Free ACAMS CAMS Practice Exam with Questions & Answers | Set: 6

 Before disclosing any supporting documentation for a suspicious transaction report (STR) to a law enforcement agency, the financial institution should confirm thatthe request is legitimate and authorized by verifying the identity and credentials of the requester1. This is to prevent unauthorized access or misuse of the confidential information by impostors or fraudsters. The other options are not true, as they may either compromise the security, integrity, or timeliness of the disclosure, or violate the confidentiality or privacy rights of the customer.

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 4, p. 117

FATF Guidance: The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing, October 20132, p. 20

Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 20173, p. 11

Effective AML programs promote aculture of compliance, which includes an environment where staff are empowered to raise concerns, challenge decisions, and continuously improve through cross-functional learning.Providing effective challengeis a supervisory expectation and best practice in institutions that value AML governance integrity.

While AML officer authority (option B) supports oversight, it is not as impactful on daily operational effectiveness as fostering a challenging and adaptive compliance culture.

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.

Financial institutions are required by law to maintain records and documentation of customer transactions and to provide this information to law enforcement agencies upon request. However, financial institutions should also have policies and procedures in place to ensure that they comply with legal and regulatory requirements and protect customer privacy. Providing protected documents that are privileged under attorney-client privilege or freezing an account immediately may not be the appropriate response and may expose the financial institution to legal or reputational risks.

these are the main factors that determine the inherent money laundering risk of a financial institution. The customer base, location, products and services of a financial institution affect the type, volume, and complexity of transactions that it processes, as well as the exposure to high-risk customers, jurisdictions, and activities12. A financial institution should review these factors regularly and conduct a comprehensive risk assessment to identify, measure, and mitigate its money laundering risk34.

Anti Money Laundering Risk Assessment - Financial Crime Academy1

Anti-Money-Laundering (AML) Risk Approach Explained | Okta2

Anti-Money Laundering (AML) Risk Assessment | ACAMS4

2024 National Money Laundering Risk Assessment (NMLRA)5

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

The first step in a financial investigation is to review and analyze allinternalsources of information related to the suspicious transaction.

Option C (Correct):Gathering and assessing internal data helps investigators establish a baseline for normal vs. suspicious customer behavior. This includes reviewing KYC (Know Your Customer) documentation, transaction history, and any previous alerts on the customer.

Option B (Incorrect):This is part of the investigation, but an investigator first needs togatherdata before determining consistency with expected behavior.

Option A (Incorrect):An FIU is typically contactedafterinternal analysis has been completed and a Suspicious Activity Report (SAR) is warranted.

Option D (Incorrect):External information is useful, but internal data should be reviewed first to confirm whether a case needs escalation.

According to the FATF Recommendations, financial institutions should maintain all necessary records on transactions and customers for at least five years, and make them available to competent authorities upon appropriate authority1. This includes records and documents related to suspicious transactions that have been reported to the financial intelligence unit (FIU) or other designated authorities. Providing the supporting documentation to competent authorities upon request is essential for the investigation and prosecution of money laundering and terrorist financing offences, as well as for the identification and tracing of criminal assets2.

Hinting to the customer that she should come in and explain her behavior is not a correct answer, as it may tip off the customer about the suspicion and compromise the effectiveness of the reporting system. Financial institutions should not disclose to the customer or to third parties that a suspicious transaction report (STR) or related information is being reported to the FIU3.

Maintaining adequate written documentation of all individuals and transactions reported is not a sufficient answer, as it does not imply cooperation with competent authorities. Financial institutions should not only keep records, but also provide them to the authorities when requested.

Submitting information upon receiving a legal request from parties involved in a civil lawsuit is not a relevant answer, as it does not relate to the cooperation with competent authorities for AML/CFT purposes. Civil lawsuits are not part of the AML/CFT framework, and financial institutions should not disclose confidential information to private parties without proper legal grounds.

FATF Recommendation 11: Record-keeping 1

FATF Recommendation 31: Powers of law enforcement and investigative authorities 2

FATF Recommendation 21: Tipping-off and confidentiality 3

Accounts may beclosedif theypose high money laundering or sanction risks.

Option A (Correct):MultipleSAR filingsindicatehigh risk, possibly requiringaccount closureif AML concerns persist.

Option B (Incorrect):Tuition paymentsare alegitimate purposefor fund transfers.

Option C (Incorrect):Indirect dealings withSDNs require compliance review, but notimmediate account closure.

Option D (Incorrect):Civil subpoenasalone do not justifyaccount termination.

RegularKYC reviewsensure that high-risk customersare monitored for potential changes in their risk profile.

Option D (Correct):TheKYC manager must determine why the required review was missed and implement corrective measures to prevent future failures.

Option A (Incorrect):A missed reviewdoes not necessarily indicate suspicious activity, so filing a SAR at this stage isnot appropriate.

Option B (Incorrect):Removing a customer from the high-risk list without reassessment is a compliance violation.

Option C (Incorrect):Suspending account access without due processmay belegally questionable.

Best Practices for KYC Compliance Management:

Ensure automated KYC review tracking to avoid missed reviews.

Conduct risk-based periodic reviews on high-risk customers.

Implement escalation protocols for overdue KYC reviews.

According to the ACAMS CAMS Study Guide, one of the most common methods of placement is to deposit cash into a bank account, either directly or through intermediaries. This allows the money launderer to introduce the illicit funds into the legitimate financial system, and to create a paper trail that can be used to justify the source of the funds. However, this method also exposes the money launderer to the risk of detection by the bank’s anti-money laundering (AML) policies and procedures, such as customer identification, transaction monitoring, and reporting of suspicious activities1.

ACAMS CAMS Study Guide, 6th Edition, page 271

Ongoing Due Diligence: FATF emphasizes the importance of continuous monitoring of business relationships and transactions. This involves regularly assessing the risk associated with a customer and ensuring that the information remains up-to-date. It includes monitoring transactions for any suspicious activity or red flags.

Beneficial Owners: Identifying beneficial owners is crucial, but it must be done with verification of their true identity. This is part of the initial due diligence process.

Risk Assessment: Conducting risk assessments is essential, but it is not specific to customer due diligence. Risk assessment applies broadly to anti-money laundering (AML) programs.

Products and Services Suitability: While understanding the suitability of products and services is relevant, it is not a direct measure within customer due diligence.

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 activity of a teller distributing bank brochures to customers who regularly conduct cash transactions below reporting limits warrants further review. This is because the teller may be facilitating or encouraging structuring, which is a form of money laundering that involves breaking down large amounts of cash into smaller transactions to avoid detection or reporting requirements. Structuring is illegal and can expose the institution and the employee to civil or criminal penalties. The teller may also be acting as an agent or a recruiter for money launderers who use the bank’s services to launder their illicit funds12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and Methods, p. 28-29 2: FATF Report: Money Laundering through the Physical Transportation of Cash, October 2015, p. 23-24, http://www.fatf-gafi.org/media/fatf/documents/reports/money-laundering-through-transportation-cash.pdf

The U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. OFAC publishes lists of individuals and entities that are subject to various sanctions programs, such as the Specially Designated Nationals and Blocked Persons List (SDN List), the Sectoral Sanctions Identifications List (SSI List), and the Foreign Sanctions Evaders List (FSE List). These lists are updated frequently and can be accessed through OFAC’s website or other sources12.

The Financial Action Task Force (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 international financial system. FATF publishes lists of jurisdictions that have strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes, and calls on its members and other countries to apply enhanced due diligence or counter-measures to protect themselves from the risks emanating from these jurisdictions. These lists are updated periodically and can be accessed through FATF’s website or other sources34.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Sanctions, p. 63-64 2: U.S. Department of theTreasury Office of Foreign Assets Control, https://home.treasury.gov/policy-issues/financial-sanctions 3: CAMS Certification Package - 6th Edition | ACAMS, Chapter 4: FATF Recommendations, p. 77-78 4: Financial Action Task Force, http://www.fatf-gafi.org/countries/#high-risk

The primary consideration the institution should keep in mind when deciding whether to agree to the law enforcement request is whether the institution can continue to meet its regulatory obligations with the accounts open. This is because the institution has a duty to comply with the applicable laws and regulations, and to protect its reputation and integrity from being associated with money laundering or terrorist financing. The institution should assess the risks and benefits of keeping the account open, and consult with its legal counsel and senior management before making a decision. The institution should also document itsdecision and the rationale behind it, and communicate it to the law enforcement agency12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 7: Conducting or Supporting the Investigation Process, p. 143-144 2: FATF Guidance: Anti-Money Laundering and Terrorist Financing Measures and Financial Inclusion, February 2013, p. 50-51, http://www.fatf-gafi.org/media/fatf/documents/reports/AML_CFT_Measures_and_Financial_Inclusion_2013.pdf

 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 .

If a financial institution wishes to close an account due to concerns about potential money laundering or other financial crimes, it is generally required to file a suspicious activity report (SAR) with the appropriate government agency. However, there may beinstances where the government requires the account to remain open for ongoing investigation purposes.

In such cases, the government must provide a written request under proper letterhead and authority to keep the account open. This document will serve as legal justification for the financial institution to maintain the account, even though it may pose a higher risk for money laundering or other financial crimes.

MSBsarehigh-risk for financial crime, requiringstrict AML controls.

Option D (Correct):Hesitancy to provide beneficiary informationis astrong indicator of illicit financial activity.

Option E (Correct):Using multiple accounts under different namesis aknown money laundering technique.

Option A (Incorrect):Currency exchange is common in MSBs, thoughadditional factors must be assessed.

Option B (Incorrect):Large cash deposits are normal for cash-based businesses, butneed further scrutiny.

Option C (Incorrect):Frequent small remittancesare normal, unless linked tostructuring or smurfing.

According to the ACAMS CAMS Study Guide, 6th Edition, Chapter 4, Section 4.2, the AML Specialist at a bank should take the following actions upon receiving a confidential alert from law enforcement about suspected money launderers:

Involve the bank’s legal and compliance function to address the gravity of the matter and ensure that the bank’s response is appropriate and lawful. The legal and compliance function can also advise on the bank’s obligations and rights under the relevant laws and regulations, such as the General Data Protection Regulation (GDPR), the Bank Secrecy Act (BSA), and the USA PATRIOT Act.

Perform a search on the bank’s client data platform to determine if the bank has had any business with the named individuals or any related parties. The search should include current and past accounts, transactions, wire transfers, and other relevant records. The AML Specialist should also review any existing customer due diligence (CDD) and enhanced due diligence (EDD) information on the potential suspects and update them as necessary.

The other options are not recommended or required actions for the AML Specialist at a bank in this scenario:

Sending out an email to all of the bank’s client advisors to request information on any of the individuals could compromise the confidentiality of the alert and expose the bank to legal and reputational risks. It could also alert the suspects or their associates and hinder the law enforcement investigation.

Reporting findings back to law enforcement only if they are of any significance is not sufficient or compliant with the bank’s obligations to cooperate with law enforcement and report any suspicious activity. The AML Specialist should report any relevant information or findings to law enforcement as soon as possible, regardless of their significance, and follow the established procedures and protocols for information sharing and reporting.

Responding to law enforcement that their request without a judicial order would breach the bank’s GDPR duty with respect to its clients is not accurate or helpful. The GDPR does not prohibit the bank from sharing personal data with law enforcement for the purposes of preventing, detecting, or investigating money laundering or other criminal activities, as long as the bank has a legal basis and safeguards for doing so. The bank should consult with its legal and compliance function to determine the best way to respond to the law enforcement request and balance its GDPR obligations with its anti-money laundering (AML) duties.