Free ACAMS CAMS Practice Exam with Questions & Answers | Set: 9

Public-private partnerships allow public organizations to gain insights from the private sector to shape effective policies and legislation. Additionally, strong data protection and privacy frameworks help create secure information-sharing protocols within PPPs, enhancing collaboration while preventing unauthorized access.

Trust and company service providers (TCSPs) are classified as higher-risk entities under FATF guidance due to their role in forming and managing legal structures. As a result, TCSPs must implement robust AML controls to mitigate misuse for money laundering.

A key requirement is gathering and recording detailed client information, including the purpose of the legal entity and the identity of managers and ultimate beneficial owners (UBOs). This supports effective customer due diligence and transparency.

TCSPs must also apply additional safeguards when relying on instructions from another TCSP, particularly one located in a different jurisdiction. Reliance on intermediaries increases risk and requires enhanced scrutiny.

Additionally, TCSPs should document the basis on which they act as a registered officer and retain records of their involvement. This ensures accountability and traceability in line with record-keeping obligations.

Requiring clients to submit AML self-assessments to an FIU and conducting onsite evaluations are not standard or required practices under AML frameworks.

Red flags include using personal accounts for business transactions (which can obscure fund tracing), preferring minimal direct interaction (potentially avoiding scrutiny), and unclear ultimate beneficial ownership (which can conceal the true controllers of the entity and facilitate illicit activity).

A: FIs should ensure they have a general understanding of virtual assets and VASP operations to assess risks accurately.

C: Enhanced KYC measures are recommended for VASPs due to their higher ML/TF risk profile.

“FIs must understand the business model and risk of VASPs and apply enhanced due diligence as required by FATF and regulatory guidance.”(CAMS 6th Edition, Virtual Assets and VASPs; FATF Guidance)

Incorrect:

B: While monitoring transactions is important, it’s not a primary initial consideration for onboarding.

D: The FI’s own holdings are not relevant to due diligence on VASPs.

Forming complex trust structures and acting as a nominee director, providing tax advice to clients moving assets across borders, and assisting offshore entities from opaque jurisdictions in acquiring property are all higher-risk services. These activities may facilitate concealment of beneficial ownership, asset flight, or the integration of illicit funds into legitimate systems.

The CAMS 6th Edition specifically lists environmental crime as a predicate offense for money laundering. Environmental crimes include activities such as illegal logging, illegal mining, and illegal trade in wildlife.

“Environmental crime, including illegal logging and mining, is recognized as a predicate offense to money laundering. Such crimes often involve complex corporate structures to hide the illicit origin of the proceeds.”

(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing; FATF Recommendations, Predicate Offenses)

Incorrect Options:

A: Trade-based ML refers to manipulating trade transactions, not the underlying crime.

B: Corruption may be involved, but the primary crime is environmental.

C: Illicit resource trade describes the act, but the official predicate crime category is environmental crime.

Residual risk represents the remaining level of risk after considering the effectiveness of controls. Under a risk-based approach, strong controls reduce risk, while weak or ineffective controls increase it.

In this scenario, the inherent risk is assessed as moderate, meaning the underlying exposure is neither low nor extreme. However, the controls are evaluated as less than satisfactory, indicating that existing measures are not adequately mitigating the identified risks.

When controls are weak, residual risk increases above the inherent risk level, as vulnerabilities remain unaddressed. Regulators expect financial institutions to escalate residual risk ratings and implement remediation plans in such cases.

Therefore, the most likely residual risk conclusion is high, reflecting the combination of moderate inherent risk and ineffective controls. This outcome aligns with AML best practice and regulatory expectations.

Once a risk appetite and Risk Appetite Statement (RAS) are established, organizations must ensure they are understood, embedded, and actively monitored. Regulatory guidance emphasizes that a risk appetite is effective only if it influences daily decision-making.

Providing training to staff ensures employees understand risk boundaries and how their actions align with the organization’s risk tolerance. Embedding risk appetite into processes and governance, such as approvals, escalation thresholds, and performance management, ensures it is operationalized rather than theoretical.

Finally, integrating breaches or misalignment with risk appetite into internal reporting allows senior management to monitor adherence and take corrective action when necessary.

Training managers on “good” risk-taking may be useful culturally but is not a core regulatory expectation. Merely describing controls does not ensure awareness or behavioral alignment.