to sign Memorandums of Understanding independently. (CAMS Manual, 6th Edition, Page 56)

According to the Basel Committee on Banking Supervision, banks should apply a risk-based approach to customer due diligence, which means that they should adopt enhanced measures for higher-risk customers and simplified measures for lower-risk customers. Enhanced due diligence (EDD) may include obtaining additional information on the customer’s identity, source of funds, business activities, beneficial owners, and expected transactions, as well as conducting more frequent and intensive monitoring of the account activity. EDD is especially important for customers who are politically exposed persons (PEPs), who are from or have connections with high-risk countries or jurisdictions, or who are involved in high-risk industries or sectors. Therefore, performing EDD including enhanced ongoing monitoring of the account activity is the correct way for banks to deal with high-risk customers.

References: Basel Committee on Banking Supervision, CAMS Study Guide, 6th Edition, Chapter 4, page 121.

The Financial Action Task Force (FATF) is an inter-governmental body that sets standards and monitors compliance with anti-money laundering and counter-terrorist financing (AML/CFT) measures. The FATF conducts periodic mutual evaluations of its members and other jurisdictions to assess their level of implementation of the FATF Recommendations, which are the international AML/CFT standards. The FATF also identifies jurisdictions with strategic deficiencies in their AML/CFT regimes that pose a risk to the international financial system, and places them on two public lists: the High-Risk Jurisdictions subject to a Call for Action (also known as the black list) and the Jurisdictions under Increased Monitoring (also known as the grey list). The FATF works with these jurisdictions to address their deficiencies and monitors their progress through regular follow-up reports and on-site visits. The FATF may remove a jurisdiction from the list if it has made sufficient and sustainable progress in implementing the required reforms and has effectively addressed the identified strategic deficiencies. Therefore, receiving a favorable mutual evaluation is the most likely reason for the FATF to remove a jurisdiction from the list, as it indicates that the jurisdiction has met the FATF standards and has a robust AML/CFT system in place.

Conducting successful annual self-assessments, entering into a mutual legal assistance treaty, or joining the Wolfsberg Group are not sufficient reasons for the FATF to remove a jurisdiction from the list, as they do not necessarily reflect the overall compliance with the FATF Recommendations or the resolution of the strategic deficiencies. Moreover, the Wolfsberg Group is a private association of global banks that develops guidance and best practices for the financial sector on AML/CFT issues, and is not affiliated with the FATF.

References:

• ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorism Financing, page 11.
• ACAMS CAMS Certification Video Training Course, Module 1: Risks and Methods of Money Laundering and Terrorism Financing, Lesson 1.4: FATF and the 40 Recommendations.
• About the Non-Cooperative Countries and Territories NCCT Initiative, FATF website.

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.

References:

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

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.

References:

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

 Having inadequate privacy policies and procedures can expose an organization to legal risks such as industry or regulatory sanctions and charges of deceptive business practices. Industry or regulatory sanctions can result from violating the laws and regulations that govern data privacy and protection, such as the GDPR, the CCPA, or the GLBA. These sanctions can include fines, penalties, injunctions, or revocation of licenses. Charges of deceptive business practices can arise from misleading or false statements about how the organization collects, uses, or discloses personal data, or from failing to comply with its own privacy policies and procedures. These charges can lead to lawsuits, settlements, or enforcement actions by authorities such as the FTC or the state attorneys general.

References: =

• The 4 Biggest Risks of Non-Compliance With Data Privacy Regulations
• Security and privacy laws, regulations, and compliance: The complete guide
• An Ethical Approach to Data Privacy Protection

The USA PATRIOT Act is a comprehensive legislation that was enacted in 2001 to enhance the powers and tools of the US authorities to combat money laundering, terrorist financing, and other threats to the national security and the integrity of the financial system. The USA PATRIOT Act contains several provisions that affect the relationship between US banks and foreign banks that maintain correspondent accounts in the US.

One of these provisions is Section 319, which allows the US authorities to seize the funds of a foreign bank held with a US bank, if the foreign bank refuses to comply with a subpoena or a request for records related to the correspondent account. This provision is intended to prevent foreign banks from using their correspondent accounts in the US to facilitate transactions involving tainted funds, such as proceeds of crime, funds intended to support terrorism, or funds subject to sanctions or asset freezing orders. Section 319 also requires US banks to maintain records of the owners and agents of foreign banks that have correspondent accounts with them, and to terminate such accounts if requested by the US authorities.

Therefore, if a foreign bank maintains a correspondent account in the US, and the US authorities find out that the account has been used to facilitate a transaction involving tainted funds, the US authorities can seize the funds of the foreign bank held with the US bank, under the authority of the USA PATRIOT Act.

References:

• CAMS Study Guide - 6th Edition, Chapter 1, Section 1.2, page 10
• USA PATRIOT Act, Section 319, page 55-57
• The USA PATRIOT Act: A Legal Analysis, Section III, page 9-10
• [The USA PATRI

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 should communicate 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.

References:

• 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

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the institution should develop a system to monitor all the activity of the customer’s accounts to mitigate the risk associated with these accounts. This is because the customer’s behavior and profile may indicate some red flags of money laundering, such as:

• Operating an import-export business, which is a common sector for trade-based money laundering, where trade transactions are used to disguise the movement of illicit funds, either by over- or under-invoicing, misrepresenting the quantity or quality of goods, or falsifying documents1.
• Receiving funds from a jurisdiction perceived as highly corrupt, which may increase the risk of the funds being derived from bribery, embezzlement, fraud, or other predicate offences2. Transparency International is a global civil society organization that publishes an annual Corruption Perceptions Index, which ranks countries by their perceived levels of public sector corruption based on expert assessments and surveys3.
• Making frequent transfers among the accounts, which may indicate a layering technique, where funds are moved through multiple accounts, institutions, or jurisdictions to obscure the audit trail and the source and ownership of the funds4.
• Preferring to manage the accounts separately, which may indicate a lack of transparency or an attempt to avoid detection or reporting by the institution.

By developing a system to monitor all the activity of the customer’s accounts, the institution can:

• Identify and verify the identity and beneficial ownership of the customer and the parties involved in the transactions.
• Obtain and verify information on the nature and purpose of the business relationship and the source and destination of the funds.
• Conduct a risk assessment of the customer and the transactions based on the customer’s profile, behavior, and geographic locations.
• Apply enhanced due diligence and ongoing monitoring measures for higher-risk customers and transactions, such as obtaining additional information, documentation, or approval, or conducting more frequent or in-depth reviews.
• Detect and report any suspicious or unusual transactions or activities to the relevant authorities.

The other three options are incorrect because:

• File a suspicious transaction report is not the best answer, as it is a reactive measure that should be taken after the institution has identified or suspected money laundering or terrorist financing activity, not before. The institution should first conduct due diligence and monitoring of the customer and the transactions, and then file a report if there are reasonable grounds to believe that the activity is suspicious or unusual.
• Diminish the importance of the subjective Transparency International rating is not the best answer, as it is a complacent and irresponsible attitude that may expose the institution to legal, regulatory, reputational, or operational risks. The Transparency International rating is not subjective, but based on credible sources and methodologies, and it is widely used as a reference by governments, businesses, civil society, and the public to assess the level of corruption in different countries3. The institution should not ignore or downplay the rating, but rather use it as one of the factors to evaluate the risk of the customer and the transactions.
• Conduct a trade-price manipulation analysis is not the best answer, as it is a specific and technical measure that may not be sufficient or appropriate to mitigate the risk associated with these accounts. A trade-price manipulation analysis is a method of detecting trade-based money laundering by comparing the prices of goods or services in a transaction with the market prices or other benchmarks, and identifying any significant discrepancies or anomalies. However, this measure may not be feasible or effective if the institution does not have access to reliable and comparable data, or if the goods or services are not standardized or homogeneous. Moreover, this measure may not address other aspects of the risk, such as the identity, ownership, or behavior of the customer and the parties involved in the transactions.

References:

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 108 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 107 3: Transparency International, Corruption Perceptions Index, 3 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 106 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 103 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 103 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 104 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 105 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 105 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 109

Shell companies are business entities that exist only on paper, with no physical presence, no employees, and no operations. They are often used for legitimate purposes, such as facilitating mergers and acquisitions, protecting assets, or managing investments. However, they are also frequently exploited for illegal activities, such as tax evasion and money laundering, due to their ability to obscure ownership and financial transactions12. Money launderers can use shell companies to disguise the origin of illicit funds, evade sanctions, and avoid the anti-money laundering (AML) measures that financial institutions use to detect suspicious activity23. The process typically involves setting up a shell company in a jurisdiction known for strict privacy laws, such as a tax haven, and then using it to move and hide illicit funds while hiding the identity of the ultimate beneficiaries13.

In this scenario, the fact that the company has been a client for many years does not rule out the possibility of money laundering. The company could have changed its ownership, activities, or risk profile over time, or it could have been involved in money laundering all along without being detected. The fact that the company has added several new subsidiaries that are recently created shell companies is a red flag that indicates potential money laundering. The company could be using the shell companies to hide the source and destination of its funds, or to conceal the identity of its beneficial owners. The institution should perform enhanced due diligence on the company and its subsidiaries, and report any suspicious transactions or activities to the relevant authorities.

References:

• How Shell Companies Are Used in Money Laundering: A Detailed Guide
• Shell Companies and Money Laundering
• The Role of Shell Companies in Money Laundering

 MLROs are responsible for implementing and enforcing an appropriate risk-based approach for their firm, ensuring compliance with the relevant laws and regulations, and reporting any suspicious activities to the authorities. If they fail to discharge their duties, they may face personal liability and civil or criminal sanctions. MLROs are not the only individuals that can be held responsible for AML program deficiencies, as other senior managers, directors, or partners may also be liable depending on their role and involvement. However, MLROs are often the primary focus of enforcement actions due to their specific responsibilities and obligations. MLROs cannot avoid liability by agreeing to a civil penalty, as this does not absolve them from their legal duties or potential criminal prosecution. Banks can also be found liable for AML program deficiencies and face fines, penalties, or other sanctions.

References:

• Technical factsheet The role of the money laundering reporting officer
• Consequences of not complying | AUSTRAC
• Money Laundering Reporting Officer: The Role Of MLRO
• FinCEN Penalizes U.S. Bank Official for Corporate Anti-Money Laundering Failures

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.

having an outdated and incomplete risk assessment could expose the financial institution to significant money laundering and terrorist financing risks that are not identified, measured, or mitigated. The risk assessment is a key component of an effective anti-money laundering program, and it should be updated regularly to reflect the changes in the business environment, customer profile, product offerings, delivery channels, and regulatory requirements12. A risk assessment that is several years old and does not cover all current products and services could fail to capture the emerging threats and vulnerabilities that the financial institution faces, and could result in inadequate or inappropriate controls, policies, and procedures. This could lead to the highest potential for unmitigated risk, as the financial institution could be exploited by money launderers and terrorist financiers, and face regulatory sanctions, reputational damage, and financial losses.

References:

• Anti-Money Laundering (AML) Risk Assessment | ACAMS1
• Risk assess your business for money laundering supervision - GOV.UK2

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.

References:

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

these are the main factors that determine the inherent money laundering risk of a financial institution. The customer base, location, products and services of a financial institution affect the type, volume, and complexity of transactions that it processes, as well as the exposure to high-risk customers, jurisdictions, and activities12. A financial institution should review these factors regularly and conduct a comprehensive risk assessment to identify, measure, and mitigate its money laundering risk34.

References:

• Anti Money Laundering Risk Assessment - Financial Crime Academy1
• Anti-Money-Laundering (AML) Risk Approach Explained | Okta2
• Anti-Money Laundering (AML) Risk Assessment | ACAMS4
• 2024 National Money Laundering Risk Assessment (NMLRA)5

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 financing risks. 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.

References:

• 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.

Results of related audits and examinations are the most useful report for an anti-money laundering specialist to inform senior management about the status of the anti-money laundering program across the organization. This is because audits and examinations provide an independent and objective assessment of the effectiveness, efficiency, and compliance of the anti-money laundering program, as well as identify any gaps, weaknesses, or areas for improvement. Audits and examinations can also help senior management to monitor the performance of the anti-money laundering program, ensure accountability and oversight, and demonstrate commitment to regulatory expectations and best practices.

References:

• Anti-Money Laundering Preparedness Survey Report 2020 - Deloitte US, page 4.
• CAMS Study Guide 6th Edition, page 39.

 A key reason why a FI conducts an enterprise-wide AML risk assessment is to assess money laundering and terrorist financing risks and ensure there are adequate controls to mitigate those risks. An enterprise-wide AML risk assessment allows the FI to identify and appropriately manage the ML/TF and other illicit financial activity risks within its banking operations. It also helps the FI to establish global AML control standards and determine the effectiveness of its AML risk management program, including internal preventive and detective controls. By understanding its risk profile, the FI can better apply appropriate risk management processes to the BSA/AML compliance program to mitigate and manage risk and comply with BSA regulatory requirements. The BSA/AML risk assessment should provide a comprehensive analysis of the FI’s ML/TF and other illicit financial activity risks, and should be documented in writing and communicated to all relevant stakeholders.

References:

• 1: Enterprise Wide AML, CTF, Sanctions Risk Assessment (EWRA … - Eloquens2
• 3: BSA/AML Risk Assessment - FFIEC BSA/AML3
• 2: ACAMS Study Guide for the CAMS Certification Examination2

According to the ACAMS CAMS Study Guide, one of the methods that attorneys may use to facilitate money laundering is to make payments to third parties on behalf of their clients, using funds from their client accounts. This may obscure the source and destination of the funds, and create a false appearance of legitimate transactions. Therefore, making payment to various people is a red flag for potential money laundering in this situation.

References:

• ACAMS CAMS Study Guide, 6th Edition, page 117
• FATF Report on Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals, June 2013, page 341
• AML/CFT Red Flags for Lawyers, AML-CFT.net, October 20202

The first line training program is the training that is provided to the employees who are directly involved in the day-to-day operations of the business, such as sales, customer service, or compliance staff1. The first line training program should cover the essential knowledge and skills that are required for the employees to perform their roles effectively and in compliance with the anti-money laundering and counter-terrorism financing (AML/CFT) policies and procedures of the organization2. The first line training program should also be updated regularly to reflect any changes in the business environment, the regulatory framework, the customer base, the products and services, or the risk assessment of the organization2.

Among the four activities listed, the one that would require an update to the first line training program is the expansion to customer segments that will utilize newly established products. This is because the new customer segments and products may pose different or higher AML/CFT risks than the existing ones, and the employees need to be aware of these risks and how to mitigate them. For example, the new customer segments may include politically exposed persons, non-resident customers, or high-net-worth individuals, who may have higher exposure to corruption, tax evasion, or fraud risks3. The new products may include prepaid cards, mobile payments, or cryptocurrencies, which may have higher vulnerability to money laundering, terrorist financing, or cybercrime risks. Therefore, the first line training program should be updated to include the relevant information and guidance on how to identify, verify, monitor, and report these new customer segments and products, and how to apply the appropriate customer due diligence and transaction monitoring measures2.

The other three activities do not necessarily require an update to the first line training program, unless they involve significant changes in the AML/CFT policies and procedures of the organization. The implementation of a new system that provides information for monitoring customer accounts may improve the efficiency and effectiveness of the existing AML/CFT processes, but it does not change the nature or level of the AML/CFT risks. The maintenance of regulatory requirements for onboarding documentation collections of a customer base is a routine and ongoing task that should already be covered by the existing first line training program. The onboarding of a new customer type which was previously reviewed and risk rated does not introduce any new AML/CFT risks, as long as the risk rating and the corresponding controls are consistent with the organization’s risk appetite and policy.

References:

• 1: What is First Line of Defense? | Definition and Overview
• 2: Training and Awareness | FATF
• 3: Politically Exposed Persons (Recommendations 12 and 22) | FATF
• : Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers | FATF

According to the Egmont Group of Financial Intelligence Units, which is a network of over 160 FIUs that promotes international cooperation and information exchange, FIUs should share information with foreign FIUs spontaneously, without prior request, when they have reasonable grounds to believe that the information is relevant for the receiving FIU1. This principle is also reflected in the FATF Recommendation 40, which states that FIUs should exchange information with other FIUs, especially when this information concerns money laundering, predicate offences, or terrorist financing2. Spontaneous information sharing can enhance the effectiveness of FIUs, as it can help to identify new leads, trends, patterns, or typologies, as well as to prevent or disrupt criminal activities1.

The other options are not consistent with the best practices of FIU information sharing. For example:

• In accordance with Wolfsberg guidelines, submit the information to the other FIU in written form. The Wolfsberg Group is an association of 13 global banks that issues guidance and standards on anti-money laundering and counter-terrorist financing. However, the Wolfsberg guidelines are not binding for FIUs, and they do not specify the format or channel of information exchange between FIUs3. Moreover, submitting information in written form may not be the most efficient or secure way of communication, as it may cause delays, errors, or breaches of confidentiality.
• Take no action until contacted by the other FIU. This option contradicts the principle of spontaneous information sharing, as it implies that the FIU with the relevant information will wait for a formal request from the other FIU, instead of proactively sharing the information. This may result in missed opportunities, inefficiencies, or failures in detecting or preventing money laundering or terrorist financing.
• Request approval from the Egmont Group prior to sharing the information with the other FIU. This option is unnecessary and impractical, as the Egmont Group does not have the authority or the capacity to approve or deny individual information requests or exchanges between FIUs. The Egmont Group provides a platform and a framework for FIU cooperation, but it does not interfere with the operational autonomy or the bilateral relations of its members4.

References:

• FATF Recommendation 40: Other Forms of International Co-operation
• Egmont Group of Financial Intelligence Units Principles for Information Exchange Between Financial Intelligence Units
• Wolfsberg Group
• Egmont Group

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.

References:

• 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

Trade-based money laundering (TBML) is a method to finance terrorism that involves falsifying transaction-related documents, such as invoices, contracts, bills of lading, or customs declarations, to conceal the origin, destination, value, or purpose of illicit funds. TBML can be used to move money, goods, or services to or from sanctioned or high-risk jurisdictions, to evade taxes, duties, or currency controls, to launder proceeds of crime, or to support terrorist activities. TBML can involve over- or under-invoicing, over- or under-shipping, multiple-invoicing, or falsely describing goods or services. TBML can also be linked to other methods of money laundering or terrorist financing, such as bribery, black market peso exchange, or informal value transfer systems.

References:

• ACAMS CAMS Certification Video Training Course, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 4: Trade-Based Money Laundering
• Money Laundering and Terrorist Financing Related to Counterfeiting of Currency, Financial Action Task Force (FATF), page 28
• Tracing terrorist finances, INTERPOL

 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 institution to align its AML strategy with its business objectives, and avoid potential reputational damage or regulatory sanctions.

References:

• 9 Things to Consider When Evaluating an AML Solution
• CAMS Study Guide 6th Edition, page 38.

A Mutual Legal Assistance Treaty (MLAT) is an agreement between two or more countries for the purpose of gathering and exchanging information in an effort to enforce public or criminal laws1. MLATs provide a legal basis for transmitting evidence that can be used for prosecution and judicial proceedings, such as witness statements, bank records, search and seizure orders, and asset forfeiture2. MLATs also facilitate the cooperation and coordination between law enforcement authorities of different jurisdictions in investigating and prosecuting transnational crimes, such as money laundering, terrorist financing, corruption, and cybercrime3. The other options are incorrect because:

• B. MLATs do not receive reports of suspicious transactions from financial institutions, but rather request specific information or evidence from foreign authorities. Financial institutions report suspicious transactions to their domestic Financial Intelligence Units (FIUs), which may then share the information with foreign FIUs through other mechanisms, such as the Egmont Group or bilateral agreements4.
• C. MLATs do not obtain intelligence that might lead to evidence, but rather request evidence that is already available or can be obtained by foreign authorities. Intelligence is a broader term that refers to any information that is relevant to the security or interests of a country, and may not be admissible as evidence in a court of law5. Intelligence may be obtained through other means, such as covert operations, surveillance, or informants6.
• D. MLATs do not issue the Principles of Information Exchange Between Financial Intelligence Units (FIUs), but rather follow them. The Principles of Information Exchange are a set of guidelines that were adopted by the Egmont Group of FIUs in 2001, and aim to enhance the cooperation and communication among FIUs in exchanging financial information and intelligence7. The Principles of Information Exchange are not legally binding, but rather reflect the best practices and standards of the FIU community.

References:

• 1: Mutual legal assistance treaty - Wikipedia
• 2: FREQUENTLY ASKED QUESTIONS REGARDING LEGAL ASSISTANCE IN CRIMINAL MATTERS, page 1
• 3: The Mutual Legal Assistance Problem explained | wilmap
• 4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 125
• 5: Intelligence - Wikipedia
• 6: Intelligence cycle - Wikipedia
• 7: Egmont Group of Financial Intelligence Units - Wikipedia
• : Principles for Information Exchange Between Financial Intelligence Units for Money Laundering and Terrorism Financing Cases

When an FI is being investigated for possible money laundering, it is important that it cooperates with the law enforcement agencies (LEAs) in a professional and transparent manner. This means that the FI should take the following steps:

• Maintain centralized control over all requests and responses to ensure completeness and timely responses. This will help the FI to avoid duplication, inconsistency, or omission of information, as well as to track the status and progress of the requests and responses. It will also facilitate the communication and coordination between the FI and the LEAs, and demonstrate the FI’s willingness to cooperate12.
• Review subpoenas and other information requests by senior management and an investigations group or counsel. This will help the FI to assess the scope, relevance, and legality of the requests, as well as to identify any potential risks, conflicts, or sensitivities. It will also enable the FI to prepare and provide the requested information in an accurate and timely manner, and to seek clarification or negotiation if necessary13.

The other options are not advisable, as they may indicate a lack of cooperation, obstruct the investigation, or damage the FI’s reputation. For example:

• Making employees, including corporate officers, unavailable for interviews and refusing documents upon receipt of a subpoena may be considered as non-compliance, evasion, or contempt of court, and may result in legal sanctions or penalties4.
• Addressing the document destruction policy to ensure the relevant documents are destroyed may be seen as tampering with evidence, destroying records, or concealing information, and may constitute a criminal offence or a breach of regulatory obligations5.
• Not answering inquiries from the media directly, but rather replying, “No comment” may create a negative impression, fuel speculation, or invite criticism, and may harm the FI’s image, credibility, or trustworthiness.

References:

• Cooperation between FIUs, Law Enforcement Authorities, and Prosecutors
• AML and Financial crimes investigation
• Mechanisms for interaction of law enforcement agencies in the field of counteracting and combating money laundering
• Recommendation 30: Responsibilities of law enforcement and investigative authorities
• Money laundering and illicit finance

 An automated transaction monitoring system is a tool that analyzes transactions and customer behavior for signs of money laundering or other financial crimes, and generates alerts when suspicious or unusual activity is detected. The system relies on a set of rules and parameters that define what constitutes normal and abnormal transactions, based on the risk profile and business nature of the financial institution or business. These rules and parameters need to be periodically reviewed and updated to ensure that they are effective and compliant with the latest regulations and best practices.

One of the factors that would most likely result in a change in the monitoring system parameters is when the national Financial intelligence Unit (FIU) issues new risk indicators. The FIU is a central authority that collects, analyzes, and disseminates financial intelligence related to money laundering, terrorist financing, and other financial crimes. The FIU also provides guidance and feedback to financial institutions and businesses on how to comply with their anti-money laundering (AML) obligations and improve their transaction monitoring systems. The FIU may issue new risk indicators based on its analysis of emerging trends, typologies, and threats in the financial sector, or based on international standards and recommendations. These risk indicators are intended to help financial institutions and businesses identify and report suspicious transactions more effectively and efficiently.

Therefore, when the FIU issues new risk indicators, the financial institution or business should review its existing monitoring system parameters and adjust them accordingly to reflect the new risks and scenarios. For example, the FIU may issue new risk indicators related to the use of cryptocurrencies, virtual assets, or online platforms for money laundering or terrorist financing. In that case, the financial institution or business should update its monitoring system parameters to include new rules, thresholds, or patterns that capture these activities and generate alerts for further investigation.

References:

• 1: The Complete Guide to Transaction Monitoring: Everything to Know
• 2: AML Scenarios: Transaction Monitoring Challenges
• 3: Setting AML Transaction Monitoring Thresholds
• 4: Automated Transaction Monitoring – Considerations for System Implementation
• 5: ACAMS (2020). CAMS Certification Package (6th Edition)