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

According to the Wolfsberg Anti-Money Laundering Principles for Private Banking (2012), the bank should have a clear policy on how to deal with intermediaries, such as lawyers, accountants, trust and company service providers, or other financial institutions, that introduce or manage clients on behalf of the bank. The policy should reflect the following aspects1:

The bank should perform due diligence on the intermediary itself, including its ownership, reputation, regulatory status, and AML policies and procedures.

The bank should obtain the identity and beneficial ownership information of the clients introduced or managed by the intermediary, and verify them using reliable and independent sources, unless there are legal or regulatory impediments to do so.

The bank should assess the level of due diligence performed by the intermediary on its clients, and determine whether it is equivalent or comparable to the bank’s own standards. If not, the bank should perform additional due diligence on the intermediary’s clients, or decline to accept them.

The bank should monitor the transactions and activities of the clients introduced or managed by the intermediary, and report any suspicious or unusual activity to the relevant authorities.

Option B is consistent with these aspects, as it states that the bank must obtain the same type of information with respect to an introduced client that would otherwise be obtained by the bank, absent the involvement of the intermediary. This ensures that the bank has a sufficient understanding of the client’s identity, source of wealth, and risk profile, and can apply appropriate AML measures.

Option C is also consistent with these aspects, as it states that where an intermediary manages assets on behalf of a number of clients and is the account holder with the bank, but that intermediary does not conduct the same level of due diligence as the bank, it is necessary for the bank to undertake due diligence on the intermediary’s clients. This ensures that the bank does not rely solely on the intermediary’s due diligence, and can identify and mitigate any potential money laundering risks associated with the clients.

Option A is not consistent with these aspects, as it states that when an intermediary introduces clients to the bank, it is not necessary for the bank to perform due diligence on the intermediary’s clients. This contradicts the principle that the bank should obtain and verify the identity and beneficial ownership information of the clients introduced by the intermediary, unless there are legal or regulatory impediments to do so.

Option D is also not consistent with these aspects, as it states that where an intermediary manages assets on behalf of a number of clients and arranges for the opening of accounts for its clients with the bank, and that intermediary is a financial institution subject to similar regulations, it is necessary for the bank to perform due diligence on the intermediary’s clients. This contradicts the principle that the bank may rely on the due diligence performed by the intermediary on its clients, if the intermediary is a regulated financial institution that applies equivalent or comparable AML standards to the bank, and if the bank has access to the relevant information and documentation.

1: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012), Section 3: Intermediaries

A compliance officer should communicate with regulatory and law enforcement authorities in line with applicable local laws during an ongoing investigation into a client’s activities by a competent authority. This is because the compliance officer has a duty to cooperate with the authorities and provide relevant information and documents as requested, while also protecting the confidentiality and privacy of the client and the institution. The compliance officer should not restrict the communication to senior management only, as this could hinder the investigation or create a perception of obstruction. The compliance officer should not communicate only in writing, as this could limit the effectiveness and timeliness of the communication. The compliance officer should not limit the communication to the absolute minimum, as this could imply a lack of cooperation or transparency.

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CAMS Certification Package - 6th Edition | ACAMS1

CAMS Certifications: How to Get CAMS Certified | ACAMS2

ACAMS CAMS Certification Video Training Course - Exam-Labs3

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)4

Political system changes can have an impact on an organization's AML risk as they can affect the legal and regulatory framework in which the organization operates. For example, changes to the laws or regulations related to AML, or changes in the way in which the government enforces AML regulations, can have an impact on the organization's AML risk by increasing or decreasing the likelihood of it being exposed to AML risk. In addition, changes in the political environment or political stability in a specific jurisdiction can also affect the organization's AML risk.

 According to the BSA/AML Manual1, once a financial institution files a SAR, it should maintain a copy of the SAR and the original or business record equivalent of any supporting documentation for a period of five years from the date of filing the SAR. The supporting documentation should be identified and maintained by the financial institution as such, and be deemed to have been filed with the SAR. The financial institution should make all supporting documentation available to FinCEN or any federal, state, or local law enforcement agency, or any federal regulatory authority that examines the financial institution for compliance with the BSA, upon request. Therefore, the best action to take regarding a particular account once suspicious activity is reported by the institution is to secure all supporting documentation, as it may be needed for further investigation or examination.

BSA/AML Manual1

Suspicious Activity Reporting - Overview2

Suspicious Activity Report (SAR) Basics3

FIs must handlelaw enforcement subpoenas carefullytocomply with legal and AML obligations.

Option A (Correct):Legal counsel must review subpoenasto ensure compliance withAML and privacy laws.

Option B (Incorrect):Original documentsshould only be provided underspecific legal conditions.

Option C (Incorrect):Account closure decisionsmust followAML risk-based assessment.

Option D (Incorrect):Tipping offa customer about an investigation isillegalunder AML laws.

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 37, one of the red flags of money laundering or terrorist financing is the use of nominees, trusts, or third parties to hide the identity, ownership, or control of the funds or assets involved in the transaction. Nominees are individuals or entities that act on behalf of the actual or beneficial owners of a company, trust, or account, and may be used to conceal the source, destination, or purpose of the funds or assets. Nominees may also be used to evade taxes, sanctions, or regulatory requirements.

In this case, the compliance officer is unable to verify the identity of the beneficial owners of the company, and only information on the nominee owners was provided. This raises the suspicion that the company may be involved in money laundering or terrorist financing activities, and that the nominee owners may be acting as fronts or intermediaries for the actual or beneficial owners. The compliance officer should conduct further due diligence on the company, the nominee owners, and the beneficial owners, and report any suspicious or unusual activity to the relevant authorities.

ACAMS Study Guide 6th Edition, Chapter 2, page 37

Beneficial Ownership Meaning and Regulation - Investopedia

What is a nominee shareholder? | LawBite

 A startup virtual currency exchange that operates as a money services business (MSB) must comply with the anti-money laundering (AML) regulations and standards applicable to MSBs, such as the Bank Secrecy Act (BSA) in the United States. One of the key requirements for MSBs is to develop and implement an effective AML compliance program that covers the following four pillars: internal controls, independent testing, designated compliance officer, and training12.

Before launching its operations, the startup should consider the following two AML responsibilities that are essential for its compliance program:

A customer onboarding process: The startup should establish a customer identification program (CIP) that verifies the identity of its customers and collects relevant information, such as name, address, date of birth, and identification number12. The startup should also perform customer due diligence (CDD) and enhanced due diligence (EDD) for higher-risk customers, such as those who engage in large or frequent transactions, use anonymous or pseudonymous digital wallets, or originate from high-risk jurisdictions34. The startup should also screen its customers against sanctions lists and other watchlists to prevent dealing with prohibited or suspicious entities12.

Transaction limits consistent with risk appetite: The startup should set appropriate transaction limits for its customers based on its risk assessment and risk appetite. Transaction limits can help mitigate the exposure to money laundering and terrorist financing risks, as well as comply with the reporting and recordkeeping obligations under the BSA. For example, the startup should report any cash transactions over $10,000 or any suspicious transactions over$2,000 to the Financial Crimes Enforcement Network (FinCEN)12. The startup should also monitor its customers’ transactions for any unusual or inconsistent patterns or behaviors that may indicate money laundering or other illicit activities34.

1: ACAMS CAMS Certification Package - 6th Edition, Chapter 6: AML Compliance Program, pp. 139-1461

2: ACAMS CAMS Certification Video Training Course, Module 6: AML Compliance Program, Lesson 6.1: The Four Pillars of an AML Compliance Program3

3: ACAMS CAMS Certification Package - 6th Edition, Chapter 4: Customer Due Diligence, pp. 87-1061

4: ACAMS CAMS Certification Video Training Course, Module 4: Customer Due Diligence, Lesson 4.1: CustomerIdentification Program and Lesson 4.3: Enhanced Due Diligence3

The Third European Union Money Laundering Directive (3MLD) is a legal framework that aims to prevent the use of the financial system for the purposes of money laundering and terrorist financing. It was adopted in 2005 and repealed by the Fourth European Union Money Laundering Directive (4MLD) in 2015. The 3MLD applies to a range of entities that are considered to be exposed to the risk of money laundering and terrorist financing, such as:

Financial institutions, which include credit institutions, financial intermediaries, insurance companies, investment firms, and payment service providers.

Casinos, which include both online and offline gambling services that involve wagering a stake with monetary value.

Real estate agents, which include both natural and legal persons that act as intermediaries in the buying and selling of real property or rights over it.

The 3MLD requires these entities to implement a number of measures to prevent and detect money laundering and terrorist financing, such as:

Conducting customer due diligence, which involves identifying and verifying the customer and the beneficial owner, understanding the purpose and nature of the business relationship, and applying enhanced or simplified measures depending on the level of risk.

Keeping records of customer and transaction data for at least five years after the end of the business relationship or the execution of the transaction.

Reporting suspicious transactions or activities to the competent authorities without delay and without tipping off the customer.

Establishing internal policies, procedures, and controls to ensure compliance with the 3MLD, and providing adequate training and awareness to staff.

Cooperating with the relevant supervisory and regulatory authorities and financial intelligence units.

The 3MLD does not apply to defense attorneys, as they are not considered to be obliged entities under the directive. However, the 3MLD does apply to other legal professionals, such as notaries, lawyers, and accountants, when they perform certain activities on behalf of their clients, such as:

Buying and selling of real property or business entities

Managing of client money, securities, or other assets

Opening or managing bank, savings, or securities accounts

Organizing contributions for the creation, operation, or management of companies

Creating, operating, or managing trusts, companies, foundations, or similar structures

THE THIRD EU DIRECTIVE ON MONEY LAUNDERING AND TERRORIST FINANCING, page 11-12

Anti-money laundering and countering the financing of terrorism legislative package, page 1

CAMS Study Guide - 6th Edition, Chapter 1, Section 1.2, page 11

V

The CAMS 6th Edition clearly identifies a risk-based approach as the cornerstone of effective AML/CFT programs. Risk assessments should consider various risk factors that directly influence exposure to ML/TF.

Product risk (A): Certain products or services may present higher ML/TF risks, such as private banking, correspondent banking, or cash-intensive products.“Products and services offered, and their inherent risk levels, must be assessed as part of the risk-based approach.”(CAMS 6th Edition, AML Compliance Program, Risk Assessment)

Geographic risk (C): Jurisdictions where the customer operates or where transactions are conducted may present higher or lower risks due to factors such as weak AML regulations or high corruption.“Geographic risk considers where a customer is located and/or where transactions occur, referencing countries with increased risk, such as those identified by the FATF.”(CAMS 6th Edition, Risk Assessment Factors)

Customer risk (D): The type of customer, such as PEPs, non-residents, or companies with complex structures, may present higher ML/TF risks.“Customer risk assessment is based on the customer’s profile, activity, and ownership structure, and is a critical component in risk-based monitoring.”(CAMS 6th Edition, CDD/EDD)

Incorrect Options:

B (Credit risk): Related to creditworthiness, not ML/TF.

E (Liquidity risk): Refers to a firm’s ability to meet financial obligations; not an AML risk factor.

The correct answer is C. Wires received in large, even dollar amounts are a suspicious behavior, as they may indicate an attempt to avoid reporting thresholds or to conceal the source of funds. Large and round numbers are often used by money launderers to simplify calculations or to avoid arousing suspicion12. The other options are not necessarily suspicious, as they may reflect the normal business operations of a wholesale auto business that ships vehicles internationally. The dock shipping receipts match the vehicles (A), vehicles are regularly shipped internationally (B), and account debits are payable to transport companies (D) are all plausible and legitimate activities for such a business.

ACAMS CAMS Certification Video Training Course3, Module 3: Risks and Methods of Money Laundering and Terrorism Financing, Lesson 2: Methods of Money Laundering

ACAMS CAMS Certification Study Guide1, Chapter 3: Risks and Methods of Money Laundering and Terrorism Financing, Section 3.2: Methods of Money Laundering, pp. 79-80

Conducting anonymous transactions is the most likely activity to facilitate money laundering through online banking systems with inadequate controls. Anonymous transactions allow money launderers to hide their identity, source and destination of funds, and the purpose of their transactions from the authorities and the financial institutions. Online banking systems that do not have proper KYC, customer due diligence, and transaction monitoring controls are vulnerable to being exploited by money launderers who can use various techniques, such as encryption, proxy servers, virtual currencies, prepaid cards, and online gambling, to conduct anonymous transactions123.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2, page 40-41, 43-44

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.4, Money Laundering Using New Payment Methods

1, Fighting money laundering in the age of online banking, virtual currencies and internet gambling | ERA Forum

2, Financial crime risk management in digital payments | McKinsey

3, The Relationship Between Digital Banking and Financial Crime

A compliance officer should consider the following three factors as part of the approach to implement an enterprise-wide anti-money laundering program for a bank that operates in multiple countries:

The types of customers serviced by the bank: Different types of customers may pose different levels of money laundering risk, depending on their nature, source of funds, geographic location, transaction patterns, and other factors. A compliance officer should identify and assess the money laundering risk associated with each customer type and segment, and apply appropriate due diligence measures, monitoring systems, and risk mitigation strategies accordingly12.

The extent of anti-money laundering regulations in the various countries: A compliance officer should be aware of the legal and regulatory requirements and expectations for anti-money laundering compliance in each country where the bank operates, and ensure that the bank’s policies and procedures are consistent with them. A compliance officer should also monitor any changes or updates in the anti-money laundering laws and regulations in the various countries, and adjust the bank’s program accordingly34.

The anti-money laundering risk posed by the products and services offered by the bank: Different products and services may have different features and functionalities that could be exploited by money launderers, such as anonymity, cross-border transfers, cash transactions,complex structures, or new technologies. A compliance officer should evaluate the money laundering risk associated with each product and service offered by the bank, and implement appropriate controls, safeguards, and oversight mechanisms to prevent and detect money laundering activities5 .

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 2: Risk Assessments

2: FATF, Guidance for a Risk-Based Approach: The Banking Sector

3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT)

4: Deloitte, AML Program Effectiveness Reform

5: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4: AML Program Design

[6]: OCC, Money Laundering: A Banker’s Guide to Avoiding Problems

Along-term, root cause-based approach ensures AML deficiencies are fully remediated.

Option C (Correct):Addressing root causes ensures the institution remains compliant and prevents recurring violations.

Option A (Incorrect):Consulting with an FIU is unnecessary for internal remediation plans.

Option B (Incorrect):Short-term fixes do not resolve systemic AML issues.

Option D (Incorrect):AML compliance improvements may require investment—cost-cutting should not compromise compliance.

Best Practices for AML Audit Remediation:

Conduct root cause analysis before implementing corrective measures.

Develop a long-term compliance improvement plan.

Allocate sufficient resources for sustainable AML enhancements.

Before sharing customer records within the same jurisdiction, an FI should consider the legal and regulatory framework that governs the protection of personal data and the disclosure of client information. Different jurisdictions may have different laws and rules regarding the privacy and confidentiality of customer data, the consent and notification requirements for data sharing, the purposes and scope of data sharing, and the safeguards and accountability measures for data protection. An FI should ensure that it complies with the applicable restrictions and obligations when sharing customer records within the same jurisdiction, and that it does not violate the rights and expectations of its customers.

CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 83

CAMS Dumps Certified Anti-Money Laundering Specialist (the 6th edition), Question 352, page 8

CAMS Dumps Certified Anti-Money Laundering Specialist (the 6th edition), Question 352, page 8

After filing a suspicious activity report (SAR), an investigator should prepare a summary for senior management recommending client off-boarding. This is because client off-boarding is a risk-based decision that requires senior management approval and may involve legal considerations. Informing other local financial institutions about the client, restraining or blocking the client’s account(s), or contacting law enforcement directly are not appropriate actions for an investigator to take after filing a SAR, as they may compromise the confidentiality of the SAR, violate privacy laws, or interfere with ongoing investigations.

According to the Bank Secrecy Act (BSA), a financial institution or business must establish an anti-money laundering (AML) program that includes at least four elements: (a) a system of internal policies, procedures and controls to prevent, detect and report money laundering and other illicit activities; (b) a designated compliance officer who is responsible for overseeing the implementation and effectiveness of the AML program; © an ongoing employee training program that covers the legal and regulatory obligations, the risks and red flags of money laundering, and the roles and responsibilities of the staff in the AML program; and (d) an independent audit function that tests and evaluates the adequacy and compliance of the AML program12.

While the Office of Foreign Assets Control (OFAC) is a key agency that enforces economic and trade sanctions against targeted foreign countries, entities and individuals, it is not part of the BSA or the AML program requirements. However, financial institutions and businesses are expected to comply with OFAC regulations and screen their customers and transactions against the OFAC lists of sanctioned parties. Failure to do so may result in civil or criminal penalties34. Therefore, it is advisable for financial institutions and businesses to have an OFAC program that is integrated with their AML program, but it is not a mandatory element that they have to specifically address in their AML program.

1: Financial Crimes Enforcement Network (2020). Anti-Money Laundering Programs

2: ACAMS (2020). CAMS Certification Package (6th Edition)

3: Office of Foreign Assets Control (2023). Sanctions Programs and Country Information

4: Moses & Singer LLP (2023). Anti-Money Laundering, Bank Secrecy and OFAC Regulations

The 40 Recommendations provide a complete set of countermeasures against money laundering

and terrorist financing, covering

• the identification of risks and development of appropriate policies;

• the criminal justice system and law enforcement;

• the financial system and its regulation;

• the transparency of legal persons and arrangements; and

• international cooperation.

Alternative remittance, also known as underground banking or informal value transfer systems, is a method of transferring money or value without using formal financial institutions or channels. It is often used by migrant workers, refugees, or people who lack access to formal banking services. However, it can also be exploited by criminals and terrorists to move funds across borders without detection or regulation. The Wolfsberg Group, a group of leading international banks that promotes best practices in anti-money laundering and counter-terrorist financing, cited alternative remittance as one of the sectors and activities that are widely used for the financing of terrorism in its Statement on the Suppression of the Financing of Terrorism. The Wolfsberg Group recommended that financial institutions apply enhanced and appropriate due diligence to customers engaged in alternative remittance and report any suspicious transactions to the relevant authorities.

Wolfsberg Group (2002). Wolfsberg Statement on Anti-Terrorism Financing1

Pieth, M. (ed.) (2002). Financing Terrorism. Springer, Dordrecht2

ACAMS (2020). CAMS Certification Package (6th Edition)3

Customer due diligence should be implemented as an ongoing activity that may vary commensurate with the risk profile of the customer. This is because the risk of money laundering or terrorist financing may change over time, depending on the customer’s behavior, transactions, products, services, and geographic locations. The institution should monitor the customer’s activity and update the customer’s information and risk assessment periodically, or when there are red flags or significant changes in the customer’s circumstances. The institution should also apply enhanced due diligencemeasures for customers that pose higher risks, and simplified due diligence measures for customers that pose lower risks12.

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 1: Risks and Methods of Money Laundering and Terrorist Financing, p. 18-19 2: FATF Guidance: Customer Due Diligence and Financial Inclusion, February 2018, p. 10-11, http://www.fatf-gafi.org/media/fatf/documents/reports/Guidance-CDD-and-Financial-Inclusion-2018.pdf