Free ACAMS CAMS Practice Exam with Questions & Answers | Set: 3

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.

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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

Enhanced Due Diligence (EDD) applies to high-risk customers and transactions, includingpolitically exposed persons (PEPs), high-risk jurisdictions, and correspondent banking relationships.

Option C (Correct):Correspondent banking relationships with high-risk jurisdictions require EDDto prevent cross-border financial crime.

Option D (Correct):Ambassadors are considered PEPs, which require EDD due to corruption risks.

Option E (Correct):A current prime minister is a high-profile PEP, requiringEDD and ongoing transaction monitoring.

Why Other Options Are Incorrect:

Option A (Incorrect):The individual no longer holds a PEP position and is in a low-risk country, soEDD is not required.

Option B (Incorrect):A local footballer does not present a high financial crime risk warranting EDD.

EDD Best Practices for High-Risk Customers:

Verify the source of wealth and funds for PEPs.

Conduct ongoing transaction monitoring on high-risk accounts.

Apply stricter controls on correspondent banking with high-risk jurisdictions.

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.

 A free-look provision is a period of time, typically 10 to 30 days, in which a new life insurance policy owner can terminate the policy and have their premium refunded1. This can help criminals to launder money by purchasing a policy with illicit funds and then cancelling it within the free-look period to receive a clean check from the insurance company2. This way, they can disguise the source and origin of their funds and avoid any penalties or charges that would otherwise apply to early termination of the policy.

1: Investopedia, What Is a Free Look Period and How Does It Work?

2: FinCEN, Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Insurance Companies

 it describes the organization that a national Financial Intelligence Unit (FIU) should consider becoming a member of, which is the Egmont Group. The Egmont Group is an international network of FIUs that was established in 1995 to facilitate the exchange of financial intelligence and information among its members, and to promote cooperation and coordination in the fight against money laundering and terrorist financing. The Egmont Group currently has 166 member FIUs from different jurisdictions, and provides them with various benefits, such as access to secure communication channels, bestpractices, training, and technical assistance. The Egmont Group also works closely with other international organizations, such as the Financial Action Task Force (FATF), the United Nations, and the World Bank, to enhance the global anti-money laundering and counter-terrorist financing (AML/CTF) framework.

The other options are not necessarily organizations that a national FIU should consider becoming a member of, although they may have some relevance or influence on the AML/CTF field. Option B describes the Wolfsberg Group, which is an association of 13 global banks that was formed in 2000 to develop standards and guidance for the financial industry on AML/CTF and other financial crime issues. The Wolfsberg Group is not an organization for FIUs, but rather for financial institutions. Option C describes the Financial Action Task Force (FATF), which is an inter-governmental body that was established in 1989 to set the international standards and recommendations for AML/CTF and to monitor the compliance and effectiveness of its members and other jurisdictions. The FATF is not an organization for FIUs, but rather for governments and policy-makers. Option D describes the Basel Committee, which is a forum of central bank governors and heads of banking supervision authorities from 28 jurisdictions that was established in 1974 to enhance the quality and consistency of banking supervision and regulation. The Basel Committee is not an organization for FIUs, but rather for banking regulators and supervisors.

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 5, pages 108-109

https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-5.pdf

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

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.

A. Offering internal policies training: This is crucial. Employees need to understand the specific procedures and policies related to customer identification and verification. These internal policies ensure consistency and compliance.

B. Offering general background and history training: While historical context is valuable, it’s not the primary focus. AML training should prioritize practical knowledge and current best practices.

C. Offering periodic refresher training: Absolutely! Regular refresher training keeps employees up-to-date with evolving AML regulations and reinforces their understanding.

D. Offering tailored training for specific roles: This is essential. Different roles require different expertise. For example, investigators need to recognize red flags, while report writers must understand how to create effective suspicious activity reports.

Comprehensive Detailed Explanation:

Internal Policies Training: AML training should cover internal policies thoroughly. This includes customer identification and verification procedures, as well as other relevant policies specific to the organization. Employees need to understand how these policies translate into day-to-day practices.

General Background and History: While historical context can be interesting, it’s not the primary focus of AML training. Instead, the emphasis should be on practical knowledge, current best practices, and real-world scenarios.

Periodic Refresher Training: Regular refresher training is essential. AML regulations evolve, and employees need to stay informed. Annual or periodic refreshers reinforce knowledge and ensure compliance.

Tailored Training for Specific Roles: Different roles within an organization have distinct responsibilities related to AML. Tailored training ensures that employees understand their specific duties. For example, investigators need to recognize suspicious patterns, while report writers must know how to create effective reports.

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

ACAMS CAMS Study Guide, 6th Edition, page 27

FFIEC BSA/AML Appendices - Appendix F – Money Laundering and Terrorist Financing Red Flags1

AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage2

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

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.

 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 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

 The FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system1. The FATF identifies jurisdictions with serious strategic deficiencies in their anti-money laundering / counter financing of terrorism (AML/CFT) regimes and issues public statements to warn the international community of the risks emanating from these jurisdictions2. These jurisdictions are also known as high-risk jurisdictions subject to a call for action, or the “black list” in external sources2. The FATF urges its members and all other jurisdictions to apply counter-measures to protect themselves from the money laundering and terrorist financing risks posed by these jurisdictions2. Counter-measures are enhanced due diligence or restrictive measures that go beyond the normal AML/CFT requirements, such as requiring additional information or documentation, rejecting transactions, restricting business relationships, or terminating correspondent banking relationships3. The FATF also provides guidance on the types and levels of counter-measures that may be appropriate, depending on the specific risks and circumstances of each jurisdiction3.

1: What is the FATF? | FATF

2: High-Risk Jurisdictions subject to a Call for Action | FATF

3: Guidance on Counter Proliferation Financing - The Implementation of Financial Provisions of United Nations Security Council Resolutions to Counter the Proliferation of Weapons of Mass Destruction | FATF

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

 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

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.

"Transaction Monitoring Systems and Ongoing Monitoring: Since the transactional monitoring system is key to mitigating ML risk within the bank, the Committee recognizes that AML risks require more than just appropriate policies and procedures; banks must have adequate and appropriate monitoring systems. For most banks, this will involve an IT monitoring system. If the bank does not believe it needs an IT monitoring system, it should document the rationale for why it does not need one.

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

Funds transfers are electronic payments that move money from one account to another, either within the same financial institution or across different institutions, countries, or currencies1. Funds transfers are commonly used for legitimate purposes, such as remittances, trade, or investment, but they can also be abused by money launderers, terrorists, or fraudsters to move illicit funds or conceal their origin or destination2. Therefore, financial institutions and other entities that offer funds transfer services are required to apply anti-money laundering and counter-terrorism financing (AML/CFT) measures, such as customer due diligence, transaction monitoring, record-keeping, and reporting of suspicious activities2.

One of the red flags for funds transfers that may indicate money laundering or other criminal activity is when funds transfers are repeatedly sent to the same beneficiary out of line with the business purpose3. This could suggest that the originator and the beneficiary are colluding to layer or integrate illicit funds, or to evade reporting or sanctions requirements. For example, a business may send multiple funds transfers to the same supplier, but the amounts or frequencies do not match the invoices or contracts, or the supplier is located in a high-risk jurisdiction or is subject to sanctions. Alternatively, an individual may send frequent funds transfers to the same person, but the relationship or the reason for the transfers is unclear or inconsistent, or the person is associated with a criminal or terrorist organization. In such cases, the financial institution or the funds transfer service provider should conduct enhanced due diligence, verify the source and purpose of the funds, and report any suspicious activity to the relevant authorities.

1: Wire Transfer Definition - Investopedia

2: International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - The FATF Recommendations | FATF

3: Wire Transfer Red Flags: Money Laundering & Fraud Risks - Alessa1