CAMS Certified Anti-Money Laundering Specialist (CAMS7 the 7th edition) Questions and Answers

A client frequently submits financial statements much earlier than required appearing overly eager

A client insists on using a personal bank account for business transactions despite being advised otherwise

A new client shows a preference for minimal direct interaction and relies primarily on indirect communication methods, citing convenience or time constraints

The client is a publicly listed company but very diversified

The ultimate beneficial ownership is unclear

Oversight of the Financial Intelligence Units in FATF Member countries

Providing a unique platform for information exchange regarding anti-money laundering efforts

Regulation of financial markets through directives and executive orders

Enhancement of international cooperation to foster anti-money laundering efforts via recommendations and guidance

Digital identification on mobile devices

Different applications to connect and communicate

Authentication via artificial intelligence (AI) and biometrics

Quick CDD and client traits analysis during onboarding

the operational burden of dealing with potential matches.

the value of fines for non-compliance.

the experience of the team dealing with potential matches.

whether the data to be screened is reliable and verified.

imposes economic sanctions on jurisdictions with lax AML controls to force them to strengthen their controls.

conducts on-site inspections of financial institutions in jurisdictions with lax AML controls to identify deficiencies and recommend improvements.

publishes annual reports ranking all member jurisdictions based on their self-assessment of AML controls.

conducts a peer review process whereby member countries assess the AML controls of other jurisdictions and provide recommendations for improvement.

Tailor training and offer regular training to all employees

Train outside of daily operations and promote awareness of Compliance

Train core AML topics once per year, at a minimum, to relevant employees

Use a variety of training methods and provide necessary resources to employees

Communicate regularly and measure effectiveness of training

Obtaining prior senior manager approval for all related transactions

Understanding the purpose of the business relationship

Performing adverse media searches on the customer

Identifying and verifying the customer's identity

A limited liability company incorporated in a foreign jurisdiction

A private company that has no activity in a tax haven jurisdiction

A company with nominee shareholders and directors in a local jurisdiction

A company with bearer shares incorporated in a tax haven jurisdiction

A private investment company incorporated in a tax haven jurisdiction with strict secrecy laws

An RAS defines the amount and type of risk an organization is willing to take to achieve its objectives and should be communicated clearly to all stakeholders with corresponding controls implemented

An RAS is a detailed plan for managing operational risks and does not cover strategic or financial risks

An RAS is a formal document meant for regulatory compliance that does not influence day-to-day risk management practices within the organization

An RAS is used to outline the risk tolerance limits to external stakeholders and does not need to be communicated within the organization

All US citizens and permanent residents while located in the US, all US incorporated entities and their foreign branches, and all individuals within the United States

All US citizens and permanent residents regardless of where they are located, all US incorporated entities excluding their foreign branches, and all individuals and entities within the United States

All US citizens except those with dual nationality, US permanent residents, all US incorporated entities, and all individuals within the United States

All US citizens and permanent residents regardless of where they are located, all US incorporated entities and their foreign branches, and all individuals and entities within the United States

impose sanctions lo maintain of restore international peace and security

impose sanctions on countries that lack AML/CFT controls.

conduct research on and analyze the impacts of sanctions to improve the effectiveness of sanctions regimes.

impose sanctions on economic targets to maintain or restore financial stability within a country.

Sponsoring the research and development of advanced technological surveillance tools to be used nationally

Prosecuting significant cases of money laundering or terrorist financing falling under national jurisdiction

Sharing real-time criminal intelligence gathered from national law enforcement agencies with the private sector

Serving as a national center for the collection and analysis of suspicious activity

Performing a comprehensive risk assessment to identify customer, transaction, and geographic risks

Focusing monitoring primarily on previously flagged customers while using standard controls for others

Choosing and applying effective controls that align with the identified risk levels

Determining detailed risk profiles for customers based on their activities and relationships

Allocating resources equally across all customer segments to ensure fairness

Information security, data privacy, and cybersecurity

Foreign exchange control, and precious gemstone and metal dealing

Ombudsman and anti-competition authority

Electronic contract and biological signature acceptance

Consumer protection, financial inclusion, and environmental, social and governance

The foreign bank will not allow indirect use of the correspondent bank accounts by Politically Exposed Persons (PEPs)

The jurisdictions in which the foreign bank maintains a physical presence

The foreign bank's operations will be limited to the country of incorporation

The ownership details of the foreign bank

The foreign bank will not allow indirect use of the correspondent bank accounts by shell banks

Money laundering typologies applicable to monetary instrument reporting

Applicable AML laws and regulations

Regulatory exam best practices

Money laundering typologies applicable to corporate loans

Change the risk profile to "high-risk" if an existing customer becomes a sanctioned entity and continue monitoring further transactions.

Adopt automatic screening systems to detect designated persons and entities.

Conduct enhanced due diligence for prohibited entities on the sanctions list.

Freeze the funds or assets of designated persons and entities once this decision is approved by the board.

The buyer is using high-value real estate transactions to obscure the origin of the funds.

The buyer is quickly diversifying their investment portfolio through structuring payments in order to take advantage of the liquidity of cash transactions in real estate.

The buyer is capitalizing on favorable market conditions and using cash purchases to outbid competitors in a competitive real estate market using insider information.

The buyer is a real estate developer acquiring multiple properties for a potential redevelopment project with a business partner located in a high-risk jurisdiction.

Whether the vendor has documented appropriate internal controls for designing system and data integration schema

Whether the permissions and user access settings for reviewing, investigating, and reporting details of alerts generated by the system are commensurate with those in use at other banks

Whether the monitoring system is adequate with respect to the bank's size, activities, complexity, and risks

Whether the monitoring system can be configured to enable the bank to execute trend analysis of transaction activity and to identify unusual business relationships and transactions

Some MSBs provide bureau de change services to retail customers after they complete a due diligence process.

Some MSBs process large, individual cash transactions on behalf of customers.

Some MSBs allow regular and frequent transactions to the same family members based in another country

Some MSBs process small remittance payments on behalf of workers based abroad sending money home.

Fully rely on central beneficial owner registry records in the high-risk third country to determine the ultimate beneficial owners of all customers

Apply tailored due diligence measures, based on the level of risk posed by each customer following risk assessment

Monitor every cross-border transaction in real time, flagging all for enhanced scrutiny due to the country risk level

Automatically apply enhanced customer due diligence measures to all customers in the high-risk third-country branch regardless of risk level

Ensuring an effective export control and treaty compliance system

Administering and enforcing economic and trade sanctions

Designating jurisdictions as primary money laundering concerns

Managing trade agreements between the US and foreign countries

Formal assessment

Regulatory overview

Technical analysis

Mutual evaluation

Open source information

Customer profile

Adverse media search

Account activity

ensure that all adverse media sources are comprehensively analyzed without the need for human review.

significantly reduce human errors arising from repetitive tasks by delivering consistent and highly accurate analysis.

instantly identify intent behind media articles, allowing for more effective risk scoring.

automate the process of identifying new information and distinguishing it from previously encountered data.

cover multiple languages and scripts, surpassing the limitations of human linguistics.

It produces outputs that include a range of intermediate possibilities between "Yes" and "No"

It is an advanced analytics tool widely used to implement AFC controls

It allows for a greater number of exact matches, reducing the need for manual review

It is a new technique for enhancing the quality of alerts for review

Appointing individuals to serve in official capacities of the company

Annual maintenance services

Provision of a local business address

Company incorporation services

Information security office (ISO)

Marketing and sales

Human resources (HR)

Data privacy office (DPO)

Restrict the client's access to the account

Request information from the relationship manager assigned to the account that caused the alert

Perform below-the-line testing to ensure the automated monitoring system is operating effectively

Send a request for information to the counterparty bank involved in the transaction that caused the alert

Utilizing a flexible communication style that adapts to different customer situations during the termination process

Implementing a standardized procedure for customer termination that includes risk assessments and necessary documentation

Performing a final review of a customer's transaction history and records to address any unresolved issues prior to termination

Keeping records of the termination process, including the justification for the decision and any correspondence with the customer

Notifying the customer of the termination decision only after completing the termination process to prevent possible disputes

Management structure

Governance framework

Asset structure

Origin of the funds

Involvement in community development and humanitarian aid projects

Large and unaccounted cash donations from anonymous sources

Operating in high-risk jurisdictions with limited oversight

Frequent changes in leadership and mission statements

Extensive transparency in financial reporting and governance practices

Permanent US resident aliens regardless of location

Merchants that offer US-origin goods for sale regardless of location

Non-US financial institutions that offer accounts in USD regardless of location

US citizens regardless of location

US incorporated entities and their foreign branches

Ensuring sanctions compliance by relying solely on international bodies like the UN because there is no requirement to adhere to local laws

Ensuring group policies and procedures prioritize adherence to US regulations because they are the most influential worldwide

Applying global AFC and sanctions policies to ensure consistency without the need to adapt to local regulations

Ensuring group policies cater to compliance with each country's specific AML and sanctions regulations

cross-border purchases.

purchases in the name of a natural person.

paying true market price for a property.

non-financed purchases.

ML undermines the integrity and stability of financial systems and makes them vulnerable to illegal activity. This can erode investor confidence and hinder economic growth.

When a financial institution (FI) is found to be promoting ML or violating AFC regulations, this can lead to a loss of confidence in the institution and a loss of customers. Interestingly, this scenario might sidestep any legal consequences for the Fl.

When laundered funds flow into legitimate economies, they can be used for illegal purposes, such as funding terrorist activities or organized crime. This distorts resource allocation and undermines development.

Jurisdictions perceived as having insufficient ML measures might be identified as uncooperative or high-risk, potentially facing restricted access to international markets, though economic sanctions by other countries are an unlikely outcome.

A lawyer located in a higher risk country deposits their firm's bank draft issued from their trust account to another lawyer's trust account located in a low-risk country for legal services rendered.

A lawyer's trust account regularly receives wire transfers from unknown remitters from a higher risk country and immediately transfers the same amount of funds received to a known beneficiary's account in a low-risk country.

A lawyer's trust account receives a large-value wire transfer from a regulated insurance company and immediately transfers the same amount of funds received to the beneficiary's bank account located in a low-risk country.

A lawyer's trust account receives a large wire transfer deposit from a client that wanted to purchase a piece of property and then transfers the same amount to the property seller's lawyer's trust account.

Relying on self-reported compliance certifications from vendors and employees to confirm adherence to AML standards on a periodic basis

Establishing a surveillance program for employees, vendors, and third parties, including periodic risk assessments, access controls, and regular reviews of their compliance with AML policies

Implementing background checks for employees and vendors prior to onboarding or the start of engagement to identify any red flags

Limiting the number of vendors and third parties in high-risk jurisdictions in order to reduce exposure to compliance risks

The head office of a foreign legal entity which has a branch in the US does not need to comply with OFAC rules.

A foreign individual visiting the US for a short vacation is obligated to follow OFAC rules.

Nationals of the US must comply with OFAC rules, regardless of where they are located in the world.

Any foreign corporation is also penalized if it conducts transactions with sanctioned countries under OFAC rules.

A subsidiary of a legal entity of the US, which is formally registered in a foreign country, is exempt from OFAC rules.

Helping overcome data protection and information sharing limitations

Enhancing the quality of reporting and additional informational input

Helping to alleviate the financial cost burden on law enforcement

Helping to design common approaches and identify desired deliverables

Offering flexibility, agility, and opportunities to adjust to the ML/TF threat environment

reputational risk.

the customers personal relationships.

the frequency of account activity

the Fl's policies and procedures.

the seriousness of the underlying conduct.

correspondence with law enforcement

the legal basis for closing the account.

identification of the customer's occupation.

identification and verification of the customer's identity.

identification of the customer's work address.

identification of the beneficial owner.

verification of the customer's credit history.

[verification of the customer's income sources.

Assist financial institutions conducting business in jurisdictions with high data privacy standards in working with industries susceptible to money laundering

Advise banks to accept only those clients whose source of funds and beneficial ownership is understood

Establish rules for private bankers on how to deal with politically exposed persons (PEPs) and persons residing in high-risk countries

Require banks to better manage reputational risk and protect the privacy of wealthy clients

FIs may disclose customer information to any third party

FIs may provide information about their internal compliance programs to law enforcement agencies without any limitations

FIs are required to report all transactions involving foreign entities to FinCEN so that FinCEN can share this information with other financial institutions

FIs may share information about suspected money laundering activities with other FIs to aid in identifying and reporting suspicious transactions

Accounting

Model risk management

Technology solutions and IT security

Marketing

Fraud risk management

European Commissions

Financial Action Task Forces

Wolfsberg Groups

Financial Intelligence Units

Investment advisor

Relationship manager

Operations manager

Compliance officer

executing cross-border transactions for their own business which is not commensurate to the PEP's wealth.

in a position to provide more information regarding the PEP's whereabouts and hidden properties.

travelling to offshore jurisdictions often on holiday which exposes them to higher risks for AML.

used as intermediaries to facilitate bribery or corruption or to conceal the illicit wealth of the PEP.

to force developing nations to adopt liberal or substantive democracies.

to support governments and regimes in the peaceful resolution of conflict.

to punish governments for having weak financial crime controls.

to deter non-democratic and non-constitutional changes within countries.

to support the protection of human rights.

include sophisticated and automated controls that use the newest types of technology available (for example, artificial intelligence (Al) and machine learning).

be proportionate with regard to the size and nature of the firm, approved by senior management, and regularly reviewed

be completed by the business and validated by an external firm (for example, an auditing or consulting firm)

be created approved, and owned only by the First Line of Defense business team, and reviewed annually

Make an official request directly from the head of Country A's anti-corruption authority to Country B's corresponding law enforcement authority

Make a request for the required evidence using Country A's mutual legal assistance treaty with Country B

Use the International Criminal Police Organization (INTERPOL) network to obtain the required evidence from Country B

Use the Egmont Secure Web to obtain the required evidence from Country B's financial intelligence unit

Inviting prospective customers for an onboarding interview

Rejecting any politically exposed persons (PEPs) as customers

Understanding the source and origin of assets

Performing negative news checks of prospective customers

Producing financial stability reports on interesting customers

fraudulent identities involving stolen or manufactured identification.

suspicious behavior involving a transaction that occurs at an unusual time of day.

hidden beneficial owners.

transaction patterns involving transactions that exceed a certain dollar amount.

anomalies involving a transaction that occurs in a location far away from the customer's usual spending patterns.

Cryptoassets can be transferred across borders quickly, but the volatility of their value still makes them less attractive for money laundering compared to traditional assets

Mandatory reporting requirements have been implemented for certain types of crypto transactions, but gaps in regulation and enforcement still leave room for money laundering activities.

The transparency of blockchain technology helps law enforcement trace transactions, but it can also provide criminals with ways to obscure their financial activities through complex layering techniques.

The pseudonymous nature of transactions allows criminals to hide their identities while transferring large sums of money globally, making it difficult to trace the ultimate beneficial owner.

Drafting detailed action plans for the audit team to execute to close the findings

Reperforming the testing for the controls mentioned in the findings to confirm the results of the audit

Defining remedial actions based on the findings' root cause analysis

Assigning responsibility for reviewing the action plan to the board of directors

Buying property allows for the movement of large amounts of funds in a single transaction

Criminal networks could purchase real estate for use as supply houses or locations to grow, manufacture, or distribute illicit narcotics

Markets can be volatile, and buyers may not achieve a strong return on their investment

Beneficial ownership information might be opaque, and criminals may abuse arrangements like shell companies and trusts

Real estate transactions often involve financial institutions and other professional gatekeepers

The high value of properties may require multiple types of financing, which can make it more difficult to identify the source of funds

Allow beneficial owners to provide proxies lot voting on corporate decisions

Obscure beneficial ownership

Allow domicile in the nominee's jurisdiction

Derail investigations

It is against international laws on data protection to access information from foreign countries

Sovereignty of nations means that information cannot be accessed from foreign countries

Any information related to money laundering can be received from any organization at any time regardless of jurisdiction

Countries that are members of the Egmont Group can request assistance for information from each other

The first line

The second line

Senior management

The third line

These businesses are all cash intensive, increasing the risk of financial crime

KYC challenges arise because e-commerce platforms face global customers making customer due diligence complex and resource intensive

These businesses are highly regulated and therefore have no reason to be non-compliant as this would put them at risk of sanctions and fines

Criminals can make use of identify fraud to fulfill KYC processes for layering purposes

The settlement systems of these businesses are not sophisticated enough to cope with the high transaction volume

Securely share sensitive information in the fight against money laundering and the financing of terrorism

Establish an environment to foster trust amongst countries

Sign memoranda of cooperation that recognize and allow room for case-by-case solutions to specific problems

Improve global cooperation between FIUs

Propose legislation to combat financial crime, including money laundering and the financing of terrorism

Establish policies and procedures to ensure due diligence activities are identical for all customers.

Establish policies and procedures to identify and verify customers, beneficial owners, and any individuals that can transact on behalf of their customers.

Establish policies and procedures for customer due diligence that vary based on risk.

Are prohibited from offering numbered accounts to customers, even if procedures are established to gather and maintain due diligence information.

Establish policies and procedures that encourage processing transactions while due diligence information is being established and verified.

Use of cash to purchase property

Unlicensed real estate agents acting as front companies

Use of a registered trust for the purchase of property

Use of a company for the purchase of property

Manipulation of the value of a property

Policies are detailed instructions for specific processes. Procedures are an overarching framework. Neither policies nor procedures are mandatory for knowledge and adherence

Policies are broad guidelines. Procedures are detailed Instructions for specific processes. Only procedures are mandatory for knowledge and adherence.

Policies are detailed instructions for specific processes Procedures are an overarching framework Both policies and procedures are mandatory for knowledge and adherence.

Policies define the principles of an organization and influence the drafting of procedures. Procedures are detailed instructions for specific processes.

Ensuring the tools are compatible and integration with current systems is possible

Assessing whether internal staff members can provide training on the tools

Assessing the cost of implementation and cost of maintaining the tools

Basing business requirements on the features offered by the vendor's tools

Periodic review of suspicious activity reports (SARs) filed with FinCEN to determine whether any should be withdrawn.

Periodic and ad hoc cooperation with the legal team to appropriately investigate and monitor the transactions of subjects of subpoenas or government inquiries.

Periodic review of client profiles to ensure that the most up-to-date information is on file for high-risk clients in line with the bank’s internal policies and procedures.

Periodic review of the transaction monitoring scenarios and their productivity to ensure that appropriate AML typologies are reflected.

clearly define the level of risk exposure to financial crime which a financial institution is willing to take.

help investors understand the risk a financial institution is willing to take.

help customers understand which financial institutions may be willing to bank their business.

eliminate high-risk business types from a financial institution.

Accepts to participate in an off-cycle FATF mutual evaluation to be held within the next 12 months.

Must pay a fine to be removed from the list before the next FATF plenary.

Has committed to swiftly resolving the deficiencies identified in a FATF mutual evaluation.

Poses a high money laundering, terrorist financing and proliferation financing risk and must be restricted from accessing the international financial system.

Trade-based money laundering

Corruption

Illicit resource trade

Environmental crime

have informal business arrangements between persons or entities.

are located in geographies that are not accountable to US laws.

include trusts, investment funds, and insurance companies.

have limited organizational disclosure and recordkeeping requirements for establishing these business entities.

Ensuring the structure is reviewed by an outside auditor or consultant

Establishing a system of internal controls commensurate with the institution’s size and complexity

Designating a qualified board of directors to monitor day-to-day compliance

Establishing clear roles and responsibilities for AFC risk escalations and issues

Adaptable to new AFC typologies through continuous model training

Completely unbiased and without error through continuous model training

More consistent and reliable detection outcomes

Transparent and easy to explain algorithms for regulator and compliance purposes

Ensuring sanctions coy on international bodies like the UN because there is no requirement to adhere to local laws.

Ensuring group policies and procedures prioritize adherence to US regulations because they are the most influential worldwide.

Applying global AFC and sanctions policies to ensure consistency without the need to adapt to local regulations.

Ensuring group policies cater to compliance with each country's specific AML and sanctions regulations.

protect the rights of the citizens of the state target against their own government and improve financial stability in the region.

indicate that the use of military force is likely unless the state or non-state target complies with the government's

interests encourage non-governmental organizations to increase the provision of humanitarian and charitable aid to the target

alter the behavior of the state or non-state target that threatens the interests of that government or violates international norms

Section 319(b)

Section 314(b)

Section 314(a)

Section 319(a)

Public organizations can belter understand what the private sector experiences and inform policy and the enactment of laws

Data-protection privacy policies provide an opportunity to develop information sharing protocols to prevent unauthorized access to information

Data-protection privacy policies prohibit the evolution of PPPs due to restrictions based on legacy government legislation

Small business owners can choose third-party providers or financial institutions to keep their private data safe which can easily be shared within a PPP

how an organization defines Its risk-based approach.

how an organization determines its key risk and performance indicators.

the level and type of risk the organization is willing to take to meet its objectives

the purpose of an organization's financial crimes compliance program.

Ongoing monitoring

Risk assessment

Policies and procedures

Suspicious activity reporting

Customer due diligence

funds being stolen from other users.

obscuring the source of illicit funds.

layering transactions to hide the origin of funds derived from illicit activity.

difficulty converting into physical currency.

facilitating payment for other illicit activities and goods.

Media searches reveal a report that the customer was accused of misconduct three years ago.

The EU bank considers the origin and destination countries Involved in the transactions to be high-risk.

The customer's activity includes multiple cross-border transactions involving various counterparties.

The EU bank received no originator or beneficiary information for the wire transfers.

The customer specializes in the import and export of petrochemical products.

Money services business (MSB)

Multinational corporations

Individual foreign customers

Non-profit organizations with international operations

Extended AML oversight to crowdfunding platforms and professional football clubs

Eliminated the requirement for the European Commission to conduct a risk assessment

Created a central EU watchdog to combat money laundering

Strengthened provisions relating to the accuracy of data submitted to central beneficial ownership registries

Conduct an open-source intelligence investigation using artificial intelligence tools to gain more information on the activities of the suspected employee

Use the FI's whistleblowing channel to report the suspected employee

Question their co-worker to determine if their suspicions are correct before reporting to the FI's Human Resources department

Warn colleagues and customers of the FI that the employee's suspicious financial investment proposals could be a scam

Report the suspected employee to the line manager of the FI to take the required action

A privately held company originates funds transfers through the casino into the betting accounts of multiple patrons

A patron requests the casino to transfer their winnings to another gambling operator

A patron purchases a large amount of chips at a blackjack table using cash

A patron routinely places multiple bets on the same sporting events

Past employment records.

Personal references from close associates.

Personal resume.

Internet and public media searches.

Criminal history searches.

Receiving securities into an existing brokerage account following the death of a spouse

Allowing fixed income securities to mature

Using brokerage accounts like deposit accounts

Engaging in transactions involving nominees or third parties

Submit a referral to file a suspicious activity report (SAR)

Evaluate the KYC review process to understand why the review did not occur as required and take corrective action as necessary

Contact the customer's relationship manager to suspend account access until the periodic KYC review is completed

Remove the customer from the bank's high-risk list

The employee was originally from a high-risk jurisdiction

The employee had friends in high-risk industries

The employee had a lavish lifestyle for her income

The employee was constantly evasive about the reasons for leaving her previous corporate finance job

Using brokerage accounts like deposit accounts

Receiving securities into an existing brokerage account following the death of a spouse

Allowing fixed income securities to mature

Engaging in transactions involving nominees or third parties

A customer deposits a large number of consecutively numbered money orders.

A customer requests loans made to local companies or secured by obligations of local banks.

A customer has regular deposits and withdrawals primarily in wire transfers.

A customer receives wire transfers from different unknown accounts which are immediately wired onwards to a third party.

A customer withdraws cash in amounts just under the reporting threshold.