Free ACAMS Advanced-CAMS-Audit Practice Exam with Questions & Answers | Set: 2

Understanding Client Risk Scoring Methodology:

Reviewing the AML risk assessment offers a comprehensive view of the institution’s client base, risk appetite, and segmentation strategies.

Preparation Steps:

Assessing the AML risk assessment ensures that auditors understand the institution’s framework for categorizing and managing client risks.

Importance in CAMS-Audit Framework:

CAMS-Audit highlights the necessity of linking client risk scoring to the broader institutional AML risk assessment​​.

Higher Sample Size Justification:

A fluctuating international customer base increases the complexity of correspondent banking relationships and sanctions compliance, necessitating a larger sample to assess risks effectively​​.

Irrelevant Options:

B and D:Stable or localized environments reduce complexity, lowering sample size needs.

C:Domestic mergers affect customer risk profiles but are less volatile than fluctuating international markets.

First Steps for Sampling:

Reviewing onboarding policies ensures the sampling aligns with established risk criteria, improving the relevance and accuracy of the audit findings​​.

Regulatory Emphasis:

FATF guidance stresses aligning audit sampling with organizational risk assessments and onboarding standards​​.

Answer:A. Management took appropriate and timely action to address any violations and other deficiencies.

Answer:B. Improper identification and assessment of risk creates deficiencies resulting in an overall weakened AML compliance program.

Audits are primarily designed to evaluate the adequacy and effectiveness of controls within a risk management framework. This includes assessing whether the controls are properly designed and functioning to mitigate identified risks effectively.

CAMS-Audit guidance highlights the critical role of controls in ensuring compliance with AML/CFT regulations and managing operational risks​​.

Testing Internal Controls:

C. Gap Analysis: Ensures policies are compliant with local regulations and address identified risks​​.

D. Sample Testing: Verifies that processes are effectively implemented in practice for both new and existing customers​​.

Jurisdictional risk is critical in correspondent banking due to potential exposure to countries with weaker AML/CFT controls, high corruption levels, or sanctions.

Role of Internal Audit:

Internal audit is tasked with evaluating and improving the effectiveness of governance, risk management, and control processes within the organization.

Periodic evaluations ensure that AML/CFT processes remain robust and effective against emerging risks.

Alignment with CAMS-Audit Guidance:

Advanced CAMS-Audit training highlights the need for internal audit to focus on process effectiveness rather than operational responsibilities, such as quality assurance or corrective actions​​.

Identification of Themes Relevant to Trade Finance Services:

Trade finance services for multinational companies participating in China's Belt and Road initiatives involve transactions with potential geopolitical, regulatory, and economic risks​​.

These transactions generally encompass cross-border activities, high-value accounts, and potentially politically exposed persons (PEPs)​​.

Scoring Theme A (11.2): Economic Activity and Geographical Risks:

As these services involve international trade, they are inherently linked to economic activity and geographical risks. FATF guidelines indicate the necessity to evaluate regions with different AML/CFT maturity levels. This is consistent with theme 11.2, focusing on the understanding and mitigation of risks associated with economic and geographical contexts​​.

Scoring Theme B (11.3): Customer Due Diligence and Enhanced Measures for High-Risk Profiles:

The target clientele includes multinational companies, which might require enhanced customer due diligence (EDD), especially when engaging with entities or PEPs from countries with varying regulatory controls​​.

FATF Recommendations and Basel Committee insights emphasize robust customer identification, verification, and ongoing monitoring, aligning with theme 11.3’s requirements​​.

Not Affected Themes:

C (12.1):This theme pertains more to specific reporting or transaction monitoring requirements that might not directly relate to the initiation of trade finance services.

D (12.2) and E (13.1):These themes are typically associated with procedural adjustments rather than the scoring of risk profiles.

Advanced CAMS-Audit Framework Alignment:

Advanced CAMS-Audit highlights the role of structured compliance frameworks in mitigating risks tied to strategic initiatives like the Belt and Road​​.

Evaluators assess the institution's alignment with FATF, Basel Committee, and regional guidelines to ensure adherence to best practices for risk mitigation​​.

Conclusion:The scoring themes A (11.2) and B (11.3) are significantly influenced by the introduction of trade finance services targeting multinational corporations under China's Belt and Road initiatives. This is due to the intertwined economic and geographical risks and the requisite enhanced due diligence measures for high-risk customer segments.