Free ACAMS CAMS Practice Exam with Questions & Answers | Set: 10

According to the Basel Committee on Banking Supervision, banks should adopt a risk-based approach to customer due diligence, which includes four essential elements1:

A customer acceptance policy that defines the types of customers that are likely to pose a higher than average risk to the bank.

A customer identification program that collects and verifies information about the customer’s identity, beneficial ownership, and purpose of the account or relationship.

An on-going monitoring of high-risk accounts to detect and report any unusual or suspicious activity, and to keep customer information up-to-date.

A risk management program that ensures that the bank’s policies and procedures are implemented effectively, and that the bank’s staff are trained and aware of their AML/CFT obligations.

Therefore, documenting a customer acceptance policy and establishing on-going monitoring of high-risk accounts are the correct choices for the essential elements that should be included in the program based on Basel’s KYC principles.

 1: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, page 8.

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

Creating complex legal arrangements, such as trusts, foundations, or corporations, that can obscure the identity and ownership of the beneficial owners or the origin and destination of the funds.

Buying and selling property, such as real estate, art, or jewelry, that can be used to transfer or store illicit proceeds or to provide a legitimate cover for the source of funds.

Performing financial transactions on behalf of a client, such as opening bank accounts, transferring funds, issuing checks, or exchanging currencies, that can facilitate the movement or concealment of illicit funds.

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

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

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

A: “Effective training includes practical examples and use cases tailored to the business.”

B: “Firms must keep accurate records of all AML/CFT training, including completion logs.”

D: “Staff should be aware of the consequences of non-compliance with AML/CFT obligations.”(CAMS 6th Edition, AML/CFT Training and Awareness)

Incorrect:

C: Training should be tailored and role-specific.

E: Third-party trainers are not required for effective training.

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

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

one of the key roles of FATF-Style Regional Bodies (FSRBs) is to support the system of mutual evaluation, which is a peer review process that assesses the level of compliance and effectiveness of each member country’s anti-money laundering and counter-terrorism financing (AML/CFT) regime12. FSRBs conduct mutual evaluations in accordance with the FATF’s methodology and standards, and share the results and recommendations with the FATF and other FSRBs3. Mutual evaluations help identify the strengthsand weaknesses of each country’s AML/CFT system, and provide a basis for technical assistance and follow-up actions4.

What are the 9 FATF-Style Regional Bodies (FSRBs)? - Sygna1

FATF-Style Regional Bodies (FSRBs) - Asia/Pacific Group on Money Laundering2

The Role of FATF Style Regional Bodies (FSRBs) in Combating … - IDMerit3

9 FATF-Style Regional Bodies (FSRBs) - fineksus.com4

Financial institutionsoperating in the EU must comply with GDPR and AML directives, ensuring a balance betweenprivacy and AML compliance.

Option B (Correct):Data minimization is a key GDPR principle, ensuring that only necessary data is collected and processed.

Option D (Correct):Strict guidelines apply to AI and machine learning models used in AML complianceto prevent bias and ensure transparency.

Why Other Options Are Incorrect:

Option A (Incorrect):FIs cannot use third parties to supplement missing customer identification unless proper KYC measures are followed.

Option C (Incorrect):Customers cannot be informed about ongoing AML investigations due to “tipping off” restrictions under AML laws.

Best Practices for AML Compliance Under GDPR:

Limit data collection to what is necessary for AML compliance.

Ensure AI and machine learning models comply with transparency regulations.

Prevent unauthorized data access through strict internal controls.

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

In theEuropean Union (EU), data protection laws (GDPR) and AML regulations (AMLDs) must be balancedwhen sharing customer data.

Option D (Correct):Data sharing must be"necessary, reasonable, and proportionate,"followingAML regulations and data protection requirements.

Option A (Incorrect):While data protection laws apply,AML/CFT regulations provide exemptionsfor legitimate investigations.

Option B (Incorrect):Aformal production orderis not always required if information sharing islegally permitted under AML regulations.

Option C (Incorrect):Privacy laws still apply, even in financial crime investigations. AML/CFT obligations donot override GDPRbut must be balanced appropriately.

Key Considerations in Cross-Border AML Data Sharing in the EU:

GDPR & AML Regulations Must Align:TheGeneral Data Protection Regulation (GDPR)protects customer privacy, but theEU Anti-Money Laundering Directives (AMLDs) require data sharing for AML purposes.

Proportionality Principle:Anydata shared must be strictly limited to what is necessaryfor AML purposes (e.g., transaction details but not unnecessary personal data).

Regulatory Guidance:Banks must comply withArticle 23 of GDPR, which allowsexceptions for AML compliance.

Why This Matters:

Failure toproperly balance AML compliance and data privacycan lead to:

Regulatory fines under GDPRfor data breaches.

AML penaltiesfor failing to cooperate in financial crime investigations.

TheBoard of Directorsholdsultimate responsibilityforAML/CFT compliance and governance.

Option B (Correct):TheBoardmustoversee, approve, and ensure AML programs are effective.

Option A (Incorrect):TheCOO manages operations, butdoes not hold ultimate accountability.

Option C (Incorrect):While theAML officer executes compliance programs, theBoard provides oversight.

Option D (Incorrect):TheCEO is responsible for strategy, butAML failures fall under Board accountability.

 The correct answer is B, as a customer acceptance policy is an essential element of KYC standards according to the Basel Committee’s Customer Due Diligence for Bankspaper1. A customer acceptance policy defines the types of customers that the bank is willing to accept, and the conditions and limitations that apply to such relationships. A customer acceptance policy helps the bank to avoid customers who are likely to pose a higher than average risk of money laundering or terrorist financing, or who are not willing to provide sufficient information for identification and verification purposes1.

 1: Customer due diligence for banks - Bank for International Settlements, page 9.

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

= Some of the references that support this answer are:

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

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

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

Lawyers who lack experience in providing specific services requested by clients or receive unusually high fees can raise red flags for money laundering. Inadequate documentation of case notes may also be suspicious, but the absence of experience and excessive fees are more significant indicators. These behaviors warrant further scrutiny to assess potential money laundering risks12.

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

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

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

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

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

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

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

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

Economic sanctionsare used as anon-military toolto enforceforeign policy and national security objectives.

Option D (Correct):Sanctions aim tochange the behaviorof entities engaged inmoney laundering, terrorist financing, or other illicit activities.

Option A (Incorrect):Sanctions do not necessarily indicatemilitary action.

Option B (Incorrect):NGOs may be exempt from sanctions, but this is not their primary purpose.

Option C (Incorrect):Whilehuman rights concernscan lead to sanctions, they are primarily imposed tochange behavior.

A robust AML training program should incorporate the followingbest practicesto ensure awareness and ongoing engagement:

Option A – Tailored and regular training:

Training should berisk-based and role-specific, ensuring employees understand how AML applies to their function.

Option D – Variety and resources:

Use ofinteractive, digital, live, and scenario-based methodskeeps training effective and adaptable. Providing materials and resources supports continued learning.

Option E – Communication and measurement:

Ongoing AML awareness campaigns andfeedback mechanismshelp assess theeffectivenessof training and reinforce its importance.

Option Bis too vague and not recognized as a best practice.

Option C, while helpful, isnot sufficient alone—annual frequency without contextual or tailored content is inadequate.

Senior management and AML officers may face personal liability if they knowingly allow AML violations to persist.

Option A (Correct):If senior management or the AML officer was aware of violations and failed to act, they could face regulatory or criminal liability.

Option B (Incorrect):Criminal liability depends on intent and negligence—an AML officer is not automatically prosecuted because a bank receives a regulatory order.

Option C (Incorrect):Liability extends beyond the AML officer—other senior executives can also be held accountable.

Option D (Incorrect):Violations can result in both civil and criminal prosecution, depending on the severity.

Legal Risks for AML Compliance Failures:

Civil penalties (fines and sanctions) for AML program deficiencies.

Criminal charges if executives knowingly ignore violations.

Regulatory enforcement actions leading to license revocation.

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

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

History of the FATF, 1

Financial Action Task Force - Wikipedia, 2

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

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