CAMS Certified Anti-Money Laundering Specialist (the 6th edition) Questions and Answers

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

=

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

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

ACAMS CAMS Certification Practice Exam, Question 145, page 2863

According to the Basel Committee's principles on customer due diligence, banks must obtain the necessary information to establish the identity of their customers, beneficial owners, and any persons acting on behalf of their customers. This includes verifying the identity of the customer and the beneficial owners and assessing the customer's risk profile. Additionally, banks must conduct ongoing due diligence to ensure that the customer does not give rise to suspicions of money laundering or terrorist financing [1].

OFAC sanctions are a key element of the U.S. AML/CFT framework. According to the CAMS 6th Edition and OFAC regulations:

Blocked funds must be placed into an interest-bearing account on a financial institution's books (B):“Blocked property must be held in a separate interest-bearing account on the books of the U.S. financial institution.”(CAMS 6th Edition, Sanctions Compliance; OFAC FAQs)

Sanctions can be either comprehensive or selective using the blocking of assets and trade restrictions (C):“OFAC administers both comprehensive and targeted (selective) sanctions programs to fulfill U.S. foreign policy and national security goals.”(CAMS 6th Edition, Sanctions Compliance)

Incorrect Options:

A: OFAC can sanction entities, vessels, and organizations—not just individuals or those in foreign countries.

D: There is no automatic expiration of OFAC sanctions after five years.

D: “Family members and close associates of PEPs are often used as intermediaries to launder the proceeds of corruption or conceal illicit assets.”(CAMS 6th Edition, Enhanced Due Diligence for PEPs; FATF Guidance on PEPs)

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

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

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.

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.

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

According to a report by the OECD, government officers are among the occupations that are particularly vulnerable to the use of false identities and identity theft. This is because government officers have access to sensitive and confidential information, such as personal data, tax records, social security benefits, passports, visas, and licenses. Identity fraudsters may target government officers to obtain or alter such information, or to impersonate them to access restricted areas or systems. Identity fraud involving government officers may facilitate tax evasion, money laundering, corruption, terrorism, and other crimes1.

Some examples of identity fraud schemes involving government officers are:

Rogue agents in the immigration services sector who issue fake or fraudulent documents, such as passports, visas, orresidence permits, to facilitate the entry or stay of illegal immigrants, criminals, or terrorists12.

Corrupt tax officials who use false identities to create fictitious taxpayers or employers, or to modify tax records, to evade taxes or to claim fraudulent refunds or credits13.

Impostors who pose as government officers, such as police, customs, or revenue agents, to extort money or information from unsuspecting victims, or to access secure facilities or databases1 .

REPORT ON IDENTITY FRAUD: TAX EVASION AND MONEY LAUNDERING VULNERABILITIES

Identity Fraud and Immigration Services

Identity Theft and Tax Fraud

[Identity Theft and Government Impersonation Scams]

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.

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

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

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

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

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

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

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

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

Why This Matters:

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

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

Encourages financial institutions to enhance correspondent banking due diligence.

Alternative remittance, also known as underground banking or informal value transfer systems, is a method of transferring money or value without using formal financial institutions or channels. It is often used by migrant workers, refugees, or people who lack access to formal banking services. However, it can also be exploited by criminals and terrorists to move funds across borders without detection or regulation. The Wolfsberg Group, a group of leading international banks that promotes best practices in anti-money laundering and counter-terrorist financing, cited alternative remittance as one of the sectors and activities that are widely used for the financing of terrorism in its Statement on the Suppression of the Financing of Terrorism. The Wolfsberg Group recommended that financial institutions apply enhanced and appropriate due diligence to customers engaged in alternative remittance and report any suspicious transactions to the relevant authorities.

Wolfsberg Group (2002). Wolfsberg Statement on Anti-Terrorism Financing1

Pieth, M. (ed.) (2002). Financing Terrorism. Springer, Dordrecht2

ACAMS (2020). CAMS Certification Package (6th Edition)3

Thetimely filing of SARs is legally mandated, and financial institutions mustfollow jurisdiction-specific reporting deadlines.

Option A (Correct):Regulatory requirements dictate SAR filing deadlines(e.g., in the U.S., SARs must be filed within30 calendar daysof detecting suspicious activity).

Option B (Incorrect):30 days is the U.S. standard, but different jurisdictions may havedifferent SAR deadlines(e.g.,EU AMLD mandates prompt reporting).

Option C (Incorrect):Complexity-based reporting delaysare not permitted if theyexceed regulatory timelines.

Option D (Incorrect):Relying solely on professional judgmentrather than regulatory rules can lead tonon-compliance.

SAR Filing Deadlines in Different Jurisdictions:

Jurisdiction

SAR Filing Deadline

United States (FinCEN)

30 calendar days(60 days if no suspect is identified)

United Kingdom (FCA/NCA)

As soon as practicable

European Union (6AMLD)

"Promptly" (no fixed number of days)

Australia (AUSTRAC)

3 business daysfor terrorism financing,14 business daysfor other cases

Why Timely SAR Filing Matters:

Delays in reporting can result in regulatory penalties.

Early SAR filing enables FIUs to take swift action against financial crime.

Non-compliance can lead to fines, criminal charges, and reputational damage.

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.

ACAMS Study Guide 6th Edition, Chapter 2, page 37

Beneficial Ownership Meaning and Regulation - Investopedia

What is a nomineeshareholder? | LawBite

According to the Anti-Money Laundering Specialist (the 6th edition) resources, one of the red flags for money laundering in real estate transactions is the use of an appraiser who is not on the approved list of the financial institution. This could indicate a possible collusion between the appraiser and the borrower or the underwriter to inflate the value of the property and obtain a higher loan amount. The anti-money laundering specialist should document the underwriter’s actions and the reasons for approving the exception, as well as the discrepancy between the appraised value and the market value of theproperty. The specialist should then file a suspicious transaction report (STR) to the relevant authorities, as required by the local regulations .

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 7: Money Laundering Risks and Methods, page 201.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 8: Anti-Money Laundering Programs, page 227.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 9: Conducting or Supporting the Investigation Process, page 255.

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 standardsand best practices for FIUs, provides training and technical assistance, and promotes the development of secure and effective communication channels12.

Egmont Group website

Egmont Group of Financial Intelligence Units - Wikipedia

ACAMS CAMS Study Guide (the 6thedition), Chapter 5: The Role of the Financial Intelligence Unit in Combating Money Laundering and Terrorist Financing, page 1532

OFAC sanctions apply extraterritorially, meaning U.S. persons must comply regardless of their location.

Option A (Correct):OFAC sanctions apply to all U.S. citizens, permanent residents, entities incorporated in the U.S. (including foreign branches), and individuals/entities within U.S. jurisdiction.

Option B (Incorrect):Foreign branches of U.S.-incorporated entities must comply with OFAC sanctions.

Option C (Incorrect):OFAC sanctions apply to all U.S. citizens, including dual nationals.

Option D (Incorrect):U.S. citizens and permanent residents must comply with OFAC sanctions even when located abroad.

Best Practices for OFAC Compliance:

Screen all transactions against the Specially Designated Nationals (SDN) list.

Ensure compliance programs extend to foreign branches and subsidiaries.

Monitor international business activities for potential sanctions violations.

 According to the Anti-Money Laundering Specialist (the 6th edition) study guide, structuring is a technique used by money launderers to avoid triggering currency transaction reporting requirements by breaking down large amounts of cash into smaller deposits that are below the reporting threshold1. Structuring can also involve withdrawing cash in small amounts from different locations or branches to evade detection and scrutiny2. Therefore, the compliance analyst is potentially identifying structuring as the type of money laundering in this case.

Wire stripping is a technique used by money launderers to remove or alter information that identifies the originator or beneficiary of a wire transfer, in order to avoid detection or tracing. To detect wire stripping, a bank employee should compare the wire transaction as it enters and after it leaves the bank, and look for any discrepancies or missing information in the fields related to the originator or beneficiary. The employee should also check for suspicious phrases usually used to conceal originator or beneficiary identity, such as “for further credit”, “in favor of”, “on behalf of”, or “as instructed”.

CAMS Study Guide, 6th Edition, Chapter 3, Section 3.21

CAMS Study Guide, 6th Edition, Chapter 5, Section 5.31

ACAMS Chapter 3 Exam Questions, Question 792

FATF Guidance on Transparency and Beneficial Ownership, Section 3.23

When an existing customer becomes a politically exposed person (PEP), the KYC analyst should perform enhanced due diligence (EDD) for that customer. EDD involves gathering additional information about the customer, assessing the risk associated with their PEP status, and updating the KYC profile accordingly. The goal is to ensure compliance with regulations, verify customer identities, and mitigate the higher risk posed by PEPs. Regular monitoring and updates during the review/refresh period are essential to stay informed about any changes in the customer’s status or risk profile1.

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.

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.

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

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.

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

Chip dumpingis a commonmoney laundering techniquein online gambling.

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

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

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

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

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

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

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

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

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.

1: Different types of sanctions - Consilium1

2: UN Sanctions and the Prevention of Conflict - United Nations University2

According to the Wolfsberg Financial Crime Principles for Correspondent Banking1, a shell bank is defined as a bank that has no physical presence in the jurisdiction in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision. Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low level staff does not constitute physical presence. Therefore, a shell bank meets the criteria A, B, and D, as it does not conduct business at a fixed address, does not employ one or more individuals or maintain operating records at that address, and is not subject to inspection by the banking authority that licensed it. Criterion C is not specific to shell banks, as any bank, whether shell or not, may or may not be subject to AML laws that require it to implement an AML program, depending on the jurisdiction.

Wolfsberg Financial Crime Principles for Correspondent Banking1, Section: Definitions, pp. 3-4.

FATF and CAMS 6th Edition highlight certain third-party activities as red flags for money laundering in the life insurance sector:

Payments are regularly received from third parties that have no apparent relationship with the policy holder (C):“Red flags include payments made by third parties, especially where there is no apparent connection between the third party and the policy holder.”(FATF, Risk-Based Approach for Life Insurance Sector, Section IV: Red Flags; CAMS 6th Edition, Customer Due Diligence for Life Insurance)

A customer names an apparently unrelated third party as a beneficiary (D):“Another warning sign is when beneficiaries have no apparent relation to the policyholder.”(FATF, Ibid; CAMS 6th Edition, Life Insurance ML/TF Red Flags)

Incorrect Options:

A: Consulting an attorney is not, by itself, a red flag.

B: Policy transfer may warrant review but is not specifically a red flag for third-party involvement.

The Office of Foreign Assets Control (OFAC) sanctions are extraterritorial in nature, meaning that they apply beyond the national borders of the United States. OFAC sanctions are intended to restrict transactions and the movement of assets between the U.S. and designated persons and organizations. These sanctions are imposed to disrupt the economic and financial relations between foreign countries and designated persons, organizations, or countries. These sanctionsinclude prohibiting transactions, requiring the blocking of assets, and implementing targeted measures such as arms embargoes, travel bans, and financial or commodity restrictions.

The board of directors or designated specialized committee should be provided with statistical data regarding SARs/STRs filed during the reported period, such as the number, type, value, and geographic distribution of the reports, as well as any trends or patterns identified. This information helps the board or committee to oversee the effectiveness of the firm’s AML program, assess the level of compliance risk, and allocate appropriate resources and training. Providing all possible details, names of customers, or copies of SARs/STRs may compromise the confidentiality of the reports, violate data protection laws, or expose the firm to legal liability.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (6th Edition), Chapter 5, Section 5.3.2, page 223.

The Role of the Money Laundering Reporting Officer - ICAEW, page 14.

Human trafficking and modern slaveryinvolveillicit financial transactions, often conductedthrough banks, money service businesses (MSBs), or virtual assets.

Option B (Correct):Frequent payments for online advertisementscan indicaterecruitment for illicit labor or traffickingoperations.

Option C (Correct):Incoming funds from third-party processors with unclear originatorssuggestconcealed financial flows linked to illicit activities.

Why Other Options Are Incorrect:

Option A (Incorrect):Transactional activity with a virtual currency exchange alone is not a strong human trafficking red flag.

Option D (Incorrect):Cash payments to workers could indicate labor law violations but do not necessarily indicate human trafficking.

Common Financial Red Flags for Human Trafficking:

Unexplained cash deposits and withdrawals from multiple accounts.

Frequent wire transfers to high-risk jurisdictions.

Use of prepaid cards to move funds anonymously.

Best Practices for Detecting & Preventing Human Trafficking-Related Transactions:

Train frontline staff to recognize financial indicators of trafficking.

Monitor unusual transaction patterns in industries with high labor exploitation risks.

File Suspicious Activity Reports (SARs) when trafficking-related transactions are suspected.

Along-term, root cause-based approach ensures AML deficiencies are fully remediated.

Option C (Correct):Addressing root causes ensures the institution remains compliant and prevents recurring violations.

Option A (Incorrect):Consulting with an FIU is unnecessary for internal remediation plans.

Option B (Incorrect):Short-term fixes do not resolve systemic AML issues.

Option D (Incorrect):AML compliance improvements may require investment—cost-cutting should not compromise compliance.

Best Practices for AML Audit Remediation:

Conduct root cause analysis before implementing corrective measures.

Develop a long-term compliance improvement plan.

Allocate sufficient resources for sustainable AML enhancements.

The bank’s internal investigation is aimed at understanding the activities and legitimacy of the client who wants to open multiple accounts for their swimming pool company, with each account assigned to a debit card for the company’s technicians. The purpose of these accounts, as stated by the client, is to facilitate the purchase of pool chemicals. To conduct a thorough investigation, the bank can consider several available sources of information. Let’s analyze each option:

A. Client’s credit bureau report: The client’s credit bureau report primarily contains information related to the individual’s credit history, including loans, credit cards, payment patterns, and any financial obligations. While this information may be useful in assessing the client’s creditworthiness, it may not provide substantial insight into the specific activities and legitimacy of the swimming pool company or the need for multiple accounts.

B. Local law enforcement investigation report: The local law enforcement investigation report may contain information about any criminal or suspicious activities involving the client or the swimming pool company, such as fraud, money laundering, tax evasion, or other offenses. However, this source may not be readily available to the bank, as it may require a formal request or a subpoena to access. Moreover, the report may not be comprehensive or up-to-date, as it may depend on the scope and progress of the law enforcement investigation.

C. Interview swimming pool technicians and chemical suppliers: The interview with the swimming pool technicians and chemical suppliers may provide some information about the nature and frequency of the transactions involving the pool chemicals, such as the amount, the price, the payment method, and the delivery mode. However, this source may not be reliable or verifiable, as the technicians and suppliers may be biased or influenced by the client. Moreover, the interview may not be feasible or practical, as it may require the bank to contact and arrange meetings with multiple parties, which may be time-consuming and costly.

D. Internet search showing how such business are typically operated: The internet search showing how such business are typically operated may provide some information about the industry standards and best practices for running a swimming pool company, such as the average number of technicians, the typical expenses, the common suppliers, and the expected revenue. This source may be useful in comparing and contrasting the client’s business model and operations with the industry norms and identifying any red flags or anomalies. Moreover, this source may be easily accessible and inexpensive, as it may only require the bank to use a web browser and a search engine.

Therefore, the best available source for the bank’s internal investigation on this client’s activities is option D.

1: CAMS Certification Package - 6th Edition | ACAMS 2: CAMS Certifications: How to Get CAMS Certified | ACAMS 3: ACAMS CAMS Certification Video Training Course - Exam-Labs 4: Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition) 5: Bank’s Internal Investigation on Client’s Activities | CAMS Exam Prep 6: South Florida: Couple arrested for more than $2 million fraud 7: Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations

Businessesmust not engage with entities in sanctioned jurisdictionswithout proper licensing.

Option D (Correct):Providing services to sanctioned areasexposes an organization toOFAC or EU penalties.

Option A (Incorrect):Personal historydoes not necessarily indicateAML risk.

Option B (Incorrect):Lack of individual ownership above 10%does not inherently indicate risk.

Option C (Incorrect):Private ownership alonedoes not pose an AML concern.

 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.

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

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

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, customerservice, 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.

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

 the compliance officer should cooperate with the law enforcement investigation, but only after receiving a formal written request that specifies the scope and purpose of the information sought. This is to ensure that the compliance officer complies with the legal and regulatory obligations of the bank, such as confidentiality, privacy, and data protection. The compliance officer should also document the request and the information provided, and report the incident to the senior management and the board of directors as appropriate.

FFIEC BSA/AML Assessing the BSA/AML Compliance Program - BSA Compliance Officer, section “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.”

Guidelines on the role of AML/CFT compliance officers, section “Guidelines on the role of AML/CFT compliance officers”, paragraph 36: “The AML/CFT compliance officer should ensure that the institution cooperates with the competent authorities, including by providing them with all the information they require in a timely manner, in accordance with the applicable legal and regulatory framework.”

Anti-Money Laundering Compliance Officer Job Description, section “Responsibilities of an AML Compliance Officer”, bullet point 6: “Cooperate with law enforcement and regulatory bodies as required.”

The FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the internationalfinancial system. The FATF conducts mutual evaluations of its members and other jurisdictions to assess their compliance with the FATF Recommendations and the effectiveness of their AML/CFT regimes1.

The FATF defines effectiveness as "the extent to which a country’s AML/CFT regime is achieving the defined outcomes of an effective regime that allows them to mitigate their risks and threats of ML/TF"2. The FATF assesses effectiveness based on 11 immediate outcomes, which are grouped into three thematic goals: financial system integrity, legal system and operational issues, and international cooperation2.

One of the immediate outcomes under the financial system integrity goal is that “FIs adequately apply preventive measures commensurate with their risks, and report suspicious transactions” (IO.4)2. This outcome measures how well FIs implement the FATF Recommendations on customer due diligence, record-keeping, internal controls, risk assessment, and suspicious transaction reporting. These preventive measures are essential for FIs to identify and mitigate the risks of being misused for money laundering or terrorist financing, and to provide useful information to the authorities for investigation and prosecution2.

Therefore, the correct answer is D. FIs adequately apply preventive measures, as this is one of the FATF characteristics used to assess a country’s effectiveness of its AML regime.

FATF Methodology for assessing compliance with the FATF Recommendations and the effectiveness of AML/CFT systems

An effective system to combat money laundering and terrorist financing

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

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

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

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

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

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 CorruptionPerceptions 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.

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

Based on the USA PATRIOT Act, one action that the US might take to demonstrate extraterritorial reach is to send requests for information to a non-US based financial institution (FI). The USA PATRIOT Act expanded the authority of the US government to issue subpoenas and other legal orders to foreign banks that maintain a correspondent account in the US, requiring them to produce records relating to such account or any account at the foreign bank, including records maintained outside the US12. This provision was intended to enhance the ability of the US to investigate and prosecute money laundering and terrorist financing activities that involve foreign FIs3.

1: USA PATRIOT Act, Section 319(b)

2: Britannica, USA PATRIOT Act, History & Society

3: Princeton Legal Journal, FISA and the USA PATRIOT Act: Reforms and Legal Implications

 The board of directors or designated specialized committee should be provided with statistical data regarding SARs filed during the reported period, such as the number, type, and amount of SARs, as well as any trends or patterns identified. This would enable them to oversee the effectiveness of the anti-money laundering program and ensure compliance with regulatory requirements. Providing too much detail, such as names of customers or copies of SARs, could compromise the confidentiality of the SARs and expose the institution to legal risks.

Anenterprise-wide risk assessment (EWRA)must beupdated when major changesoccur thatimpact AML risk exposure.

Option A (Correct):New products and services(e.g., cryptocurrency trading, private banking)can introduce new money laundering risks.

Option B (Correct):Restructuring compliance teams can impact AML oversightand risk assessment effectiveness.

Option E (Correct):Mergers and acquisitionsmay bringlegacy compliance issues and different risk cultures.

Why Other Options Are Incorrect:

Option C (Incorrect):Changes in product leadership do not automatically change risk exposureunless the product itself changes.

Option D (Incorrect):Using new technology for existing products does not inherently change AML risks, thoughnew digital products might.

Best Practices for Enterprise-Wide AML Risk Assessment Updates:

Review AML program effectiveness before launching new services.

Assess legacy compliance issues when acquiring or merging with another entity.

Align risk frameworks with regulatory changes.

According to the Financial Action Task Force (FATF), substantial growth in wealth during a short period of time is a red flag for money laundering or terrorist financing. Additionally, when a client is a family member of a politically exposed person (PEP) from a country known for corruption, it raises concerns about the potential for corruption, bribery, or influence peddling. In this case, the client's father became the president of Country B, which makes him a PEP.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, PEPs are individuals who are or have been entrusted with prominent public functions, such as heads of state, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, or important political party officials1. PEPs pose a higher risk of money laundering and corruption due to their position and influence2. Therefore, financial institutions should apply enhanced due diligence and ongoing monitoring measures when dealing with PEPs as customers3. This includes:

Conducting enhanced ongoing monitoring of the businessrelationship to detect and report any suspicious transactions or activities4. This may involve more frequent reviews, higher-level approvals, or increased documentation of the transactions and the rationale behind them.

Taking adequate measures to establish the source of wealth and source of funds which are involved in the business relationship or occasional transaction. This may involve verifying the origin, legitimacy, and purpose of the funds, as well as the economic activities and assets of the PEP.

The other two options are incorrect because:

Expedite due diligence when a PEP is pre-approved by a member of senior management is not a recommended course of action, as it may compromise the quality and integrity of the due diligence process. Pre-approval by senior management does not exempt the financial institution from conducting thorough and timely due diligence on the PEP and the business relationship.

Obtain appropriate senior management approval for establishing a business relationship with a PEP from a high risk country is a necessary but not sufficient course of action, as it does not address the ongoing monitoring and source of funds aspects of the PEP risk management. Senior management approval is required for establishing or continuing a business relationship with a PEP, regardless of the country of origin or residence of the PEP.

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 83 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 84 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 85 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88

The susceptibility of a company or jurisdiction to ML/TF abuse is significantly increased by:

Permissibility of bearer shares (B):“Bearer shares make it easy to hide ownership and control, presenting a major risk for misuse by criminals.”(CAMS 6th Edition, Beneficial Ownership and Company Transparency)

Rules governing the disclosure of beneficial ownership by the jurisdiction (C):“Weak requirements or loopholes in beneficial ownership disclosure are frequently exploited to conceal criminal involvement in corporate structures.”(CAMS 6th Edition, Chapter: Legal Persons and Arrangements)

Incorrect Options:

A: High or low fees are not a significant ML/TF risk driver.

D: Ease of travel is unrelated to ML/TF risk related to company structures.

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.

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

Private investment companies (PICs) are potentially vulnerable to money laundering due to the difficulty in identifying the ultimate beneficial owners. PICs are often used to hold and manage private wealth, making them attractive targets for money launderers. Since these entities are privately held and not publicly traded, it can be challenging to identify the individuals whoultimately control or benefit from them. This makes it easier for money launderers to use them to disguise the origins of illicit funds.

Organized crime groups often use front companies to disguise the origin and destination of their illicit funds, and to integrate them into the legitimate economy. Front companies are businesses that appear to be engaged in lawful activities, but are actually controlled by criminals for money laundering purposes.

One reason why organized crime groups use front companies is to gain control over an entire sector of the economy, such as construction, transportation, or gambling. By using multiple front companies, they can create a network of interrelated businesses that can manipulate prices, evade taxes, and influence public contracts. This can give them a competitive advantage over legitimate businesses, and allow them to launder large amounts of money through seemingly legitimate transactions.

Another reason why organized crime groups use front companies is to comingle their illicit funds with those of legal businesses. By using the bank accounts of front companies, they can deposit cash from criminal activities along with the revenues from legitimate operations, making it harder to trace the source of the funds. They can also transfer funds between different front companies, or use them to pay for goods and services, creating layers of transactions that obscure the money trail.

CAMS Study Guide - 6th Edition, Chapter 2, Section 2.2, page 43

A Guide to the 6th Anti-Money Laundering Directive, Part 2, page 9

Money Laundering and Financial Crimes, Chapter 2, page 29

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

What We Do | FinCEN.gov

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

[Egmont Group of Financial Intelligence Units]

A risk-based approach is central to AML/CFT programs and includes:

A: Creating detailed risk profiles for customers based on their behaviors and connections.

C: Applying controls that are tailored to the actual risk (not a one-size-fits-all approach).

D: Performing a thorough risk assessment, considering customer, transaction, and geographic factors.

“A risk-based approach involves risk profiling, tailored controls, and comprehensive risk assessment across key risk factors.”

(CAMS 6th Edition, Risk-Based Approach and Risk Assessment)

Incorrect:

B: Monitoring only flagged customers is not sufficient.

E: Equal allocation of resources ignores differing risk levels.

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

Unilateral offboarding (Option B)may violate internal protocols.

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

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

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

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

These are the information that can help the correspondent bank to assess the risk profile, the regulatory compliance, and the operational capacity of the respondent bank, and to verify its identity and legitimacy. The correspondent bank should obtain and verify the following information about the respondent bank:

Respondent’s management, nature of license, and major business activity. This can help the correspondent bank to understand the governance, the legal status, and the core functions of the respondent bank, and to evaluate its reputation, integrity, and competence.

The quality of supervision in the home country. This can help the correspondent bank to determine the level of oversight and regulation that the respondent bank is subject to, and to identify any potential gaps or weaknesses in the anti-money laundering and counter-terrorist financing (AML/CTF) framework of the home country.

Respondent’s location, in particular the existence of a real physical presence. This can help the correspondent bank to verify the actual existence and operation of the respondent bank, and to avoid dealing with shell banks or banks located in high-risk or non-cooperative jurisdictions.

The other option is not necessarily information that should be included to establish a rigorous “Know Your Respondent” procedure, although it may have some relevance or importance depending on the circumstances and the nature of the correspondent relationship. Option 2 describes computer equipment and software capability, which may be useful to assess the technical and operational compatibility and efficiency of the respondent bank, but it is not essential to evaluate its risk or compliance level.

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 154-155

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

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

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 ACAMS study guide, one of the red flags for money laundering in cash-intensive businesses is “the presence of privately-owned ATMs on the premises” (p. 222). This could indicate that the business is using the ATM to deposit or withdraw large amounts of cash from illicit sources, or to facilitate the movement of funds across borders. The other options are not necessarily indicative of money laundering risk, as they could be explained by legitimate factors such as the change in customer preferences, the economic situation, or the expansion of the business.

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

CFI. (2023)Money Laundering - Overview, How It Works, Example 1. Retrieved from https://corporatefinanceinstitute.com

CALERT. (2016)How Do Criminals Launder Money Through a Restaurant? 2. Retrieved from https://calert.info

AMutual Legal Assistance Treaty (MLAT)is aformal agreement between two or more countriesthat facilitatescooperation in legal and law enforcement matters, includingAML investigations.

Option D (Correct):MLATs allow governments to share financial intelligence, request legal assistance, and conduct joint investigations.

Option A (Incorrect):A Memorandum of Agreement (MOA) is typically a non-binding contract used for general business or governmental cooperation.

Option B (Incorrect):A Declaration of Understanding is an informal agreement and does not provide a legal framework for law enforcement cooperation.

Option C (Incorrect):A Memorandum of Understanding (MOU) is often used for informal cooperation but lacks the legal enforceability of an MLAT.

Option E (Incorrect):A Request for Urgent Information is not a recognized international legal instrument.

Best Practices for Cross-Border AML Cooperation:

Use MLATs to request access to financial records in foreign jurisdictions.

Collaborate with Financial Intelligence Units (FIUs) via the Egmont Group.

Leverage FATF’s International Cooperation Review Group (ICRG) for guidance.

A, B, C, D are all identified by CAMS 6th Edition and FATF as primary financial crime risks for e-commerce platforms:

A: Platforms can be exploited to launder money by processing the movement of criminal proceeds under the guise of legitimate sales.

B: Use of stolen credit/debit cards for online purchases is a common fraud and ML technique.

C: Fraud schemes (such as chargebacks or fake listings) are widespread on e-commerce platforms.

D: E-commerce platforms can serve as fronts for illicit goods or services, masking the true nature of transactions.

E and F are not commonly cited as principal inherent risks in AML/CTF guidance.

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

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

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

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

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

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

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

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

2: Overview - FinCEN.gov

An oil exploration company based in France does business with oil refineries in Iran, which is subject to comprehensive Office of Foreign Assets Control (OFAC) sanctions. What type of OFAC sanctions should be imposed against the French company?

A. Sectoral

B. Country-based

C. Secondary

D. List-based

Answer: C

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

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

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

Why Other Options Are Incorrect:

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

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

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

Best Practices for Addressing AML Exam Findings:

Document all remediation efforts with clear implementation timelines.

Demonstrate a culture of compliance through leadership and training.

Ensure sustained improvements, not just short-term fixes.

When assessing and managing money laundering risks while operating in foreign jurisdictions different from that of the head office, an effective AML monitoring program should conform to the foreign jurisdiction policies to align with the head office policies. This ensures that the organization's AML/CFT risk management remains consistent across all jurisdictions, while allowing local compliance staff to assess and manage the risks specific to their jurisdiction. Additionally, the program should be tailored to the higher of standards between the jurisdictions, and should be consistent with the head office audits. Providing all foreign jurisdiction reports to the head office for approval is not necessary, as long as the program is consistent with the head office policies.

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

ACAMS Study Guide, 6th Edition, page 191

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

Learn more

1blob:https://www.bing.com/12e36647-a7b4-48a5-9dff-13e7aab69e80

quizlet.com2blob:https://www.bing.com/2c9f865a-c41c-4acb-9e08-acb661cdbbe3

exam4training.com3blob:https://www.bing.com/2c9f865a-c41c-4acb-9e08-acb661cdbbe3

exam4training.com4blob:https://www.bing.com/12e36647-a7b4-48a5-9dff-13e7aab69e80

quizlet.com

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

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.

[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.

Vendors and third-party relationships pose financial crime risks, particularly when theyoperate in sanctioned jurisdictions. Organizations must ensure thatthey are not directly or indirectly violating economic sanctionswhen engaging with vendors.

Option D (Correct):If a vendor provides services tosanctioned entities or individuals, an organizationrisks violating OFAC, EU, or UN sanctions laws, potentially leading tofines, legal action, or reputational damage. Engaging in business in asanctioned regionrequires strictdue diligence and licensing.

Option A (Incorrect):Thepersonal backgroundof an employee isnot relevantunless theycurrently have direct ties to a sanctioned jurisdiction or person.

Option B (Incorrect):Alack of majority ownershipdoes not automatically indicateAML risk; however, organizations should still assessownership structures for opacity.

Option C (Incorrect):Privately held companiescan betransparentif theydisclose ownership and operate within compliance standards.

Why This Matters:

Failing toscreen vendors for sanctions riskscan result insevere penalties, reputational harm, and regulatory scrutiny.OFAC (U.S.), EU, and UN sanctions prohibit business transactions with specific countries, entities, and individuals. Organizations mustconduct thorough due diligencetoidentify and mitigate sanctions risks.

Mutual Legal Assistance Treaties (MLATs) are characteristics of D. only involving two countries, E. cooperatively combating crime between countries, and F. being useful for gathering evidenceand intelligence in a foreign country. MLATs are public and binding under international law (A), can be used for obtaining banking records from treaty partners (B), and provide a legal basis for transmitting evidence ©.

Financial institutions (FIs) are required to cooperate with law enforcement agencies (LEAs) in their investigations of money laundering, terrorist financing, and other financial crimes. However, sometimes LEAs may submit requests for information or documents that are overly broad, unduly intrusive, or unreasonable in scope or volume. Such requests may pose challenges or risks for FIs, such as violating customer privacy, compromising data security, disrupting business operations, or incurring excessive costs.

The most appropriate response for an FI in such a situation is to narrow the request through a prompt response to the LEA. This means that the FI should communicate with the LEA as soon as possible to clarify the purpose, scope, and relevance of the request, and to negotiate a more reasonable and proportionate request that meets the LEA’s needs and the FI’s capabilities. The FI should also explain the potential difficulties or consequences of complying with the original request, and propose alternative or additional sources of information that may be more useful or accessible. The FI should document the communication and the agreed terms of the request, and comply with the request in a timely and accurate manner.

By narrowing the request through a prompt response, the FI can demonstrate its good faith and willingness to cooperate with the LEA, while also protecting its own interests and obligations. This can help avoid or resolve any conflicts or misunderstandings between the FI and the LEA, and facilitate a more efficient and effective investigation.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, the Financial Action Task Force (FATF) is an inter-governmental body that sets the global standards for anti-money laundering and counter-terrorist financing (AML/CTF). The FATF also monitors the compliance and implementation of its recommendations by its members and other jurisdictions. To enhance its global reach and effectiveness, the FATF works with nine FATF-style regional bodies (FSRBs) that cover different regions of the world. These FSRBs have similar objectives and functions as the FATF, but they also take into account the specific characteristics and challenges of their regions. Two ways that FSRBs influence AML/CTF standards within their respective regions are:

They issue typologies specific to their geographical region. Typologies are reports or studies that analyze the methods, trends, and patterns of money laundering and terrorist financing in a particular sector, industry, or region. FSRBs produce typologies that reflect the regional context and risks of their members and provide guidance and best practices to address them. For example, the Asia/Pacific Group on Money Laundering (APG) has issued typologies on trade-based money laundering, wildlife trafficking, and virtual assets in the Asia-Pacific region12.

They administer mutual evaluations of participating members. Mutual evaluations are peer reviews that assess the level of compliance and effectiveness of a country’s AML/CTF system against the FATF standards. FSRBs conduct mutual evaluations of their members and publish the results and recommendations in detailed reports. These reports help identify the strengths and weaknesses of each country’s AML/CTF regime and provide a basis for follow-up actions and technical assistance. For example, the Caribbean Financial Action Task Force (CFATF) hasconducted mutual evaluations of its members such as Barbados, Jamaica, and Trinidad and Tobago34.

Anti-Money Laundering Specialist (the 6th edition) study guide, page 27

APG website, section on Typologies

Anti-Money Laundering Specialist (the 6th edition) study guide, page 28

CFATF website, section on Mutual Evaluations

The customer activity that poses the highest risk of money laundering is making multiple cash deposits slightly below a required reporting limit. This could indicate a practice known as structuring or smurfing, which is a method of breaking down large amounts of cash into smaller transactions to avoid detection or reporting by financial institutions12. Structuring is a common technique used by money launderers to conceal the source, ownership, or destination of illicit funds3.

The other options are not necessarily indicative of money laundering, although they may require further due diligence or monitoring depending on the customer profile and the nature of the transaction. For example:

Transferring funds to pay for flight training lessons could be a legitimate educational expense, or it could be related to terrorist financing or other criminal activities. The financial institution should verify the identity and background of the customer and the recipient, and check for any red flags or suspicious indicators4.

Paying a supplier of precious metals at regular quarterly intervals could be a normal business practice, or it could be a way of moving or storing value in an alternative asset class. The financial institution should assess the customer’s source of funds, business rationale, and market conditions, and monitor for any changes or inconsistencies.

Conducting business in a country that represents a high risk of money laundering could be a legitimate commercial opportunity, or it could be a sign of involvement in illicit activities or tax evasion. The financial institution should apply enhanced due diligence measures, such as verifying the identity and reputation of the customer and the counterparties, obtaining information on the purpose and nature of the business relationship, and screening for any sanctions or adverse media.

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 2, page 29: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-2.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 6, page 121: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-6.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 139: 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 4, page 77: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-4.pdf

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.

In the context ofgambling and gaming sectors, a well-known money laundering typology is the use of platforms tointroduce illicit funds and withdraw them as "winnings". When a customerdeposits large cash amounts and quickly withdraws themwithout engaging in actual gambling, it indicates"placement and layering"techniques.

This behavior is indicative of attempts todisguise the origin of illicit funds, converting them into legitimate-looking financial flows. It is considered a classic red flag in AML programs related to casinos and online gaming.

The USA PATRIOT Act of 20011 is a comprehensive anti-terrorism and anti-money laundering legislation that grants various powers and authorities to the US government to combat money laundering, terrorist financing, and other financial crimes. Among its provisions, Title III of the Act, also known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 20012, specifically addresses the issue of correspondent banking and the risks of money laundering and terrorist financing through foreign banks that maintain accounts with US banks. Section 319 of Title III3 authorizes the US Attorney General or the Secretary of the Treasury to issue a subpoena or summons to any foreign bank that maintains a correspondent account in the US, and to request any records relating to such account, including records maintained outside the US. Furthermore, Section 319(b) of Title III4 allows the US authorities to seize the funds of the foreign bank held with the US bank, if the foreign bank fails to comply with such a subpoena or summons, or if the US authorities initiate a civil forfeiture action against the funds in the correspondent account. Therefore, the USA PATRIOT Act is the correct answer, as it enables the US authorities to seize the funds of the foreign bank held with the US bank, if the correspondent account is found to have facilitated a transaction involving tainted funds.

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

Consolidated KYC Risk Management - Bank for International Settlements

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

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

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

Incorrect Options:

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

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

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

According to the research report by the Council of Europe1, one of the typologies of money laundering through online gambling is the use of multiple accounts and identities to conceal the source and destination of funds. This can be done by opening several accounts under the same name using different IP addresses, or by using false or stolen identification documents to create multiple accounts. Another typology is the use of online gambling platforms that are not regulated or authorized by the jurisdiction where the customer is located, or that do not require know-your-client information from users. This can allow money launderers to access the online gambling services from multiple countries, without being subject to any verification or monitoring by the authorities.

1: Research report - The use of online gambling for money laundering and the financing of terrorism purposes, Council of Europe, April 2013.

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

The scenario described in the question presents several indicators of potential money laundering through real estate, which the broker should be aware of and report accordingly. The most relevant red flags are:

Value: The student wants to buy a home that is overvalued, meaning that the asking price is higher than the market value or the appraisal value of the property. This could indicate that the student is trying to launder a large amount of illicit funds in one transaction, or that the seller is colluding with the student to inflate the price and receive a kickback. Overvaluing or undervaluing properties is a common technique used by money launderers to manipulate the price of real estate and conceal the source or destination of their funds12.

Inconsistency: The student’s behavior and profile are inconsistent with the typical characteristics of a legitimate home buyer. The student cancels the viewing of the home at the last minute due to illness, which could suggest a lack of interest or a pretext to avoid scrutiny. The student also wants to buy an expensive home despite being a student, which could indicate a discrepancy between the student’s income and the source of funds. Moreover, the student disregards the broker’s objections to the asking price, which could imply that the student is not concerned about the value or quality of the property, but rather the amount of money that can be laundered through it34.

Transaction speed: The student wants to quickly buy the home, which could indicate a sense of urgency or pressure to move the illicit funds before they are detected or seized by the authorities. Money launderers often use fast transactions to avoid raising suspicion or leaving a paper trail. Transaction speed is especially relevant when combined with other red flags, such as cash payments, anonymous buyers, or overvalued properties5 .

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

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

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

 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 specialistshould 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.

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

 The customer activity that should trigger a suspicious transaction report is purchasing travelers checks (cheques) for trips to a Non-Cooperative Countries and Territories (NCCTs). This could indicate an attempt to evade currency reporting requirements, avoid sanctions or embargoes, or facilitate money laundering or terrorist financingthrough high-risk jurisdictions12. NCCTs are countries or territories that have been identified by the Financial Action Task Force (FATF) as having serious deficiencies in their anti-money laundering and counter-terrorist financing regimes, and that pose a threat to the international financial system3.

The other options are not necessarily grounds for a suspicious transaction report, although they may require further due diligence or monitoring depending on the customer profile and the nature of the transaction. For example:

The increased activity is due to money order deposits. This could be a legitimate source of income for the customer’s export business, or it could be a way of disguising the origin or destination of the funds. The anti-money laundering specialist should verify the identity and background of the customer and the issuers of the money orders, and check for any red flags or suspicious indicators4.

Wire transfers are coming from a Financial Action Task Force member country. This could be a normal business practice, or it could be a sign of involvement in trade-based money laundering or other illicit activities. The anti-money laundering specialist should assess the customer’s source of funds, business rationale, and market conditions, and monitor for any changes or inconsistencies.

The client changed his address without advising the institution. This could be a simple oversight, or it could be a way of concealing the customer’s true location or identity. The anti-money laundering specialist should update the customer’s information, verify the new address, and check for any adverse media or sanctions.

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 1, page 11: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-1.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 2, page 29: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-2.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 4, page 77: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-4.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 5, page 97: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-5.pdf

According to the Certified Anti-Money Laundering Specialist (CAMS) Sixth Edition manual, the AML compliance officer should inform senior leadership and the board of the investigation (page 124) and monitor the progress of the investigation by keeping clear records (page 127). Additionally, the AML compliance officer should provide all information to the FIU as soon as possible to avoid delays (page 126).

According to the CAMS Manual, when a financial institution is being investigated by the financial intelligence unit (FIU), the AML compliance officer should inform senior leadership and the board of the investigation and monitor the progress of the investigation by keeping clear records. The manual states:

"The AML compliance officer should inform senior leadership and the board of any investigations and then monitor the progress of the investigation by keeping clear records of what has been requested and submitted, deadlines and extensions granted, and any findings or reports received. This will allow the financial institution to respond effectively and efficiently to the investigation and take appropriate action if necessary." (CAMS Manual, Section 7.4.1 - Financial Intelligence Units, p. 366)

The bank should request a formal letter be submitted to verify the validity of the request, as this is the best practice to ensure compliance with the law and protect customer privacy. The bank should not confirm or deny the existence of a customer relationship, nor provide any information without proper authorization. The bank should also not inform the board of directors before responding to the request, as this could compromise the confidentiality of the investigation or alert the customer.

ACAMS CAMS Certification Video Training Course, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.3: Data Protection and Privacy, Slide 10

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Page 51

PEPs posehigher risks for corruption and money laundering, requiringenhanced due diligence (EDD).

Option D (Correct):Understanding aPEP’s source of wealth and fundsensureslegitimacy of transactions.

Option A (Incorrect):Commercial databases help identify PEPsbutdo not mitigate risk alone.

Option B (Incorrect):Lowering monitoring thresholds, not raising them, helps detect suspicious activity.

Option C (Incorrect):Regulatory approval isnot required, but internal risk assessments are.

AML audit findings must beanalyzed and addressed through remedial actions based on root cause analysis.

Option D (Correct):Root cause analysis helps develop effective corrective measures to prevent recurring AML deficiencies.

Option A (Incorrect):Retesting controls may be useful, but addressing deficiencies is more critical.

Option B (Incorrect):While the board oversees compliance, the responsibility for implementing fixes lies with AML teams.

Option C (Incorrect):Audit teams provide findings but do not execute corrective actions.

Best Practices for Addressing AML Audit Findings:

Identify the root cause of AML control failures.

Develop risk-based remediation plans.

Implement and monitor corrective actions.

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

= Some of the references that support this answer are:

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

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

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

 According to the ACAMS CAMS Certification Study Guide (6th edition), one of the red flags for money laundering is the transfer of large sums of money to or from high-risk jurisdictions, especially if the transactions are inconsistent with the customer’s profile or business activity. Large payments to a beneficiary in a high-risk jurisdiction may indicate that the originator is involved in illicit activities such as tax evasion, fraud, corruption, or terrorism financing. Therefore, such payments should be escalated for further investigation and reporting1

 1: ACAMS CAMS Certification Study Guide (6th edition), page 64.

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.

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

Customer due diligence should be implemented as an ongoing activity that may vary commensurate with the risk profile of the customer. This is because the risk of money laundering or terrorist financing may change over time, depending on the customer’s behavior, transactions, products, services, and geographic locations. The institution should monitor the customer’s activity and update the customer’s information and risk assessment periodically, or when there are red flags or significant changes in the customer’s circumstances. The institution should also apply enhanced due diligencemeasures for customers that pose higher risks, and simplified due diligence measures for customers that pose lower risks12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 1: Risks and Methods of Money Laundering and Terrorist Financing, p. 18-19 2: FATF Guidance: Customer Due Diligence and Financial Inclusion, February 2018, p. 10-11, http://www.fatf-gafi.org/media/fatf/documents/reports/Guidance-CDD-and-Financial-Inclusion-2018.pdf

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.

Real estate transactions are vulnerable to ML/TF risks, particularly when there is limited transparency or unusual payment methods:

Cross-border purchases (A):“Purchases by foreign buyers, especially from high-risk jurisdictions, are a red flag for money laundering in the real estate sector.”(CAMS 6th Edition, Real Estate Money Laundering Risks; FATF, Money Laundering and Terrorist Financing through the Real Estate Sector, 2007)

Non-financed purchases (D):“Non-financed (all-cash) purchases can indicate the introduction of illicit funds into the financial system, bypassing the controls of mortgage lenders.”(CAMS 6th Edition, Real Estate ML/TF Risks)

Incorrect Options:

B: Purchasing in the name of a natural person is standard and not inherently risky.

C: Paying the true market price does not raise ML/TF risk.

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.

1: Home - Egmont Group

2: EGMONT GROUP OF FINANCIAL INTELLIGENCE UNITS OPERATIONAL GUIDANCE FOR …

Paying a large amount in cash for an art purchase is a typical red flag of potential money laundering, as it may indicate an attempt to avoid traceability and reporting requirements. Cash transactions are often used by criminals to launder illicit funds, as they are difficult to track and verify. According to the FATF guidance on money laundering and terrorist financing risks in the art trade, cash payments above a certain threshold should be subject to enhanced due diligence and reporting obligations by art market participants (AMPs). AMPs should also be wary of customers who provide insufficient or inconsistent information about the source of funds, the purpose of the transaction, or the identity of the beneficial owner.

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.

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.

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.

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 Basel Committee on Banking Supervision standards, the following statements best describe sound practices in relation to customer due diligence (CDD) policies and procedures:

Banks should take into consideration the occasional banking transaction or the size/level of assets to build an understanding of the customer’s profile and behavior. This is because the nature and frequency of transactions and the size of the account balance may indicate the level of risk associated with the customer and the need for ongoing monitoring1

Banks should develop and implement clear acceptance policies and procedures to identify the types of customer that are likely to pose a higher risk of financing terrorism or money laundering. This is because banks should not enter into or maintain relationships with customers who pose unacceptable risks to the bank or the financial system. Banks should also apply a risk-based approach to CDD and apply more stringent measures to higher-risk customers12

Banks should implement enhanced due diligence measures for entering business relationships with high-risk customers, such as approval by senior management. This is because banks should ensure that they have adequate information and controls to manage the risks posed by such customers and to comply with the relevant laws and regulations. Senior management should be involved in the decision-making process and be accountable for the outcomes12

 1: Basel Committee on Banking Supervision, Consolidated KYC Risk Management, October 2004, page 6-7. 2: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, page 8-9.

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

ACAMS CAMS Certification Video Training Course - Exam-Labs1

Understanding Money Laundering in Casinos | ComplyAdvantage2

Casino Money Laundering: Red Flag Indicators - Alessa3

Specialized AML training must be relevant to the specific risks the corporate banking team faces, including legal/regulatory expectations and the ML/TF typologies applicable to their products and customer base.

Applicable AML laws and regulations (B):“Staff must be aware of the applicable AML/CFT laws and regulatory requirements relevant to their business area.”(CAMS 6th Edition, Chapter: AML Training and Awareness)

Money laundering typologies applicable to corporate loans (D):“Training should include typologies and red flags that are most relevant to the risks present in the specific business line, such as corporate lending.”(CAMS 6th Edition, AML Training for High-Risk Departments)

Incorrect Options:

A: Monetary instrument reporting is more relevant to retail/branch banking.

C: Regulatory exam best practices are for compliance teams, not business-line relationship managers.

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

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

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

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

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

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

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

Why Other Options Are Incorrect:

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

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

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

Red Flags for Terrorist Financing:

Frequent low-value transactions to conflict zones.

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

Funds moving through unregulated crowdfunding platforms.

Best Practices for Detecting Terrorist Financing:

Identify transactions involving known terrorist financing typologies.

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

Use negative news screening to detect links to sanctioned entities.

According to the USA PATRIOT Act, the four minimum elements required for an anti-money laundering program for a foreign bank with branches in the United States are:

An ongoing employee training program. This is to ensure that the employees are aware of the anti-money laundering policies and procedures, the legal and regulatory requirements, the red flags and indicators of suspicious activity, and their roles and responsibilities in detecting and reporting money laundering and terrorist financing.

The designation of a compliance officer. This is to ensure that there is a person responsible for overseeing the implementation and effectiveness of the anti-money laundering program, ensuring compliance with the applicable laws and regulations, and liaising with the regulators and law enforcement agencies.

An independent audit function to test the program. This is to ensure that the anti-money laundering program is periodically reviewed and evaluated by an independent and qualified auditor, who can assess the adequacy and effectiveness of the program, identify any weaknesses or deficiencies, and recommend corrective actions or improvements.

The development of internal policies, procedures, and controls. This is to ensure that the foreign bank has a written and documented anti-money laundering program that establishes the standards, guidelines, and processes for preventing, detecting, and reporting money laundering and terrorist financing, and that the program is consistent with the risk profile and business activities of the foreign bank.

The development of a Know Your Customer program is not a minimum element required under the USA PATRIOT Act, although it is a recommended best practice and may be required by other laws or regulations.

CAMS Study Guide - 6th Edition, Chapter 5, pages 141-142

CAMS Certification Exam Outline, Domain 2, Task 2.2, Skill 2.2.1

Anti-Money Laundering Initiatives Under the USA Patriot Act, FindLaw, March 2008

[The U.S. PATRIOT Act and AML: What You Need to Know], Dow Jones Risk & Compliance, June 2020

MSBs arevulnerable to financial crimedue to theircash-intensive natureandremittance services.

Option D (Correct):Hesitation to provide beneficiary detailssuggestsanonymity concerns, a common money laundering tactic.

Option E (Correct):Usingmultiple accounts under different namesis aknown structuring techniquetoevade detection.

Option A (Incorrect):Exchanging foreign currency is normal, though higher-risk transactions require monitoring.

Option B (Incorrect):Cash deposits are expectedin MSBs but needadditional risk factorsto be considered suspicious.

Option C (Incorrect):Frequent small transfersmay be normal forremittance businesses.

 Section 311 of the USA PATRIOT Act grants the Secretary of the Treasury the authority to designate foreign jurisdictions, financial institutions, classes of transactions, or types of accounts as being of primary money laundering concern, and to impose one or more of five special measures on them. These special measures range from requiring enhanced recordkeeping and reporting to prohibiting U.S. financial institutions from opening or maintaining correspondent accounts for the designated entities. The purpose of these special measures is to protect the U.S. financial system from money laundering and terrorist financing risks posed by the designated entities.

USA PATRIOT Act | FinCEN.gov

FACT SHEET for Section 312 of the USA PATRIOT Act Final Regulation and Notice of Proposed Rulemaking | FinCEN.gov

International Financial Crime: Treasury’s Roles and Responsibilities Should Be Updated - GovInfo

ARisk Appetite Statement (RAS)helps financial institutions defineacceptable risk levelsand align them withregulatory compliance and business strategy.

Option A (Correct):Incorporating risk appetite adherence into internal reporting ensures consistent enforcementandaccountabilityacross business functions.

Option D (Correct):Embedding risk appetite into daily processes ensures that compliance is built into the organization’s culture and operations.

Option E (Correct):Training employees on risk appetite awareness helps them understand compliance limits and risk management principles.

Why Other Options Are Incorrect:

Option B (Incorrect):Whiletraining managers on "good" risk-takingis valuable,it does not directly enhance risk appetite awareness for compliance.

Option C (Incorrect):Describing risk controls is useful but insufficientfor embedding risk appetite into an organization’s structure.

Best Practices for Implementing Risk Appetite Awareness:

Ensure risk appetite is a key part of regulatory and operational reporting.

Train employees at all levels on risk tolerance boundaries.

Integrate risk appetite considerations into product development and customer onboarding processes.

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

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

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

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

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

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

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

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

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

Online Banking and Money Laundering, ACAMS Today, September 2012

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

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

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

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

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

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

According to the 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.

=

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

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

RefThis transaction should result in a SAR/STR filing because it indicates possible structuring, which is a form of money laundering that involves breaking down large amounts of cash into smaller deposits to avoid detection or reporting requirements. Structuring is often done to conceal the source or destination of illicit funds, or to evade taxes, regulations, or sanctions. A small business owner who deposits checks just below the $10,000 USD threshold on a daily basis without providing a legitimate purpose raises a red flag for suspicious activity and should be reported to the relevant Financial Intelligence Unit.

Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR)

What Is a Suspicious Activity Report (SAR)? Triggers and Filing

How to decide if SAR filing is needed

erence: https://aml-cft.net/library/suspicious-transaction-report-str-suspicious-activity-report-sar/

Real estate ML/TF risk is highest where transparency is low or the origin of funds is obscured:

Use of cash to purchase property (A):“All-cash transactions in real estate present a high ML risk, as they bypass traditional financial scrutiny and facilitate the placement of illicit funds.”(CAMS 6th Edition, Real Estate Money Laundering Risks)

Use of a company for the purchase of property (D):“Purchasing property through companies, especially shell companies, can conceal the beneficial owner and the true source of funds.”(CAMS 6th Edition, Real Estate ML/TF Risks; FATF, Real Estate Sector)

Incorrect Options:

B: Unlicensed agents may be risky, but the core risks are A and D.

C: Trusts may add complexity but are less common/high-risk than company structures.

E: Value manipulation is risky but less so than the above.

When assessing the risk rating of customers, financial institutions should consider various factors that may indicate the potential for money laundering, terrorist financing, or other illicit activities. According to the ACAMS Study Guide for the CAMS Certification Examination1, some of the key risk factors are:

Customer risk: This refers to the characteristics of the customer that may affect their risk profile, such as their identity, occupation, source of funds, business activities, reputation, and political exposure. For example, customers who are politically exposed persons (PEPs), cash-intensive businesses, non-resident customers, or customers with complex ownership structures may pose a higher risk of money laundering or terrorist financing.

Geographic risk: This refers to the location of the customer, their business, or their transactions, and the level of risk associated with that location. For example, customers who are based in, operate in, or transact with jurisdictions that have weak anti-money laundering (AML) regulations, high levels of corruption, or are subject to sanctions or embargoes may pose a higher risk of money laundering or terrorist financing.

Product risk: This refers to the type of products or services that the customer uses or offers, and the level of risk associated with those products or services. For example, customers who use or offer products or services that are anonymous, complex, or facilitate cross-border transactions may pose a higher risk of money laundering or terrorist financing.

Other risk factors that may be considered include transaction risk, delivery channel risk, and industry risk2. However, these are not among the options given in the question.

In anEnterprise-Wide Risk Assessment (EWRA),residual riskis the level of risk that remains after applying mitigating controls to theinherent risk(the risk present before controls are applied).

In this scenario, theinherent risk is highdue to the nature of private banking—high net worth clients,cross-border transactions,complex ownership structures, andhigh-value financial products. However, the institution has implementedrobust CDD and EDD, as well asadvanced transaction monitoring systems.

According to the CAMS Study Guide – 6th Edition, wheneffective and properly implemented controlsare in place, they cansignificantly reducethe residual risk—even in high-risk business areas like private banking. However, no control framework caneliminate all riskentirely.

Option Ais correct: Controls can significantly reduce the residual risk when strong, effective systems and procedures are in place.

Option Bis partially true but suggests inadequacy, which is not indicated here.

Option Cincorrectly assumes residual risk cannot be lowered even with controls.

Option Dis incorrect because residual riskcannot be eliminated entirely.

FIs mustcooperate with law enforcement requestswhile ensuringlegal compliance.

Option C (Correct):Adesignated compliance officershould handledocument preparation and internal review.

Option A (Incorrect):There isno requirementto wait for theCEO’s approval.

Option B (Incorrect):Privacy policies should already align withAML laws, delaying compliance isnot recommended.

Option D (Incorrect):Blocking a lawful requestcould lead tolegal and regulatory action.

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

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

Transaction Monitoring Processes for Red Flag Activity in Banking

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

The Basel Committee on Banking Supervision identified four risks to banking institutions as a result of an inadequate KYC program: legal, reputational, operational, and concentration. Legal risks include the potential for fines or sanctions for non-compliance with applicable laws and regulations. Reputational risks include the loss of customer confidence due to the institution's involvement in illicit activities. Operational risks include the potential for fraudulent or suspicious activity to go undetected. Finally, concentration risks involve the potential for a single customer or group of related customers to dominate the institution's operations.

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 moneylaundering 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

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

Red flags in connection with a company involved in illegal logging include: D. Expeditious shipment of wood to far away jurisdictions, E. Use of heavy machinery in non-protected areas, and F. Executive's association with politically exposed persons. These red flags could be indicative of attempts to conceal the origin of illegally harvested wood and to avoid detection by government authorities.

Money launderersexploit corporate structuresthat offeranonymityandreduced transparency.

Option A (Correct):Nominee shareholders and directorscan be used tohide true beneficial ownership.

Option C (Correct):Bearer sharesallowownership to transfer anonymously, amajor AML risk.

Option E (Correct):Tax haven companieswithsecrecy lawsare frequently used formoney laundering.

Option B (Incorrect):A private companywithout activitydoes not inherently pose anAML risk.

Option D (Incorrect):LLCscan be transparentif properKYC and reporting measuresare in place.

Asset management companies handlelarge amounts of funds, making themprime targets for money launderers.

Option A (Correct):Negative news (adverse media) screeningis essential for identifyingpotential financial crime risks.

Option D (Correct):Understanding thesource and origin of assetsensures that fundscome from legitimate sources.

Option B (Incorrect):PEPs should not be automatically rejected, butenhanced due diligence (EDD)is required.

Option C (Incorrect):While onboarding interviews help,they are not a mandatory AML measure.

Option E (Incorrect):Financial stability reportsare useful, butnot directly linked to AML compliance.

AML Risks in Asset Management:

High-value transactions that may mask illicit wealth.

Layering through investment portfolios to hide the origin of funds.

Use of offshore structures to evade regulatory scrutiny.

Best Practices for AML in Asset Management:

Conduct enhanced due diligence (EDD) on high-net-worth clients.

Monitor large and unusual transactions.

Screen customers against PEP, sanction, and adverse media databases.

According to the ACAMS study guide1, some of the common red flags for money laundering or financing terrorism are:

Customers who provide insufficient or suspicious information, such as unusual or unverifiable identification documents, different taxpayer identification numbers, or vague or inconsistent information about their business or source of funds.

Transactions that have unusual features, such as large cash payments, unexplained payments from a third party, use of multiple or foreign accounts, complex or illogical transactions, or transactions that are inconsistent with the customer’s profile or expected behavior.

Geographic concerns, such as transactions involving high-risk jurisdictions, offshore financial centers, secrecy havens, or countries subject to sanctions or embargoes.

Ultimate beneficial ownership that is unclear, such as customers who use shell companies, trusts, or other legal entities to obscure their identity or the identity of the true owners or controllers of the funds or assets.

In this scenario, two red flags that could indicate money laundering or financing terrorism are:

B. The guarantor company’s ownership structure is overly complex. This could be an attempt to hide the true source or destination of the funds, or to evade regulatory or law enforcement scrutiny. The use of a trust formed in a Caribbean island and a holding company based in a European secrecy haven could also indicate geographic concerns, as these jurisdictions are known for their low transparency and high confidentiality.

D. The ultimate beneficial owner is a young lady who has gained her wealth through a small business. This could be a case of false or misleading information, as the source of funds is not commensurate with the size or nature of the transaction. The fitness studio business could be a front or a cover for illicit activities, or the young lady could be a nominee or a straw man for the real owner or beneficiary.

= 1 ACAMS. (2020). Study Guide for the Certification Examination: Sixth Edition. Miami, FL: ACAMS.

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

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

What Is An AML Officer1

Bank Secrecy Act/Anti-Money Laundering: Requests by Law Enforcement for Financial Institutions to Maintain Accounts 2

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

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

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

According to the CAMS Study Guide (the 6th edition), page 184, when an FI receives a formal law enforcement request to produce documents, such as a subpoena, a search warrant, or a court order, it should designate a person responsible for the internal investigation in preparation of documents for the request. This person should be familiar with the FI’s policies and procedures, the applicable laws and regulations, and the nature and scope of the request. The designated person should also coordinate with the FI’s legal counsel, compliance officer, and senior management, and ensure that the FI preserves the confidentiality and integrity of the documents and the investigation.

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.

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’.

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

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

MLO Mentor: Anti-Money Laundering 1

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

 A key risk indicator associated with terrorism financing is the link between the charity group and a known terrorist group. This indicates that the funds transferred to the charity group may be used to support the terrorist group’s activities, such as recruitment, training, propaganda, or attacks. Charities are often vulnerable to abuse by terrorist financiers, as they may operate in high-risk areas, have access to large amounts of cash, and enjoy public trust and legitimacy. Therefore, financial institutions (FIs) should conduct due diligence on the charity group, its directors, its beneficiaries, and its sources and uses of funds, and monitor the transactions for any red flags, such as unusual patterns, amounts, or destinations. FIs should also comply with the relevant sanctions and regulatory requirements, and report any suspicious or unusual activity to the authorities.

1: FATF Guidance on Private Sector Information Sharing1

2: Mitigating the risks of terrorist financing | Crowe LLP3

3: ACAMS Study Guide for the CAMS Certification Examination3

 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.

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

 According to the Anti-Money Laundering Specialist (the 6th edition) resources, FSRBs are regional organizations that help the FATF implement its global AML/CFT policy and standards in over 200 affiliated countries1. FSRBs have their own high-level principles and objectives that govern their relationship with the FATF and their members2. Among these principles and objectives, two that should be included in a FSRB update are:

Issue country-specific Mutual Evaluation reports. This is the process by which FSRBs assess the compliance and effectiveness of their members’ AML/CFT systems, based on the FATF standards and methodology3. Mutual Evaluation reports provide an in-depth analysis of the strengths and weaknesses of each jurisdiction, as well as recommendations for improvement4.

Identify jurisdictions with weak AML/CFT regimes. This is the process by which FSRBs, in coordination with the FATF, monitor and publicly list the countries that pose a risk to the international financial system due to their strategic deficiencies in AML/CFT. This process aims to encourage and assist these jurisdictions to address their gaps and enhance their cooperation with the global network.

The other three options are incorrect because:

Address AML/CFT technical assistance of individual members is not a principle that should be included in a FSRB update, as it is not a core function of FSRBs. FSRBs may facilitate or coordinate technical assistance, but they are not the primary providers or funders of such assistance.

Establish AML/CFT standards and typologies is not a principle that should be included in a FSRB update, as it is not a role of FSRBs. FSRBs are expected to adopt and implement the FATF standards, not to create their own. Typologies are the methods and trends of money laundering and terrorist financing, which are identified and analyzed by the FATF and FSRBs through research and workshops.

Protect the reputation and standing of FATF is not a principle that should be included in a FSRB update, as it is not a responsibility of FSRBs. FSRBs are autonomous and independent organizations that have their own governance and accountability mechanisms. FSRBs are expected to cooperate and coordinate with the FATF, but not to act as its agents or representatives.

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 64 2: FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 65 4: FATF, FATF Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems, February 2013 (updated October 2019), [12] : ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 66 : FATF, High-Risk and Other Monitored Jurisdictions, 4 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 4 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 2 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 67 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 3 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 5 : FATF, FATF Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems, February 2013 (updated October 2019), [12], p. 9 : FATF, High-Risk and Other Monitored Jurisdictions, 4, p. 1

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.

ACAMS CAMS Certification Video Training Course

[31 CFR § 1020.320 - Reports by banks of suspicious transactions]

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 couldindicate that the customer is trying to conceal the source or destination of the funds, or transfer them to a high-risk jurisdiction2.

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

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’.

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.

The FATF 40 Recommendations are the international standards for combating money laundering, terrorist financing, and proliferation financing. They provide a comprehensive and consistent framework of measures that countries should implement in their national systems. Recommendation 5 of the FATF 40 Recommendations states that countries should criminalize the financing of terrorism, terrorist acts and terrorist organizations. This means that countries should adopt laws that make it an offence to provide or collect funds or other assets with the intention or knowledge that they will be used to carry out terrorist acts or support terrorist organizations. Countries should also ensure that such offences are punishable by effective, proportionate and dissuasive sanctions. Furthermore, countries should ensure that terrorist financing offences extend to any person who wilfully provides or collects funds or other assets by any means, directly or indirectly, with the unlawful intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out terrorist acts or support terrorist organizations. Therefore, the correct answer is D. Criminalize, as this is the action that countries should take related to the financing of terrorist acts in accordance with the FATF 40 Recommendations.

FATF website

FATF 40 Recommendations - February 2012

FATF Recommendation 5 - Criminalisation of Terrorist Financing

 Structuring is a technique used in the placement stage of money laundering, in which the launderer deposits or withdraws cash in amounts below the reporting threshold to avoid detection or suspicion. Structuring is also known as smurfing, because it involves using multiple individuals or locations to carry out the transactions. Structuring is illegal in many jurisdictions and is a red flag for money laundering12.

Option A is not an example of structuring, but of using an alternative remittance system, which is a method of transferring money outside the formal financial sector. Hawala is a type of alternative remittance system that relies on a network of brokers who settle the transactions through trust and honor. Hawala can be used for legitimate purposes, but also poses a risk for money laundering and terrorist financing13.

Option B is not an example of structuring, but of a large cash transaction, which is a common indicator of money laundering. Large cash transactions may involve the proceeds of crime or the attempt to evade taxes or currency controls. Financial institutions are required to report large cash transactions above a certain threshold to the relevant authorities14.

Option D is not an example of structuring, but of a wire transfer, which is a method of moving funds electronically from one account to another. Wire transfers can be used for legitimate purposes, but also pose a risk for money laundering and terrorist financing, especially if they involve high-risk jurisdictions, shell companies, or complex chains of transactions1 .

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.

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.

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

This is stated in the Certified Anti-Money Laundering Specialist (the 6th edition) manual on page 595, which states: “Potential indicators of money laundering associated with Trust and Company Service Providers include the use of legal persons in jurisdictions with strict secrecy laws, structuring cash deposits into third party accounts, multi-jurisdictional wire transfers with no legal purpose, and frequent deposits to or withdrawals from bank accounts.”

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

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

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

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

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

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

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

Incorrect Options:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Higher-risk customer profilesoften include businesses that:

Regularly handle large volumes of cash

Operate in sectors withhistorical vulnerabilities to money laundering

Are involved invirtual assets or unregulated financial activities

Option C – A local used car sale lot that allows cash payments:

This business type is consideredcash-intensive, and accepting monthly payments in cash raises concerns about the source of funds, potential structuring, or placement of illicit proceeds.

Option D – A Virtual Asset Service Provider (VASP):

VASPs involved inpeer-to-peer crypto transactionspresent elevated AML risks due to theanonymity, speed, and borderless natureof virtual assets. These institutions are often subject toenhanced due diligence requirements.

Option Ais incorrect: A large multinational with documented transactions and transparency typically poseslower inherent risk, though still subject to review.

Option Bmay be reviewed, buton-site ATM replenishment using store cashis not automatically a red flag without other risk indicators.

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 .

According to the ACAMS CAMS Certification Study Guide (6th edition), the bank should file a SAR if it knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity, or is intended or conducted to hide or disguise funds or assets derived from illegal activity, or to evade any BSA regulation or federal law, or has no business or apparent lawful purpose, or is not the sort in which the customer would normally be expected to engage1. The scenario described in the question meets these criteria, as the small deposits and withdrawals from a high-risk country could indicate money laundering, terrorist financing, or other illicit activities. The bank should also document its decision to file or not file a SAR, and retain thesupporting documentation for five years1.

The other options are not correct because they either do not comply with the BSA requirements, or do not adequately address the potential risk of the activity. Blocking any further activity could alert the customer of the bank’s suspicion, and could also interfere with law enforcement investigations. Initiating an investigation into the activity could be part of the bank’s due diligence process, but it does not substitute the obligation to file a SAR if the activity is suspicious. Contacting the customer could also tip off the customer, or elicit false or misleading explanations that could hinder the bank’s assessment of the activity.

ACAMS CAMS Certification Study Guide (6th edition), page 82-83. 12345678 [9]

According to the ACAMS CAMS Study Guide (the 6th edition), one of the key steps in conducting an effective investigation of a potential money laundering or terrorist financing activity is to gather all relevant information about the customer and the transaction, including the nature and purpose of the account, the source and destination of funds,the expected account activity, and the customer’s risk profile1. In this case, the compliance officer should meet with the staff who opened the new account for the public official to obtain this information and assess whether the account is consistent with the customer’s profile and needs, or whether it indicates a possible attempt to conceal or launder illicit funds. Waiting for the new account to receive funds, calling the competentauthorities, or calling the official’s office are not appropriate actions at this stage, as they may compromise the investigation, alert the customer, or violate confidentiality rules1.

ACAMS CAMS Study Guide (the 6th edition), Chapter 4: Conducting or Supporting the Investigation Process, page 1311

According to the Financial Action Task Force (FATF) standards for suspicious activity reports (SARs) information sharing within a financial group, "Financial institutions should establish adequate procedures to ensure that confidentiality of information is maintained and that information is only used for purposes permitted under national law. Where the parent institution is located in a country that does not permit such sharing, financial institutions should take measures to address this limitation" (CAMS Manual, 6th Edition, page 476). Therefore, financial institutions must establish sufficient safeguards concerning the confidentiality of information shared for AML purposes.

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

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

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

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

Statement Ais correct:

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

Statement Bis incorrect:

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

Statement Cis correct:

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

Statement Dis incorrect:

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

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

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

The FATF Regional Style Bodies (FSRBs) are autonomous regional organizations that help the FATFimplement its global AML/CFT policy, which revolves around its 40 Recommendations, in over 200 affiliated countries1. One of the key characteristics of the FSRBs is that they emphasize regional co-operation between member countries, as stated in the High-Level Principles and Objectives approved by the FATF Plenary in October 20122. This means that the FSRBs facilitate information exchange, technical assistance, training, and mutual support among their members to enhance their AML/CFT capacities and compliance. The FSRBs also promote regional perspectives and specificities in the FATF policy-making process and foster dialogue and collaboration with other regional and international bodies2.

1: What are the 9 FATF-Style Regional Bodies (FSRBs)? - Sygna

2: FATF-Style Regional Bodies (FSRBs) - Asia/Pacific Group on Money Laundering

A qualified independent party/auditor is the most effective resource to evaluate the effectiveness of an anti-money laundering program. This is because an independent auditor can provide an objective and unbiased assessment of the program, identify any weaknesses or gaps, and make recommendations for improvement. An independent auditor can also verify the compliance of the program with the relevant regulations and best practices, and test the adequacy and functionality of the internal controls, customer due diligence processes, and transaction monitoring systems. An independent auditor can also help an organization prepare for regulatory examinations and audits, and avoid potential penalties or sanctions.

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

The document titled “Frequently Asked Questions Conducting Independent Reviews of Money Services Business Anti-Money Laundering Programs” published by the Financial Crimes Enforcement Network (FinCEN) in July 2010. You can access it by clicking here.

The document titled “AML Audit: How to Effectively Assess Your Compliance Program” published by Alessa in May 2023. You can access it by clicking here.

The document titled “Mutual Evaluations” published by the Financial Action Task Force (FATF). You can access it by clicking here.

Institutions that violate anti-money laundering laws may face various risks and consequences, such as legal, regulatory, reputational, and operational risks. As demonstrated by the 2012 HSBC settlement with United States authorities, two of the most significant risks are:

Forfeiture of assets. This means that the institution may have to surrender some or all of its assets that are related to the money laundering activities or violations. For example, HSBC agreed to forfeit $1.256 billion as part of its deferred prosecution agreement with the US Department of Justice1.

Civil money penalties. This means that the institution may have to pay fines or penalties to the government or other regulatory agencies for violating the anti-money laundering laws or regulations. For example, HSBC agreed to pay $665 million in civil money penalties to various US regulators, including the Office of Foreign Assets Control, the Federal Reserve Board, and the Office of the Comptroller of the Currency1.

The other two options, C and D, are not as common or relevant to the 2012 HSBC settlement. Loss of bank charter/license may occur in extreme cases where the institution is deemed unfit to operate or poses a serious threat to the financial system. Imprisonment of bank employees may occur if the employees are found guilty of criminal charges, such as fraud, conspiracy, or wilful violation of anti-money laundering laws. However, these outcomes are usually reserved for individuals, not institutions, and depend on the specific facts and circumstances of each case.

1: HSBC announces settlements with authorities, 2012, https://www.hsbc.com/-/files/hsbc/investors/stock-exchange-announcements/2012/december/2012-12-11-hsbc-announces-settlements-with-authorities.pdf

2: Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and HSBC Holdings plc, 2012, https://ofac.treasury.gov/recent-actions/20121211_33

3: HSBC settles on record US fee, 2012, https://www.dw.com/en/hsbc-settles-in-us-money-laundering-probe/a-16443391

4: HSBC pays record $1.9bn fine to settle US money-laundering accusations, 2012, https://www.theguardian.com/business/2012/dec/11/hsbc-bank-us-money-laundering

5: HSBC to pay $1.9bn in US money laundering penalties, 2012, https://www.bbc.com/news/business-20673466

 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.

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”

 A financial institution should regularly update its AML risk assessment in order to ensure that the results of the assessment are accurate and reflect the current money laundering and other illicit financial activity risks that the institution may face. This helps to ensure the institution has a comprehensive understanding of the risks associated with its activities and can implement adequate controls and procedures as necessary.

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.

A. Geographic risks should be used to identify the priority of the Fl in this scenario. According to the CAMS Manual (6th Edition), "Geographic risk refers to the possibility that the location of a customer, transaction, or product may increase the likelihood of money laundering or terroristfinancing because of weak or nonexistent AML/CFT controls" (p. 59). In this scenario, the expansion to an area of the world with weak AML laws would increase the Fl's geographic risk.

'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.

Global organizations must ensure their policies and procedures comply with local laws and regulations in each country where they operate, even when maintaining group-wide consistency. Relying solely on international or U.S. standards does not ensure compliance with all local requirements, which may be more stringent or specific.

“A global group-wide program should ensure adherence to local AML and sanctions laws and regulations in every jurisdiction in which it operates. Local adaptation of policies is essential to address jurisdiction-specific risks and legal requirements.”

(CAMS 6th Edition, International AML/CFT Standards; FATF Recommendations 18, 35; EU & US Sanctions Regulations)

When investigating unusual transactions, financial institutions must focus on data-driven risk assessment and internal review first.

Option A (Correct):Assessing business ownership and control structureshelps determine ifmultiple businesses are connected through hidden links(e.g., shell companies or common ownership).

Option C (Correct):The account managermay provide valuable insight on whether the customer’s activity aligns with their expected profile.

Option B (Incorrect):Law enforcement should only be contacted after internal review confirms suspicious activity.

Option D (Incorrect):Declining transactions without thorough investigationcould lead tomissed SAR filingsor improper risk assessment.

Option E (Incorrect):Social media is not a reliable investigative toolfor AML casework.

Key Red Flags in Business AML Investigations:

Frequent transactions between businesses with no clear commercial relationship.

Ownership structures that obscure beneficial owners.

Rapid movement of funds through multiple accounts without economic justification.

Best Practices for Investigating Complex Cases:

Verify ownership and control through official company registries.

Conduct negative news screening and PEP/sanctions screening.

Request supporting documentation from the customer.

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.

ACAMS Study Guide, 6th Edition, page 184

What steps should the institution take? - Exam4Training

Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR) | AML-CFT

Trade-based money laundering (TBML) is a method of disguising and moving illicit funds through the international trade system. Criminals often manipulate various aspects of trade transactions, such as pricing, quantity, documentation, and commodity type, to transfer value and obscure the source of funds. Some of the common red flags that may indicate TBML are:

The transaction involves the use of front (or shell) companies: Front or shell companies are entities that have no physical presence, no employees, and no business activity, but are used to facilitate money laundering. They often have vague or generic names, are registered in secrecy jurisdictions, and have no available ownership information. In this case, ABC Holdings Ltd. and Sunrise Holdings Ltd. could be front or shell companies that are used to launder money through trade transactions.

The type of commodity being shipped appears inconsistent with the exporter or importer’s regular business activities: Criminals may use commodities that are unrelated to their core business or that have low correlation with the market price to launder money. They may also use commodities that are difficult to value, verify, or trace, such as precious metals, gems, art, or antiquities. In this case, the automotive parts company and the silk flower supplier seem to have no logical connection, and the value of the silk flowers may be inflated or deflated to transfer funds.

Trade-Based Money Laundering: Risk Indicators - Financial Action Task Force, pp. 9-10, 14-15

Identifying TBML: 8 Trade-Based Money Laundering Red Flags - Alessa, pp. 1-2

FFIEC BSA/AML Appendices - Appendix F – Money Laundering and Terrorist Financing Red Flags, p. 7

AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage, p. 1

According to the guidance issued by FinCEN and the Federal banking agencies, when a financial institution receives a request for SAR supporting documentation from FinCEN or an appropriate law enforcement or supervisory agency, it must first verify that the requestor is, in fact, a representative of such an agency. This is to ensure the confidentiality and security of the SAR information and to prevent unauthorized disclosures. A financial institution should have procedures for such verification in its BSA/AML compliance program, which may include, for example, independent employment verification with the requestor’s field office or face-to-face review of the requestor’s credentials.

 Money laundering has severe social and economic impacts, including increased crime rates, corruption and erosion of public trust. Money laundering fuels criminal activities by providing the necessary financial resources for criminals to continue their operations. As illicit funds circulate within the financial system, they enable the growth of criminal organizations and contribute to an increase in crime rates, including organized crime1. Money laundering also facilitates corruption and undermines public trust in financial institutions and the wider economy. This erosion of public trust is exacerbated by trade-based money laundering, which involves the manipulation of international trade transactions to disguise the origins of illicit funds2. Money laundering also weakens financial institutions by exposing them to reputational, operational, legal and regulatory risks. Money launderers exploit the vulnerabilities of financial systems and compromisetheir integrity and stability. Money laundering can also distort the allocation of resources, create inflationary pressures, and undermine the effectiveness of monetary policy3.

1: Consequences Of Money Laundering Are: Understanding The Social, Economic, and Penalties Impacts1

2: Consequences of Money Laundering and Financial Crime2

3: Money laundering, its impact and consequences3

Terminating customer relationships due toAML risksrequiresclear procedures and documentation.

Option B (Correct):Astandardized termination procedureensurescompliance, fairness, and consistency.

Option C (Correct):Afinal review of transactionshelps identifysuspicious activity before closure.

Option D (Correct):Documenting termination decisionsprotects the FI fromlegal and regulatory risks.

Option A (Incorrect):Whileclear communication is important, termination decisions should beconsistent and policy-driven.

Option E (Incorrect):Customers should benotified appropriatelybut not necessarilyaftertermination.

REPORTING OF SUSPICIOUS TRANSACTIONS [https://www.fatf- gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf] If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, by law, to report promptly its suspicions to the financial intelligence unit (FIU). According to the Financial Action Task Force‘s (FATF) Recommendation 20, a suspicious transaction report (STR) or a suspicious activity report (SAR) is filed by a financial institution or, by a concerned citizen, to the local Financial Intelligence Unit if they have reasonable grounds to believe that a transaction is related to criminal activity. [https://aml-cft.net/library/suspicious-transaction-report-str-suspicious-activity-report-sar/]

 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.

 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]

Trade finance transactions involve the financing of the movement of goods and services across borders. Trade finance products include letters of credit, guarantees, documentary collections, open account, and supply chain finance. Trade finance transactions are exposed to various risks, such as credit risk, operational risk, fraud risk, and money laundering risk. Money laundering risk refers to the possibility that trade finance transactions are used to conceal the origin, ownership, or destination of illicit funds, or to evade taxes, sanctions, or exchange controls. Trade-based money laundering (TBML) is a form of money laundering that involves the manipulation of trade transactions, such as mispricing, misinvoicing, over- or under-shipping, or falsifying documents, to transfer value or obscure the true nature of the funds12.

An analyst reviewing trade finance transactions should be alert to any red flags or indicators of potential TBML, such as significant discrepancies between the value or quantity of the goods and the invoice, payment, or contract; unusual or complex shipment routes or methods; involvement of high-risk jurisdictions, entities, or commodities; or lack of transparency or documentation of the trade transaction12. If the analyst notices an increase in price of 25% over 12 months for commodities with the same specification and quantity, this could be a sign of mispricing, which is a common technique of TBML. Mispricing involves inflating or deflating the price of the goods to transfer value or evade taxes or duties. For example, an exporter may overprice the goods to move funds out of a country with exchange controls, or an importer may underprice the goods to reduce the customs duty payable12.

However, an increase in price of 25% over 12 months for commodities with the same specification and quantity does not necessarily indicate TBML, as there could be other legitimate factors that may have affected the transaction cost, such as market fluctuations, supply and demand, quality, transportation, insurance, or other fees. Therefore, the analyst should not jump to the conclusion that TBML is occurring, but rather conduct a thorough investigation to verify the validity and rationale of the price change. The analyst should produce an investigation report that considers the client activity and factors that may have legitimately affected the transaction cost, such as:

The nature and purpose of the client’s business and trade activities

The client’s profile, risk rating, and transaction history

The source and destination of the funds and the goods

The market price and trends of the commodities involved

The contractual terms and conditions of the trade transaction

The supporting documents, such as invoices, bills of lading, certificates of origin, inspection reports, etc.

The due diligence and verification procedures performed by the bank or the third parties

The compliance with the relevant laws, regulations, and standards of the jurisdictions involved

The investigation report should document the findings, analysis, and conclusions of the analyst, and provide evidence and references to support the assessment. The investigation report should also include any recommendations or actions to be taken by the bank or the authorities, such as:

Requesting additional information or clarification from the client or the counterparties

Conducting enhanced due diligence or monitoring of the client or the transaction

Escalating the case to the senior management or the compliance department

Reporting the case to the Financial Investigation Unit (FIU) or the relevant regulator

Filing a Suspicious Activity Report (SAR) or a Suspicious Transaction Report (STR) if there are reasonable grounds to suspect TBML or other criminal activity

Therefore, the best action for the analyst to take is to produce an investigation report that considers the client activity and factors that may have legitimately affected the transaction cost, as this would allow the analyst to determine whether the price increase is justified or indicative of TBML, and to take appropriate measures accordingly.

Trade Finance and Trade-Based Money Laundering

Trade-Based Money Laundering: Red Flag Indicators

 Bearer shares are unregistered equity securities owned by the possessor of the physical share documents. The issuing company does not record the identity or ownership of the shareholders, nor does it track the transfers of ownership. This means that the holder of the bearer share can claim ownership and exercise the rights associated with the share, such as voting and receiving dividends, by simply presenting the physical certificate. This also makes the transfer of ownership very easy, as it only requires the delivery of the physical document, without any formalities or intermediaries. Bearer shares are therefore attractive for those who seek anonymity, privacy, and flexibility in their corporate structures.

Investopedia: Bearer Share

SuperMoney: Bearer Shares: Definition, Examples, and Implications

ACAMS: Bearer Shares

The USA PATRIOT Act is a comprehensive legislation that was enacted in response to the terrorist attacks of September 11, 2001, and aimed to strengthen the US government’s ability to prevent, detect, and prosecute money laundering and terrorist financing. Among its many provisions, the USA PATRIOT Act contains several sections that have extraterritorial reach, meaning that they apply to foreign entities or activities that have a nexus with the US. Three of these sections are:

Section 319(b), which allows for the US Attorney General or the Secretary of the Treasury to issue a subpoena or other legal order to any foreign bank that maintains a correspondent account in the US, requiring the production of records relating to such account or any account at the foreign bank, including records maintained outside the US12. This section also allows foreign banksto voluntarily designate a registered agent in the US to accept service of such subpoenas or orders12.

Section 313, which prohibits US financial institutions from establishing, maintaining, administering, or managing correspondent accounts for foreign shell banks, which are banks thathave no physical presence in any country and are not affiliated with a regulated financial group34. This section also requires US financial institutions to take reasonable steps to ensure that their correspondent accounts with foreign banks are not being used to provide banking services indirectly to foreign shell banks34.

Section 311, which authorizes the Secretary of the Treasury to designate foreign jurisdictions, financial institutions, classes of transactions, or types of accounts as being of “primary money laundering concern” and to impose special measures to address such concerns . These special measures may include requiring US financial institutions to obtain and retain information on the beneficial owners of foreign accounts, prohibiting or imposing conditions on the opening or maintaining of correspondent or payable-through accounts for foreign financial institutions, or requiring US financial institutions to identify the customers of their foreign correspondent account holders . The Secretary of the Treasury may also order a US financial institution to terminate a correspondent account within 10 days if the foreign bank fails to comply with a subpoena or other request for information under Section 319(b) .

1: USA PATRIOT Act, Section 319(b)

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

3: USA PATRIOT Act, Section 313

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 120

USA PATRIOT Act, Section 311

ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 119

When onboarding a corporate customer, financial institutions mustconduct due diligence to assess potential AML risks.

Option A (Correct):Understanding thenature of the businesshelps identifyhigher-risk industries(e.g.,casinos, cryptocurrency exchanges, cash-intensive businesses).

Option D (Correct):Identifyingsenior managing officials and account signatorieshelps verify thetrue control and ownership of the company.

Option E (Correct):Jurisdictional risk assessmentis key, especially if the company is from aFATF-listed high-risk country.

Why Other Options Are Incorrect:

Option B (Incorrect):Theemployment profiles of all employeesarenot relevantunless they have adirect role in financial transactions.

Option C (Incorrect):A company'sbanking history is not always relevant, unless there arered flags of prior financial crime involvement.

Best Practices for Corporate Customer Onboarding:

Verify beneficial ownership structuresto detect potential shell companies.

Conduct enhanced due diligence (EDD) for high-risk industries and jurisdictions.

Ensure ongoing monitoring of corporate customers.

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

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

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

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

 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.

=

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 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.

1: UN Sanctions1

2: UN Charter, Chapter VII2

3: ACAMS Study Guide for the CAMS Certification Examination3

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 ofmoney 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.

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 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 Cdescribes 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.

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 correspondent bank has engaged in a high-risk activity that could expose the primary bank to sanctions violations, reputational damage, and regulatory scrutiny. The Office of Foreign Assets Control (OFAC) administers and enforces economic and tradesanctions against targeted foreign countries, regimes, terrorists, and other threats to the national security, foreign policy, or economy of the United States1. Opening branches in a country on the OFAC list indicates that the correspondent bank is not complying with the sanctions requirements, and could be facilitating transactions for sanctioned entities or individuals. This would pose a serious risk for the primary bank, which is responsible for conducting due diligence and monitoring of its correspondent banking relationships2. Therefore, the primary bank should terminate the relationship with the correspondent bank to avoid any potential liability or penalties.

The other options are not as compelling as A, because they do not necessarily indicate that the correspondent bank is violating any laws or regulations, or that the primary bank is exposed to significant risks. Option B could be a cause for concern, but it does not imply that the correspondent bank is involved in any wrongdoing, or that the compliance officer has any influence over the correspondent banking activities. Option C could suggest that the correspondent bank is engaging in unusual or suspicious transactions, but it does not mean that the primary bank should terminate the relationship immediately, as it could also be a result of changes in the correspondent bank’s business profile, customer base, or market conditions. Option D is a normal and expected part of the correspondent banking relationship, as the primary bank has the right and obligation to request transactional details from the correspondent bank to verify the legitimacy and source of funds, and to identify any red flags or anomalies3.

1: OFAC website

2: ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 5, page 178

3: ACAMS CAMS Certification Video Training Course, Module 5, Lesson 4

4: ACAMS CAMS Certification Practice Exam, Question 93

https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-information

https://www.acams.org/en/cams-certification-package-6th-edition

https://www.exam-labs.com/video-training/acams-cams

https://vceplus.io/exam-cams/

Section 319(b) of the USA PATRIOT Act allows U.S. authorities to seize funds from correspondent accounts held by foreign banks in the U.S.

Option A (Correct):Section 319(b) grants the U.S. government authority to seize assets in U.S. correspondent bank accounts belonging to foreign financial institutions involved in illicit activities.

Option B (Incorrect):Section 314(b) facilitates voluntary information sharing among financial institutions but does not authorize asset seizure.

Option C (Incorrect):Section 314(a) relates to law enforcement requests for financial intelligence, not asset seizures.

Option D (Incorrect):Section 319(a) concerns record-keeping requirements for foreign banks but does not authorize asset seizures.

Best Practices for Foreign Banks with U.S. Correspondent Accounts:

Ensure full AML compliance to avoid regulatory scrutiny.

Avoid processing high-risk transactions that may trigger U.S. jurisdiction.

Monitor cross-border transactions to detect potential financial crime exposure.

 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 tothe 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.

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.

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.

According to the web search results, 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 money laundering and terrorist financing methods and trends using standards and templates used for FATF typologies reports12. Typologies are the various techniques used to launder money or financeterrorism, and typologies reports are the documents that describe these techniques, identify the vulnerabilities and risks, and provide case studies and best practices to prevent and detect them3. The FATF and its FSRBs produce typologies reports on a regular basis, covering different topics and sectors relevant to their regions and the global community3. By conducting regional-level research and analysis, FSRBs can enhance their understanding of the specific money laundering and terrorist financing threats and challenges faced by their member countries, and provide them with useful guidance and recommendations to mitigate these risks12.

The other options are not correct because they are either not the methods used by FSRBs to understand the inherent money laundering and terrorist financing risks in their regions, or they are not consistent with the FATF standards and expectations. Requiring member countries to develop statistical metrics over money laundering and terrorist financing crimes may be a useful way to measure the effectiveness of their anti-money laundering and counter-terrorist financing (AML/CFT) systems, but it is not a method used by FSRBs to understand the risks in their regions. Rather, it is a requirement imposed by the FATF on all countries to collect and maintain comprehensive statistics on matters relevant to the effectiveness and efficiency of their AML/CFT systems4. Requiring participating financial institutions of their members to file suspicious transaction reports (STRs) to the regional body may be a violation of the FATF standards, which state that financial institutions should report any suspicious transactions to the financial intelligence unit (FIU) of their country, not to any regional or international body5. Moreover, STRs are confidential and protected by legal provisions, and should not be disclosed to any third party without the consent of the FIU5. Conducting global research on money laundering and terrorist financing trends and reporting their findings in their own typologies report may be a duplication of the FATF’s work, as the FATF is the global standard-setter and policy-maker for AML/CFT, and produces typologies reports that cover the global trends and issues3. FSRBs should focus on the regional-level research and analysis, and coordinate and cooperate with the FATF and other FSRBs to share information and experiences12.

 5678910

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 manipulationthat 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.

= 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.”

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

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

ACAMS CAMS Certification Video Training Course - 6th Edition1

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

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

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

 the 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, dataprotection, 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.

Bank Records and Financial Privacy Laws - FindLaw1

Anti-Money Laundering (AML) Risk Assessment | ACAMS2

What is the Difference Between Smurfing and Structuring?3

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.

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

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

According to the Certified Anti-Money Laundering Specialist (the 6th edition) Study guide, the CCO should advise the manufacturing customer that increased scrutiny of cross-border transfers may lead to delays and caution them to ensure that all necessary documentation is provided in order to facilitate a timely transfer. Additionally, the CCO should recommend that the customer contact the FATF to discuss the possibility of an independent review of the findings, as well as other options to mitigate the potential negative consequences.

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

According to the FATF Recommendations, the international standard for anti-money laundering and counter-terrorist financing, beneficial owners are the natural persons who ultimately own or control a customer or the natural persons on whose behalf a transaction is being conducted1 The beneficial ownership criterion is not based on the legal title or the nominal ownership of the funds, but on the effective control or the ultimate entitlement to the funds. Therefore, having signature authority over the account, being the person in whose name an account is opened, or being a trusted party in a correspondent banking relationship are not sufficient to determine the beneficial ownership of funds. These may be indicators of legal ownership or nominee arrangements, but they do not necessarily reflect the true ownership or control of the funds. The most effective criterion for determining the beneficial ownership of funds is having control over such funds or entitlement to such funds, either directly or indirectly, through ownership, voting rights, contractual agreements, trusts, or other means2345

1: FATF Recommendations, 2012, Recommendation 10 and Interpretive Note

2: Beneficial Ownership Meaning and Regulation, Investopedia, 2022

3: Ultimate Beneficial Ownership: Understanding Where The Money Comes From, ComplyAdvantage, 2022

4: Beneficial ownership and Irish investment funds, A&L Goodbody, 2021

5: Asset Management and Investment Funds Legal and Regulatory Update, Arthur Cox, 2020

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

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

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

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

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).

According to the FATF Recommendation 10, financial institutions should conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds. This is one of the core measures of customer due diligence (CDD) that aim to prevent and detect money laundering and terrorist financing risks.

= The main reference for this question is the document titled “International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - The FATF Recommendations” published by the FATF in February 2018. You can access it by clicking here. You can also find more information about the CDD measures and the risk-based approach on the FATF website, the CFATF website, the Central Bank of Ireland website, and the Medium blog.

The bank’s existing anti-money laundering training is not adequate to be delivered to the employees of the newly acquired credit card business, because anti-money laundering training needs to be tailored and focused on the risks specific to the business. Credit card businesses face different types of money laundering risks than retail banks, suchas card-not-present fraud, identity theft, card skimming, and prepaid card abuse. Therefore, the anti-money laundering training for credit card businesses should cover the specific red flags, indicators, typologies, and mitigation measures related to these risks, as well as the relevant laws and regulations that apply to credit card businesses.

CAMS Study Guide, 6th Edition, Chapter 4, Section 4.31

CAMS Study Guide, 6th Edition, Chapter 5, Section 5.21

Certification Candidate Handbook, Section 3.22

Latest CAMS Exam Questions, Question 433

The Basel Committee on Banking Supervision’s Customer Due Diligence for Banks Paper recommends that banks should verify the bank has a physical presence in the country where it is incorporated and confirm the bank is subject to regulatory supervision with adequate anti-money laundering laws before opening a correspondent account. These steps are intended to prevent the establishment of relationships with shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group. Shell banks pose a high risk of money laundering and terrorist financing, as they can be used to hide the identity and source of funds, evade regulatory oversight, and facilitate illicit transactions. Therefore, banks should conduct enhanced due diligence on correspondent banks that operate in offshore jurisdictions, where the regulatory standards and transparency may be lower or insufficient.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4, Section 4.3.1, p. 1091

ACAMS CAMS Certification Exam Outline, 6th Edition, Domain 2, Task 2.2, p. 52

Basel Committee on Banking Supervision, Customer Due Diligence for Banks, October 2001, p. 13-143

Lawyers and legal professionalsare frequently used inmoney laundering schemes, particularly throughtrust accountsthat offeranonymity and client privilege protections.

Option A (Correct):Repeated wire transfers from unknown sources followed by immediate outward transferssuggest that the lawyer’s trust accountis being used as a pass-through account for laundering funds.

Option B (Incorrect):If legal services were actually rendered,this is a normal transactionunless other risk factors exist.

Option C (Incorrect):Receiving funds from aregulated insurance companyisnot inherently suspicious, unless the transaction isinconsistent with the lawyer’s usual business activity.

Option D (Incorrect):Large transactions are normal inreal estate purchases, as long as proper documentation exists.

Red Flags in Legal Sector Money Laundering:

Use of lawyer trust accounts to move funds with no legitimate business purpose.

Frequent transactions from high-risk jurisdictions.

Transactions that are inconsistent with the lawyer’s area of practice.

Clients who refuse to disclose the source of funds.

Best Practices:

Apply AML measures to law firmshandling financial transactions, as required by FATF’sDesignated Non-Financial Businesses and Professions (DNFBPs)guidelines.

Require enhanced due diligence (EDD) for high-risk clientsandunusual transactions.

The Basel Committee on Banking Supervision (BCBS) is a global standard-setting body for the prudential regulation of banks. It does not have any formal authority to enforce its standards, but relies on its members’ commitment and peer pressure to implement them. The BCBS’s principles on customer due diligence (CDD) are part of its guidelineson anti-money laundering and combating the financing of terrorism (AML/CFT), which aim to enhance the soundness and integrity of banking systems. The BCBS’s principles on CDD provide guidance to banks and bank supervisors on the essential elements of a CDD programme, such as customer acceptance, identification, verification, risk assessment, monitoring, and record-keeping. The BCBS’s principles on CDD are not legally binding, but are intended to be a benchmark for national practices and for banks to design their own policies and procedures. The BCBS’s principles on CDD are consistent with the recommendations of the Financial Action Task Force (FATF), the global standard-setter for AML/CFT.

Customer due diligence for banks 1, BCBS, October 2001.

The Basel Committee on Banking Supervision report on customer due diligence 2, Journal of Banking Regulation, 2002.

Governance arrangements (A):“Sound governance and risk management arrangements are fundamental to assessing and managing ML/TF risk in products and services.”(CAMS 6th Edition, Risk-Based Approach for Products and Services)

Complexity of the products (B):“Complexity increases risk—products that are highly complex, opaque, or allow for multiple layers or jurisdictions are more vulnerable to misuse for ML/TF.”(CAMS 6th Edition, Product Risk Assessment)

Incorrect Options:

C: Last audit results inform program effectiveness, not inherent product risk.

D: Business financial status is considered in customer risk assessment, not product risk.

 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.

= 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.”

An institution should focus on the appropriateness of having a centralized review of suspicious transactions and recommendations to file an STR to ensure consistency. This is because a centralized review process can help to avoid duplication, inconsistency, or omission of STRs, as well as to ensure compliance with regulatory requirements and internal policies. A centralized review process can also facilitate the analysis of trends, patterns, and typologies of suspicious transactions across the institution, and enable the communication and coordination with relevant stakeholders, such as law enforcement, regulators, or other financial institutions.

=

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 5, Section 5.3.1, page 1911

ACAMS CAMS Certification Video Training Course, Module 5, Lesson 5.3, video time 2:30-4:002

ACAMS CAMS Certification Practice Exam, Question 124, page 2843

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

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

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

 The Fourth European Union Directive on money laundering (AMLD4) requires member countries to maintain registries of the beneficial owners of legal entities, such as companies, trusts, foundations, etc. This is to ensure that the true identity and ownership of the customers and the natural persons on whose behalf transactions are conducted are known to the obliged entities, such as banks, lawyers, accountants, etc., and to the competent authorities, such as regulators, supervisors, or law enforcement12. This requirement aims to prevent the misuse of legal entities for money laundering or terrorist financing purposes, and to enhance transparency andaccess to beneficial ownership information34.

 1: AMLD4, Article 30, 5; 2: AMLD4, Recital 25, 5; 3: AMLD4, Recital 26, 5; 4: AMLD4, Recital 27, 5.

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

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

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

A (Enhanced due diligence): EDD is a key control at onboarding for high-risk customers, involving deeper scrutiny, additional documentation, and approval layers to address increased ML/TF risk.

“High-risk customers must be subject to enhanced due diligence during onboarding to ensure a thorough understanding of potential ML/TF risks.”(CAMS 6th Edition, CDD/EDD for High-Risk Customers)

Aproper investigation of unusual transactions requires a mix of data analysis, contextual review, and expert judgmentto assess potential risks.

Option B (Correct):Cross-referencing transactions with external factors(e.g.,political events, commodity price fluctuations, news reports) helps identifypotential links to illicit activities.

Option C (Correct):Therelationship managermay provide insights intowhether a transaction aligns with the customer’s known profile and business activity.

Option D (Correct):Arisk-based approachensures thathigher-risk transactions receive enhanced scrutiny, while lower-risk ones undergo standard monitoring.

Why Other Options Are Incorrect:

Option A (Incorrect):Focusing only on transaction amountsignorescontextual factors, such asunusual behavior in low-value transactions.

Option E (Incorrect):Automated alerts are valuable but cannot replace human analysis and judgment.Manual reviews remain necessary for complex cases.

Red Flags in Unusual Transactions:

Large or frequent transactions inconsistent with a customer’s normal profile.

Payments from/to high-risk jurisdictions without a clear purpose.

Use of intermediaries or shell companies to move funds.

Best Practices for AML Investigations:

Use both qualitative and quantitative factorsto assess transaction risks.

Collaborate with business units(e.g., relationship managers) to understand client behavior.

Apply a risk-based approach to allocate investigation resources efficiently.

 According to the web search results, the Egmont Group is a united body of 170 Financial Intelligence Units (FIUs) that provides a platform for FIUs tosecurely exchange expertise and financial intelligence to combat money laundering, terrorist financing, and associated predicate offences12. The goal of the Egmont Group is to provide a forum for FIUs around the world to improve support to their respective governments in the fight against money laundering, terrorist financing, and other financial crimes345. The other options are not correct because they either do not capture the full scope of the Egmont Group’s activities, or they are not the primary focus of the Egmont Group.

 https://egmontgroup.org/

https://2009-2017.state.gov/j/inl/rls/nrcrpt/2015/vol2/239473.htm\

The red flags that most likely triggered the referral are:

B. Several cash deposits along the country's border that are quickly withdrawn by third parties. C. Several lodging and food payments made on the same day at unusual hours for a business.

Red flag B suggests possible structuring activity, where individuals are trying to avoid currency transaction reporting requirements by depositing and withdrawing cash in amounts below the reporting threshold. This activity is often associated with money laundering and could indicate human trafficking activity.

Red flag C suggests unusual activity that may be indicative of human trafficking, such as lodging and food payments made at unusual hours or in unusual patterns. This type of activity could indicate that the business is being used as a front for human trafficking or that the individuals involved in the trafficking are using the business to facilitate their activities.

A bank employee who willfully violates anti-money laundering laws faces the risk of criminal investigation and imprisonment, as these are serious offenses that could result in felony charges and penalties. According to the U.S. Department of Justice, individuals who knowingly violate the Bank Secrecy Act (BSA) or other anti-money laundering laws could face up to 10 years in prison and/or a fine of up to $500,0001. Similarly, in other jurisdictions, such as the UK, Canada, and Australia,individuals who commit money laundering offenses could face imprisonment and/or fines234.

1: U.S. Department of Justice, Criminal Resource Manual, Title 18 U.S.C. § 1956. Laundering of Monetary Instruments, Section 2101 2: UK Government, Proceeds of Crime Act 2002, Part 7: Money Laundering Offences, Section 327-329 3: Government of Canada, Criminal Code, Part XII.1: Laundering of Proceeds of Crime, Section 462.31 4: Australian Government, Criminal Code Act 1995, Chapter 10: National Infrastructure, Part 10.2: Money Laundering, Section 400.3-400.9

Penalties for AML/CFT violations, including criminal and civil penalties, fines, jail terms, as well as internal sanctions, such as disciplinary action up to and including termination of employment.

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 alsoallows 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.

Customer composition and product offerings are two important factors that affect the level of risk exposure for a financial institution (FI) in terms of money laundering and terrorist financing. Customer composition refers to the types of customers that the FI serves, such as individuals, businesses, non-profit organizations, or politically exposed persons (PEPs). Different customer segments may pose different levels of risk depending on their activities, sources of funds, geographic locations, and connections to other entities. For example, customers that are cash-intensive, have complex ownership structures, operate in high-risk jurisdictions, or are associated with PEPs may present higher risk indicators than customers that are transparent, regulated, and operate in low-risk jurisdictions12. Product offerings refer to the types of products, services, and transactions that the FI provides, such as deposits, loans, wire transfers, trade finance, or digital assets. Different products, services, and transactions may have different levels of vulnerability to money laundering and terrorist financing depending on their features, complexity, volume, and speed. For example, products that are anonymous, involve high-value or cross-border transfers, enable rapid movement of funds, or involve new or emerging technologies may present higher risk indicators than products that are identifiable, involve low-value or domestic transfers, require multiple verification steps, or involve established or traditional technologies12.

1: Risk Assessment: Risk Factors & Mitigating Measures2

2: Risk Assessment: Process, Examples, & Tools1

According to the Basel guidelines on customer due diligence for banks, a trust is a legal arrangement whereby a person (the settlor or grantor) transfers the legal ownership of specific assets to another person or entity (the trustee) to hold for the benefit of a third person or persons (the beneficiaries)1. The Basel guidelines recommend that banks should identify and verify the identity of the following parties to determine the true nature of the trust relationship:

The trustee, who is the person or entity that has the legal authority and duty to manage the trust assets and distribute them to the beneficiaries according to the trust deed2. The trustee may also be the settlor, the beneficiary, or both, depending on the type and structure of the trust3.

The beneficiaries, who are the persons or entities that have a beneficial interest in the trust assets or income, either presently or in the future4. The beneficiaries may be named individuals, classes of persons, or charitable causes.

The settlor or grantor, who is the person or entity that creates the trust and transfers the legal ownership of the assets to the trustee. The settlor or grantor may also retain some rights or powers over the trust, such as the ability to appoint or remove trustees, beneficiaries, or protectors.

The other three options are incorrect because:

Respondents are not trust parties, but rather financial institutions that maintain correspondent banking relationships with other financial institutions. Respondents are not relevant for the identification of the trust relationship, but rather for the due diligence of the correspondent banking relationship.

Payees are not trust parties, but rather persons or entities that receive payments from the trust or other sources. Payees are not relevant for the identification of the trust relationship, but rather for the monitoring of the transactions and activities of the trust.

Trust administrators are not trust parties, but rather persons or entities that provide administrative services to the trust, such as accounting, record-keeping, or tax compliance. Trust administrators are not relevant for the identification of the trust relationship, but rather for the assessment of the risk and complexity of the trust.

1: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, 4, p. 17 2: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, 4, p. 17 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5,p. 111 4: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, 4, p. 17 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 111 : Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, 4, p. 17 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 111 : Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, 4, p. 10 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 112 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 112

1. D. The account received a large cash deposit followed by systematic automated teller machine (ATM) withdrawals until the balance was nominal.

This pattern of behavior, known as “structuring” or “smurfing,” is often associated with money laundering. The large cash deposit followed by smaller withdrawals in a systematic manner raises red flags and requires further investigation.

2. E. The customer conducts multiple cash transactions on a regular basis which do not match the customer’s occupation.

Conducting frequent cash transactions that do not align with the customer’s stated occupation or income source is suspicious. It suggests potential attempts to hide the true origin of funds or evade reporting requirements1.

D. Large Cash Deposit Followed by ATM Withdrawals:

The large cash deposit followed by systematic ATM withdrawals is indicative of structuring, a common money laundering technique. Structuring involves breaking down large sums of money into smaller transactions to avoid detection. In this case, the customer’s behavior warrants further scrutiny to determine the purpose behind these transactions.

E. Inconsistent Cash Transactions:

When a customer conducts multiple cash transactions that do not align with their stated occupation or income source, it raises suspicions. Such behavior may indicate an attempt to obscure the true origin of funds or evade reporting requirements. Investigating the reasons behind these inconsistent cash transactions is essential to assess potential money laundering risks1.

The company regularly understating the value of goods exported is an indicator of possible money laundering because it may suggest that the company is involved in trade-based money laundering (TBML), which is the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins or finance their activities. One of the common TBML techniques is over-invoicing or under-invoicing, which involves manipulating the price, quantity or quality of goods or services in order to transfer value between the importer and exporter. By understating the value of goods exported, the company may be transferring funds to a foreign counterpart who is either a co-conspirator or a third-party money launderer, who will then pay the company the difference in cash or through other means. This way, the company can avoid currency reporting requirements, evade taxes, conceal the source and destination of funds, and integrate the illicit proceeds into the formal economy.

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2:Money Laundering Risks and Methods, page 381

Trade-Based Money Laundering: Trends and Developments, FATF-Egmont Group, December 2020, page 282

Trade-Based Money Laundering and Terrorist Financing, Global Investigations Review, September 20233

When dealing with correspondent banking clients, banks must evaluate the ownership and management structure of the client in order to assess the risks associated with the relationship. The status of the entity as a state, publicly, or privately held entity, as well as the transparency of the ownership structure, are important factors to consider when assessing these risks. Banks should also take into account the size of the management structure, the regularity of boardmeetings, and the length of time since the last Wolfsberg Group review in order to determine the risk associated with the correspondent banking relationship.

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

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

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

 According to the Anti-Money Laundering Specialist (the 6th edition) resources, one of the challenges of online financial technologies is the difficulty of verifying the identity and legitimacy of the customers and counterparties. This creates opportunities for money launderers and other criminals to exploit the anonymity and speed of online transactions to move and conceal illicit funds. The other options are not directly related to the money laundering risk posed by online financial technologies.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 5: Risk-Based Approach, page 133.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 7: Money Laundering Risks and Methods, page 203.

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

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

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

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

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.

ACAMS Study Guide 6th Edition, Chapter 2, page 37

Beneficial Ownership Meaning and Regulation - Investopedia

What is a nominee shareholder? | LawBite

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

The other options are not advisable or effective, because:

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

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

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

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

STION NO: 96

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

period are close to $9,500.

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

A. The restaurant is located in a different city

B. The daily cash deposits are so close in amount

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

D. The new account demonstrates a steady flow of income

Answer:BD

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

Transactions structured to avoid recordkeeping or reporting requirements

Transactions inconsistent with the customer’s profile or business activity

Transactions involving the use of multiple accounts or locations

Transactions involving high-risk jurisdictions or entities

Transactions involving cash or complex crypto assets

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

The CAMS 6th Edition specifically lists environmental crime as a predicate offense for money laundering. Environmental crimes include activities such as illegal logging, illegal mining, and illegal trade in wildlife.

“Environmental crime, including illegal logging and mining, is recognized as a predicate offense to money laundering. Such crimes often involve complex corporate structures to hide the illicit origin of the proceeds.”

(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing; FATF Recommendations, Predicate Offenses)

Incorrect Options:

A: Trade-based ML refers to manipulating trade transactions, not the underlying crime.

B: Corruption may be involved, but the primary crime is environmental.

C: Illicit resource trade describes the act, but the official predicate crime category is environmental crime.