ACAMS CAMS Dumps

having an outdated and incomplete risk assessment could expose the financial institution to significant money laundering and terrorist financing risks that are not identified, measured, or mitigated. The risk assessment is a key component of an effective anti-money laundering program, and it should be updated regularly to reflect the changes in the business environment, customer profile, product offerings, delivery channels, and regulatory requirements12. A risk assessment that is several years old and does not cover all current products and services could fail to capture the emerging threats and vulnerabilities that the financial institution faces, and could result in inadequate or inappropriate controls, policies, and procedures. This could lead to the highest potential for unmitigated risk, as the financial institution could be exploited by money launderers and terrorist financiers, and face regulatory sanctions, reputational damage, and financial losses.

References:

Anti-Money Laundering (AML) Risk Assessment | ACAMS1

Risk assess your business for money laundering supervision - GOV.UK2

In many jurisdictions, it is a requirement to report certain information regarding STRs to senior management and/or the board of directors. This information may be limited to the number of reports filed, the dollar amounts involved and significant trends as observed by compliance personnel. In some cases, if the activity presents a significant or potentially ongoing risk to the institution, the leaders of the institution should be made aware so that high-level decisions can be made regarding potential changes to systems, staffing, products, services or particular relationships maintained by the institution.

Banks are required by the SAR regulations of their federal banking agency to notify the board of directors or an appropriate board committee that SARs have been filed. However, the regulations do not mandate a particular notification format and banks should have flexibility in structuring their format. Therefore, banks may, but are not required to, provide actual copies of SARs to the board of directors or a board committee. Alternatively, banks may opt to provide summaries, tables of SARs filed for specific violation types, or other forms of notification. Regardless of the notification format used by the bank, management should provide sufficient information on its SAR filings to the board of directors or an appropriate committee in order to fulfill its fiduciary duties, while being mindful of the confidential nature of the SAR. ents/0

Financial Intelligence Units (FIUs) are national agencies that collect, analyze, and disseminate information on suspicious or unusual financial activity, such as money laundering and terrorist financing, to relevant authorities. One of their main functions is to disseminate the results of their analysis to law enforcement agencies in a timely manner, so that they can initiate investigations or prosecutions. This is also one of the standards set by the Financial Action Task Force (FATF), the global body that sets the anti-money laundering and counter-terrorist financing (AML/CFT) policies and recommendations. The other options are not the primary responsibilities of FIUs, although they may perform them as part of their mandate or in cooperation with other agencies.

References:

What are Financial Intelligence Units (FIUs)? | Dow Jones

Financial Intelligence Units: An Overview - IMF

Financial Intelligence Units - Egmont Group

FATF Recommendation 29 - Financial Intelligence Units (page 17)

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.

References:

ACAMS CAMS Study Guide, 6th Edition, page 271

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.

References:

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

Trade-based money laundering (TBML) is a method to finance terrorism that involves falsifying transaction-related documents, such as invoices, contracts, bills of lading, or customs declarations, to conceal the origin, destination, value, or purpose of illicit funds. TBML can be used to move money, goods, or services to or from sanctioned or high-risk jurisdictions, to evade taxes, duties, or currency controls, to launder proceeds of crime, or to support terrorist activities. TBML can involve over- or under-invoicing, over- or under-shipping, multiple-invoicing, or falsely describing goods or services. TBML can also be linked to other methods of money laundering or terrorist financing, such as bribery, black market peso exchange, or informal value transfer systems.

References:

ACAMS CAMS Certification Video Training Course, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 4: Trade-Based Money Laundering

Money Laundering and Terrorist Financing Related to Counterfeiting of Currency, Financial Action Task Force (FATF), page 28

Tracing terrorist finances, INTERPOL

 According to the Anti-Money Laundering Specialist (the 6th edition) resources, FSRBs are regional organizations that help the FATF implement its global AML/CFT policy and standards in over 200 affiliated countries1. FSRBs have their own high-level principles and objectives that govern their relationship with the FATF and their members2. Among these principles and objectives, two that should be included in a FSRB update are:

Issue country-specific Mutual Evaluation reports. This is the process by which FSRBs assess the compliance and effectiveness of their members’ AML/CFT systems, based on the FATF standards and methodology3. Mutual Evaluation reports provide an in-depth analysis of the strengths and weaknesses of each jurisdiction, as well as recommendations for improvement4.

Identify jurisdictions with weak AML/CFT regimes. This is the process by which FSRBs, in coordination with the FATF, monitor and publicly list the countries that pose a risk to the international financial system due to their strategic deficiencies in AML/CFT. This process aims to encourage and assist these jurisdictions to address their gaps and enhance their cooperation with the global network.

The other three options are incorrect because:

Address AML/CFT technical assistance of individual members is not a principle that should be included in a FSRB update, as it is not a core function of FSRBs. FSRBs may facilitate or coordinate technical assistance, but they are not the primary providers or funders of such assistance.

Establish AML/CFT standards and typologies is not a principle that should be included in a FSRB update, as it is not a role of FSRBs. FSRBs are expected to adopt and implement the FATF standards, not to create their own. Typologies are the methods and trends of money laundering and terrorist financing, which are identified and analyzed by the FATF and FSRBs through research and workshops.

Protect the reputation and standing of FATF is not a principle that should be included in a FSRB update, as it is not a responsibility of FSRBs. FSRBs are autonomous and independent organizations that have their own governance and accountability mechanisms. FSRBs are expected to cooperate and coordinate with the FATF, but not to act as its agents or representatives.

References:

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 64 2: FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 65 4: FATF, FATF Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems, February 2013 (updated October 2019), [12] : ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 66 : FATF, High-Risk and Other Monitored Jurisdictions, 4 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 4 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 2 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 3, p. 67 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 3 : FATF, High-Level Principles for the Relationship between the FATF and the FATF-Style Regional Bodies, February 2019, 3, p. 5 : FATF, FATF Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems, February 2013 (updated October 2019), [12], p. 9 : FATF, High-Risk and Other Monitored Jurisdictions, 4, p. 1

According to the ACAMS Study Guide, 6th Edition, page 184, “The decision to close an account should be made in consultation with the institution’s legal counsel and AML compliance officer, and in accordance with the institution’s policies and procedures.” Closing an account may not always be the best option, as it may trigger the customer’s suspicion, interfere with law enforcement investigations, or expose the institution to legal risks. Therefore, the institution should carefully weigh the pros and cons of closing an account, and follow its own internal guidelines.

References:

ACAMS Study Guide, 6th Edition, page 184

What steps should the institution take? - Exam4Training

Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR) | AML-CFT

account opening documents and account statements are examples of supporting documentation that can help the law enforcement agency to verify the identity, profile, and activity of the customer involved in the suspicious transaction. These documents can provide useful information such as the customer’s name, address, date of birth, identification number, occupation, source of funds, transaction history, and beneficiaries. These documents can also help to establish the baseline of normal and expected activity for the customer, and to identify any deviations or anomalies that may indicate money laundering, fraud, or other criminal activities.

References:

Suspicious Activity Report Supporting Documentation, section “What Constitutes Supporting Documentation”, paragraph 2: “Supporting documentation may include, for example, transaction records, new account information, tape recordings, e-mail messages, and correspondence.”

Documentation Requirements: Suspicious Activity Report Supporting Documentation, section “SARs Documentation Requirements”, paragraph 2: “Keep all documents with evidence of the background, the purpose of the transactions, the trigger, the investigation carried out, and all findings and conclusions.”

BSA/AML Manual, section “Assessing the BSA/AML Compliance Program - BSA Compliance Officer”, paragraph 3: “The BSA compliance officer is responsible for ensuring that the bank’s BSA/AML compliance program is implemented effectively, including timely updates in response to changes in regulations or business activities, and for managing all aspects of the BSA/AML compliance program. The BSA compliance officer is also responsible for ensuring that the bank’s BSA/AML compliance program is communicated to all personnel and that adequate training is provided to appropriate personnel.”

purchasing a low volume of chips with cash and turning them in for a casino check is a common technique of money laundering in casinos. This method allows the launderer to convert “dirty” money into physical casino chips, which are then played with for a short while, and then cashed out as “clean” money in the form of a check. This way, the launderer can avoid the reporting requirements and the traceability of cash transactions.

References:

ACAMS CAMS Certification Video Training Course - Exam-Labs1

Understanding Money Laundering in Casinos | ComplyAdvantage2

Casino Money Laundering: Red Flag Indicators - Alessa3

shell banks are banks that have no physical presence in any country and are not affiliated with any regulated financial institution. They are often used by money launderers and terrorist financiers to hide their illicit activities and evade regulatory oversight. The USA PATRIOT Act prohibits US financial institutions from opening or maintaining correspondent accounts with shell banks, and requires them to take reasonable steps to ensure that their foreign correspondent banks do not provide services to shell banks12. Therefore, the US does not have jurisdiction over shell banks operating in foreign jurisdictions, unless they are involved in transactions that violate US laws or sanctions.

References:

USA PATRIOT Act Section 313: Prohibition on U.S. Correspondent Accounts with Foreign Shell Banks1

Fact Sheet Regarding the Treasury Department’s Use of Sanctions Authorities to Combat Money Laundering and Terrorist Financing3

A Mutual Legal Assistance Treaty (MLAT) is an agreement between two or more countries for the purpose of gathering and exchanging information in an effort to enforce public or criminal laws1. MLATs provide a legal basis for transmitting evidence that can be used for prosecution and judicial proceedings, such as witness statements, bank records, search and seizure orders, and asset forfeiture2. MLATs also facilitate the cooperation and coordination between law enforcement authorities of different jurisdictions in investigating and prosecuting transnational crimes, such as money laundering, terrorist financing, corruption, and cybercrime3. The other options are incorrect because:

B. MLATs do not receive reports of suspicious transactions from financial institutions, but rather request specific information or evidence from foreign authorities. Financial institutions report suspicious transactions to their domestic Financial Intelligence Units (FIUs), which may then share the information with foreign FIUs through other mechanisms, such as the Egmont Group or bilateral agreements4.

C. MLATs do not obtain intelligence that might lead to evidence, but rather request evidence that is already available or can be obtained by foreign authorities. Intelligence is a broader term that refers to any information that is relevant to the security or interests of a country, and may not be admissible as evidence in a court of law5. Intelligence may be obtained through other means, such as covert operations, surveillance, or informants6.

D. MLATs do not issue the Principles of Information Exchange Between Financial Intelligence Units (FIUs), but rather follow them. The Principles of Information Exchange are a set of guidelines that were adopted by the Egmont Group of FIUs in 2001, and aim to enhance the cooperation and communication among FIUs in exchanging financial information and intelligence7. The Principles of Information Exchange are not legally binding, but rather reflect the best practices and standards of the FIU community.

References:

1: Mutual legal assistance treaty - Wikipedia

2: FREQUENTLY ASKED QUESTIONS REGARDING LEGAL ASSISTANCE IN CRIMINAL MATTERS, page 1

3: The Mutual Legal Assistance Problem explained | wilmap

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 125

5: Intelligence - Wikipedia

6: Intelligence cycle - Wikipedia

7: Egmont Group of Financial Intelligence Units - Wikipedia

: Principles for Information Exchange Between Financial Intelligence Units for Money Laundering and Terrorism Financing Cases

"The first European Union Directive, “Prevention of the Use of the Financial System for the Purpose of Money Laundering (Directive 91/308/EEC),” was adopted by the Council of the European Communities in June 1991. Like all directives adopted by the Council, it required member states to achieve (by amending national law, if necessary) the specified results. This First Directive required the members to enact legislation to prevent their domestic financial systems from being used for money laundering"

Concentration accounts are internal accounts used by financial institutions to aggregate funds from or for various clients or other accounts. They are also known as omnibus accounts or suspense accounts. The use of concentration accounts may obscure the audit trail and the identity of the clients involved in the transactions. Therefore, the Wolfsberg Principles on Private Banking, which are a set of voluntary guidelines for preventing money laundering and terrorist financing in the private banking sector, prohibit the use of concentration accounts in a way that would prevent appropriate monitoring or identification of the clients or their funds12.

References:

1: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012), Section 4.3 2: The Wolfsberg Principles - an analysis, Journal of Money Laundering Control, Vol. 7 No. 3, 2004, pp. 237-240

Large and frequent credit balances on a credit card resulting in request for refunds is an indicator of suspicious activity because it may suggest that the cardholder is using the credit card to launder money or to conceal the source of funds. This is also known as credit card refund fraud or credit card laundering. The cardholder may make purchases with the credit card using illicit funds, then request refunds to another account or in cash, thus transferring the funds to a legitimate or less traceable channel. This activity may also be used to evade currency reporting requirements or to avoid detection by law enforcement or financial institutions.

References:

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Money Laundering Risks and Methods, page 381

Suspicious Activity Reporting Indicators and Examples, U.S. Department of Homeland Security, Indicator 14: Excess Purchases or Transactions2

Credit Card Laundering, Money Laundering Bulletin, Issue 245, October 2019

The compliance officer should perform the first step of reviewing the institution’s risk assessment before implementing any changes to the customer onboarding program. The risk assessment is a key component of the AML compliance program, as it identifies and measures the institution’s exposure to money laundering and terrorist financing risks. The risk assessment should be updated regularly and reflect the institution’s products, services, customers, geographic locations, and delivery channels. By reviewing the risk assessment, the compliance officer can determine the adequacy and effectiveness of the current customer onboarding program and identify any gaps or weaknesses that need to be addressed. The compliance officer can also benchmark the institution’s risk assessment against the regulatory expectations and best practices in the industry.

The other steps are also important, but they should be performed after the risk assessment review. Revising training materials for frontline staff, conducting enhanced due diligence on high risk customers, and resolving substantive discrepancies in customer verification are all part of the customer onboarding program, but they depend on the risk assessment to provide the appropriate level of controls and procedures. For example, the training materials should reflect the risk assessment results and the revised customer onboarding policies. The enhanced due diligence should be applied to customers who pose a higher risk according to the risk assessment criteria. The customer verification should be consistent with the risk assessment and the customer identification program.

References:

AML KYC Onboarding Lifecycle Process Flow | Guide – AdvisoryHQ

New EBA AML Guidelines on the use of Remote Customer Onboarding Solutions - Bird & Bird

KYC Onboarding Process 2023 - AML requirements - Sumsub

Review of any AML/CFT program begins with the Risk Based Approached. It should first check the internal system to identify risk factors and design program accordingly.

One of the key components of an effective anti-money laundering (AML) program is to implement adequate customer due diligence (CDD) measures for new accounts. This includes verifying the identity of the party opening the account, determining the beneficial owner(s) of the account, and seeking to determine the source of deposited funds. These measures help the financial institution (FI) to understand the nature and purpose of the customer relationship, assess the risk profile of the customer, and detect and report any suspicious or unusual activity. Documenting the identity of the party opening the account and the beneficial owner(s) of the account also helps the FI to comply with the record-keeping and reporting requirements of the AML laws and regulations, and to cooperate with the authorities in case of investigations or inquiries. Seeking to determine the source of deposited funds helps the FI to prevent the introduction of illicit funds into the financial system, and to identify any discrepancies or inconsistencies between the customer’s profile and activity.

References:

1: FATF Guidance for a Risk-Based Approach for the Banking Sector1

2: OCC Bulletin 2020-10: Customer Due Diligence and Bank Secrecy Act/Anti-Money Laundering Examination Procedures2

3: ACAMS Study Guide for the CAMS Certification Examination3

According to the FATF 40 recommendations, the focus of AML efforts has been expanded beyond financial institutions to include other businesses and professions that are vulnerable to money laundering and terrorist financing risks. These include:

Casinos, when customers engage in financial transactions equal to or above a designated threshold. Casinos are required to identify and verify the identity of their customers, keep records of transactions, report suspicious transactions, and implement internal controls and compliance programs to prevent money laundering and terrorist financing. The designated threshold is USD/EUR 3,000 or more1.

Real estate agents, when they are involved in transactions for clients concerning buying and selling properties. Real estate agents are required to identify and verify the identity of their customers and beneficial owners, keep records of transactions, report suspicious transactions, and implement internal controls and compliance programs to prevent money laundering and terrorist financing. Real estate transactions can involve large amounts of money and complex legal arrangements that can be used to conceal the source or destination of illicit funds2.

Trust and company service providers, when they prepare for or carry out transactions for a client concerning the creation, operation or management of legal persons or arrangements. Trust and company service providers are required to identify and verify the identity of their customers and beneficial owners, keep records of transactions, report suspicious transactions, and implement internal controls and compliance programs to prevent money laundering and terrorist financing. Trust and company service providers can facilitate the misuse of legal persons or arrangements, such as shell companies or trusts, to hide the true ownership and control of assets or funds3.

The other option, dealers in art, when they engage in any cash transaction with a customer at or above a designated threshold, is not covered by the FATF 40 recommendations. However, dealers in precious metals and stones are covered when they engage in any cash transaction with a customer at or above a designated threshold of USD/EUR 15,000 or more. Dealers in art may be subject to national or regional regulations that impose AML obligations on them, depending on the jurisdiction.

References:

FATF Recommendation 22: Designated Non-Financial Businesses and Professions: Customer Due Diligence

FATF Recommendation 23: Designated Non-Financial Businesses and Professions: Other Measures

FATF Recommendation 24: Transparency and Beneficial Ownership of Legal Persons

[FATF Recommendation 25: Transparency and Beneficial Ownership of Legal Arrangements]

an employee who avoids taking periodic vacations despite having accrued vacation time may be trying to conceal fraudulent or illegal activities that would be exposed in their absence. This is a common red flag for internal fraud and money laundering, as it indicates a lack of segregation of duties, internal controls, and oversight. Employees who engage in such behavior may also exhibit other signs of stress, defensiveness, or secrecy.

References:

Learn about red flags for internal fraud, section “An employee may be a higher internal fraud risk when a combination of the following red flags are present”, bullet point 1: “Unwilling to share duties or take leave.”

Money Laundering Red Flags | Key Behaviours and Indicators, section “Employee Red Flags”, bullet point 1: “Avoiding taking holidays or time off work.”

Top 10 AML Red Flags: Warning Signs and Financial Risks, section “AML Red Flags Categories”, sub-section “Employee Red Flags”, bullet point 1: “Avoiding taking vacations or sick leaves.”

An effective anti-money laundering training program should include real-life money laundering examples to illustrate the concepts and strategies for detecting and preventing money-laundering activity. Real-life examples can help employees to understand the risks, methods, indicators, and impacts of money laundering, as well as the roles and responsibilities of different staff members in combating it. Real-life examples can also enhance the engagement, retention, and application of the knowledge gained from the training program.

References: = The main references for this question are the following sources:

The document titled “Anti-Money Laundering Awareness Training” published by ACAMS. You can access it by clicking here. This document states that “ACAMS AML General Awareness Training equips employees with knowledge of basic anti-money laundering (AML) principles” and that it is “based on real-life industry scenarios with interactive content to help learning stick”.

The document titled “Anti-Money Laundering (AML) Training” published by LIMRA. You can access it by clicking here. This document states that “LIMRA’s AML training program provides training for insurance and securities producers and home office employees” and that it “uses real-life scenarios to help learners understand how to apply AML principles to their everyday work”.

2.4 Senior Management Approval

The bank's internal policies should indicate whether, for any one or more among these categories, Senior

Management must approve entering into new relationships.

Relationships with Politically Exposed Persons may only be entered into with the approval of Senior Management.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, the Financial Action Task Force (FATF) is an inter-governmental body that sets the global standards for anti-money laundering and counter-terrorist financing (AML/CTF). The FATF also monitors the compliance and implementation of its recommendations by its members and other jurisdictions. To enhance its global reach and effectiveness, the FATF works with nine FATF-style regional bodies (FSRBs) that cover different regions of the world. These FSRBs have similar objectives and functions as the FATF, but they also take into account the specific characteristics and challenges of their regions. Two ways that FSRBs influence AML/CTF standards within their respective regions are:

They issue typologies specific to their geographical region. Typologies are reports or studies that analyze the methods, trends, and patterns of money laundering and terrorist financing in a particular sector, industry, or region. FSRBs produce typologies that reflect the regional context and risks of their members and provide guidance and best practices to address them. For example, the Asia/Pacific Group on Money Laundering (APG) has issued typologies on trade-based money laundering, wildlife trafficking, and virtual assets in the Asia-Pacific region12.

They administer mutual evaluations of participating members. Mutual evaluations are peer reviews that assess the level of compliance and effectiveness of a country’s AML/CTF system against the FATF standards. FSRBs conduct mutual evaluations of their members and publish the results and recommendations in detailed reports. These reports help identify the strengths and weaknesses of each country’s AML/CTF regime and provide a basis for follow-up actions and technical assistance. For example, the Caribbean Financial Action Task Force (CFATF) has conducted mutual evaluations of its members such as Barbados, Jamaica, and Trinidad and Tobago34.

References:

Anti-Money Laundering Specialist (the 6th edition) study guide, page 27

APG website, section on Typologies

Anti-Money Laundering Specialist (the 6th edition) study guide, page 28

CFATF website, section on Mutual Evaluations

The compliance officer is the person who has the day-to-day responsibility of communicating and reinforcing the established anti-money laundering (AML) compliance culture and program within the organization. The compliance officer is also responsible for overseeing the implementation, maintenance, and improvement of the AML policies, procedures, controls, and training. The compliance officer should have sufficient authority, independence, and resources to perform their duties effectively and report to senior management and the board of directors on the status and effectiveness of the AML program.

References:

1, Chapter 4: Designing and Implementing an AML Compliance Program

2, FFIEC BSA/AML Examination Manual, Compliance Program - Overview

3, FinCEN Advisory, Guidance on Promoting a Culture of Compliance

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 strengths and weaknesses of each country’s AML/CFT system, and provide a basis for technical assistance and follow-up actions4.

References:

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

 According to the CAMS Study Guide, the most commonly used risk criteria for assessing the money laundering and terrorist financing risks are country risk, customer risk, and product and service risk. These criteria are based on the FATF Recommendations and the Basel Committee’s guidance on sound management of risks related to money laundering and financing of terrorism.

Country risk refers to the level of exposure to potential money laundering and terrorist financing activities in a specific jurisdiction, based on factors such as the quality of its AML/CFT regime, its level of corruption, its political and economic stability, its involvement in illicit activities, and its cooperation with international bodies.

Customer risk refers to the level of exposure to potential money laundering and terrorist financing activities associated with a specific customer or customer segment, based on factors such as the nature and purpose of the business relationship, the source and destination of funds, the type and volume of transactions, the customer’s profile and behavior, and the customer’s geographic location.

Product and service risk refers to the level of exposure to potential money laundering and terrorist financing activities associated with a specific product or service offered by a financial institution, based on factors such as the complexity, transparency, anonymity, and accessibility of the product or service, the delivery channels and payment methods used, and the degree of oversight and monitoring applied.

Reputation risk is not a risk criterion for assessing the money laundering and terrorist financing risks, but rather a potential consequence of failing to manage those risks effectively. Reputation risk refers to the potential damage to the public trust and confidence in a financial institution due to its involvement or association with money laundering and terrorist financing activities, whether directly or indirectly.

References:

CAMS Study Guide, 6th Edition, Chapter 2: Risk Assessments, pp. 41-461

FATF Recommendations, Recommendation 1: Assessing Risks and Applying a Risk-Based Approach2

Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 2017, pp. 9-143

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.

References:

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

A comprehensive risk analysis is the first and most important step in developing an effective anti-money laundering program. A risk analysis helps a financial institution identify and assess its exposure to money laundering and terrorist financing risks, based on its products, services, customers, geographic locations, and other factors. A risk analysis also enables a financial institution to tailor its policies, procedures, controls, and training to mitigate the specific risks it faces. A risk analysis should be conducted periodically and updated as necessary to reflect changes in the institution’s risk profile.

References:

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.1: Risk-Based Approach, p. 29-30

ACAMS Risk Assessment, What is Anti-Money Laundering (AML) Risk Assessment?

How to Conduct an AML Risk Assessment - Assess Key Risk Drivers

Reviewing parameter settings based on the latest risk assessment should be included in the evaluation of system settings for anti-money laundering alert surveillance. This is because parameter settings determine the thresholds and criteria for generating alerts based on the risk profile of the customers, products, services, channels, and jurisdictions involved in the transactions. A risk assessment is a periodic and comprehensive analysis of the potential money laundering and terrorist financing risks faced by an organization, and it should inform the design and implementation of an effective anti-money laundering program, including the alert surveillance system. By aligning the parameter settings with the risk assessment, an organization can ensure that the system is capturing the most relevant and high-risk transactions, and reducing the number of false positives or irrelevant alerts.

References:

CAMS Study Guide 6th Edition, page 37-38.

Implementing AML Transaction Monitoring Systems: Critical Considerations, page 2-3.

3 techniques to improve AML transaction monitoring strategies, page 2.

The primary international authoritative body that designates sanctions is the United Nations (UN). The UN Security Council has the power to impose sanctions under Chapter VII of the UN Charter, which deals with threats to the peace, breaches of the peace, and acts of aggression. The UN sanctions are legally binding on all UN member states and aim to maintain or restore international peace and security. The UN sanctions can target individuals, entities, groups, sectors, or countries, and can include measures such as arms embargoes, travel bans, asset freezes, trade restrictions, or diplomatic isolation. The UN sanctions are implemented and enforced by the member states, with the assistance of the UN Secretariat and other specialized agencies. The UN sanctions are periodically reviewed and adjusted by the Security Council, based on the reports of the sanctions committees and expert panels.

References:

1: UN Sanctions1

2: UN Charter, Chapter VII2

3: ACAMS Study Guide for the CAMS Certification Examination3

 the specialist should inform the bank’s senior legal advisor of the situation and seek guidance on how to handle the legal request and the internal memos. The specialist should not take any action that could compromise the integrity of the legal request, the bank’s anti-money laundering program, or the specialist’s own professional obligations. The specialist should not place the memos in his personal files, as this could be seen as hiding or tampering with evidence. The specialist should not ask the bank president to document his instructions, as this could create a conflict of interest or a perception of undue influence. The specialist should not call the law enforcement agent and suggest he modify the legal request, as this could be seen as interfering with the investigation or tipping off the account holder.

References:

Legal Sector Affinity Group (LSAG) Anti-Money Laundering Guidance for the Legal Sector (January 2021) p. 1321

ACAMS: Certified Anti-Money Laundering Specialist | ACAMS2

Anti-Money Laundering – The Law Society of Singapore3

According to the Anti-Money Laundering Specialist (the 6th edition) resources, PEPs are individuals who are or have been entrusted with prominent public functions, such as heads of state, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, or important political party officials1. PEPs pose a higher risk of money laundering and corruption due to their position and influence2. Therefore, financial institutions should apply enhanced due diligence and ongoing monitoring measures when dealing with PEPs as customers3. This includes:

Conducting enhanced ongoing monitoring of the business relationship to detect and report any suspicious transactions or activities4. This may involve more frequent reviews, higher-level approvals, or increased documentation of the transactions and the rationale behind them.

Taking adequate measures to establish the source of wealth and source of funds which are involved in the business relationship or occasional transaction. This may involve verifying the origin, legitimacy, and purpose of the funds, as well as the economic activities and assets of the PEP.

The other two options are incorrect because:

Expedite due diligence when a PEP is pre-approved by a member of senior management is not a recommended course of action, as it may compromise the quality and integrity of the due diligence process. Pre-approval by senior management does not exempt the financial institution from conducting thorough and timely due diligence on the PEP and the business relationship.

Obtain appropriate senior management approval for establishing a business relationship with a PEP from a high risk country is a necessary but not sufficient course of action, as it does not address the ongoing monitoring and source of funds aspects of the PEP risk management. Senior management approval is required for establishing or continuing a business relationship with a PEP, regardless of the country of origin or residence of the PEP.

References:

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 83 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 84 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 85 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88

The company regularly understating the value of goods exported is an indicator of possible money laundering because it may suggest that the company is involved in trade-based money laundering (TBML), which is the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins or finance their activities. One of the common TBML techniques is over-invoicing or under-invoicing, which involves manipulating the price, quantity or quality of goods or services in order to transfer value between the importer and exporter. By understating the value of goods exported, the company may be transferring funds to a foreign counterpart who is either a co-conspirator or a third-party money launderer, who will then pay the company the difference in cash or through other means. This way, the company can avoid currency reporting requirements, evade taxes, conceal the source and destination of funds, and integrate the illicit proceeds into the formal economy.

References:

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Money Laundering Risks and Methods, page 381

Trade-Based Money Laundering: Trends and Developments, FATF-Egmont Group, December 2020, page 282

Trade-Based Money Laundering and Terrorist Financing, Global Investigations Review, September 20233

The payment received from an account in an offshore jurisdiction and the lack of beneficial ownership details for the originating account are two money laundering red flags. Offshore jurisdictions are often used by money launderers to hide the source and destination of their funds, as they typically have low transparency and weak regulatory oversight. The absence of beneficial ownership information makes it difficult to identify the true owners and controllers of the funds, and to assess the legitimacy and risk of the transaction. These factors increase the possibility that the payment is related to money laundering, tax evasion, or other illicit activities.

References:

ACAMS CAMS Certification Study Guide, 6th Edition, page 33

ACAMS CAMS Certification Exam Outline, 6th Edition, Domain 1, Task 1.2

ACAMS CAMS Certification Video Training Course, Module 1, Lesson 1.2

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 315

According to the Financial Action Task Force (FATF) 40 Recommendations, financial institutions should obtain senior management approval before establishing new correspondent banking relationships1. This is to ensure that the financial institution has assessed the money laundering and terrorist financing risks associated with the respondent institution and has applied appropriate due diligence measures. The FATF also requires financial institutions to gather sufficient information about the respondent institution, its business activities, its reputation, its supervision, and its anti-money laundering and counter-terrorist financing policies and procedures1. Additionally, the FATF recommends that financial institutions document the respective responsibilities of each institution and prevent the use of their accounts by shell banks1.

References:

1: Guidance on Correspondent Banking Services, FATF, 2016

 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.

References:

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

A financial intelligence unit (FIU) is a national body or government agency that collects, analyzes, and disseminates financial information related to potential financial crimes, such as money laundering and terrorist financing. One of the core functions of an FIU is to receive disclosures filed by reporting entities, such as banks, money service businesses, casinos, and other obliged entities, that are required to report suspicious or unusual financial activity. These disclosures, also known as suspicious activity reports (SARs) or suspicious transaction reports (STRs), provide valuable intelligence for the FIU and other competent authorities to identify and investigate financial crimes and trace illicit funds. The other statements do not describe the duties of an FIU, but rather the roles of other agencies or bodies, such as the Office of Foreign Assets Control (OFAC) in the US, which administers and enforces economic and trade sanctions, or the Financial Action Task Force (FATF), which sets international standards for anti-money laundering and counter-terrorist financing (AML/CFT) supervision and regulation.

References:

ACAMS CAMS Certification Video Training Course, Module 1: Risks and Methods of Money Laundering and Terrorist Financing, Lesson 1: The Financial Intelligence Unit

The Financial Intelligence Unit: Role of the FIU and International Cooperation, Financial Crime Academy

What We Do, Financial Crimes Enforcement Network (FinCEN)

Sanctions screening and transaction monitoring rules are two of the most common controls that FIs use to identify suspicious money-laundering activity. Sanctions screening is the process of checking customers, transactions, and counterparties against various lists of sanctioned individuals, entities, and countries issued by national and international authorities. Sanctions screening helps FIs to avoid doing business with or facilitating the activities of those who are involved in terrorism, proliferation, human rights violations, or other criminal activities. Transaction monitoring rules are the criteria or scenarios that FIs use to detect unusual or potentially suspicious patterns of transactions or behaviors of customers or accounts. Transaction monitoring rules help FIs to identify transactions that deviate from the expected norms, such as large cash deposits, frequent wire transfers, or transactions with high-risk jurisdictions. Transaction monitoring rules also help FIs to comply with their reporting obligations, such as filing Suspicious Activity Reports (SARs) or Currency Transaction Reports (CTRs).

References: = ACAMS CAMS Certification Video Training Course, Chapter 4: Developing an Effective Anti-Money Laundering Program, Section 4.2: Customer Identification Program (CIP) and Customer Due Diligence (CDD); Money laundering and terrorist financing, Section: Anti Money Laundering (AML) regulations; The Three Stages Of Money Laundering And How Money Laundering Works, Section: How to Prevent Money Laundering.

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.

payments received on the account that reference unknown companies in the instructions indicate a possible attempt to obscure the source or purpose of the funds. This could be a sign of money laundering, tax evasion, fraud, or other illicit activities. Such payments should be referred to AML Investigations for further review and verification of the identity and legitimacy of the companies involved.

References:

FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones, page 18, paragraph 57: “The dealer should also pay attention to the information provided by the customer on the source and origin of the funds or assets, and verify it where possible. For example, the dealer should be alert to situations where the customer provides vague, incomplete or inconsistent information about the source and origin of the funds or assets, or where the information provided does not match with the customer’s profile or business activity.”

Risk-Based Approach For Dealers in Precious Metals and Stones (DPMS), section “Business-based risk approach”, sub-section “2- Geographical location”: “You must also assess the geographical location of your business and the countries you deal with. You must be aware of the countries that are high-risk or non-cooperative jurisdictions as per the FATF recommendations. You must also consider the countries that are subject to sanctions, embargoes, or similar measures issued by the United Nations, the European Union, or any other relevant organization. You must also be careful of the countries that are known to have significant levels of corruption, organized crime, or terrorist activity.”

What are the Risks of Money Laundering for Precious Metals Dealers?, section “Money Laundering Red Flags for DPMS”, bullet point 4: “The customer provides vague, incomplete, or inconsistent information about the source and origin of the funds or assets.”

According to the Third European Union Money Laundering Directive (3rd AMLD), a politically exposed person (PEP) is an individual who is or has been entrusted with prominent public functions, such as heads of state, government ministers, judges, senior military officers, or members of parliament1. The 3rd AMLD requires institutions and persons covered by the Directive to apply enhanced customer due diligence measures when dealing with PEPs residing in another Member State or in a third country, in order to prevent money laundering and terrorist financing risks1. The 3rd AMLD also specifies that a person who is no longer entrusted with a prominent public function shall not be considered a PEP after a period of at least one year has elapsed since that person left office, unless the institution or person covered by the Directive has knowledge or reason to believe that the person is still exposed to specific risks2. However, the Commission Directive 2006/70/EC, which lays down implementing measures for the 3rd AMLD, extends this period to at least two years, and allows Member States to extend it further, depending on the level of risk and the type of prominent public function involved3.

References:

1: Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing

2: Article 3(8) of Directive 2005/60/EC

3: Article 2 of Commission Directive 2006/70/EC of 1 August 2006 laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of ‘politically exposed person’ and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis

Economic sanctions are a tool that governments and multi-national bodies can use to prevent the proliferation of weapons of mass destruction (WMDs) by imposing restrictions on trade, financial transactions, travel, or other activities with targeted countries, entities, or individuals that are involved or suspected of being involved in WMD programs. Economic sanctions aim to disrupt the supply chains, funding sources, and incentives for developing or acquiring WMDs, as well as to deter and punish any violations of international norms and obligations regarding WMDs. Economic sanctions can be imposed unilaterally by a country or multilaterally by a group of countries or an international organization, such as the United Nations, the European Union, or the Financial Action Task Force.

References:

ACAMS CAMS Certification Video Training Course, Module 4: Preventing the Proliferation of Weapons of Mass Destruction, Lesson 4.2: Sanctions1

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4: Preventing the Proliferation of Weapons of Mass Destruction, Section 4.2: Sanctions2

According to the FATF Guidance on Private Sector Information Sharing, FIs should establish sufficient safeguards concerning the confidentiality of information shared for AML purposes, both within the same financial group and between FIs not belonging to the same group. These safeguards include ensuring that the information is shared only with authorized personnel who have a need to know, that the information is used only for the intended AML purpose, and that the information is protected from unauthorized access, disclosure, or misuse. FIs should also comply with the applicable legal and regulatory requirements on data protection and privacy, and respect the rights and interests of the customers whose information is shared1.

References:

1: FATF Guidance on Private Sector Information Sharing1

OFAC-issued regulations apply to all U.S. persons, including U.S. banks, bank holding companies, and non-bank subsidiaries, regardless of where they are located. This means that foreign subsidiaries of U.S. banks and U.S. branches of a foreign bank are also subject to OFAC compliance. However, intermediaries transacting with U.S. banks, foreign banks with U.S. customers, and foreign import-export companies are not necessarily subject to OFAC regulations, unless they are involved in transactions that involve U.S. jurisdiction or U.S. persons.

References:

Basic Information on OFAC and Sanctions

OFAC Consolidated Frequently Asked Questions

Office of Foreign Assets Control — Overview

According to the Anti-Money Laundering Specialist (the 6th edition) resources, electronic funds transfers (EFTs) are transactions that involve the movement of funds electronically from one account to another, either within the same financial institution or across different institutions, domestically or internationally1. EFTs can be used for legitimate purposes, such as facilitating trade, commerce, and remittances, but they can also be exploited by money launderers to conceal the origin, ownership, and destination of illicit funds2. Some of the indicators of money laundering associated with using EFTs are:

Funds transfers to or from a financial secrecy haven without an apparent business reason. Financial secrecy havens are jurisdictions that offer a high degree of banking secrecy, low or no taxes, lax regulation and supervision, and weak or non-existent anti-money laundering and counter-terrorist financing (AML/CTF) measures3. Money launderers may use these havens to hide their illicit funds, evade taxes, and avoid scrutiny from authorities. Funds transfers to or from these havens without a clear or plausible explanation may indicate an attempt to launder money or finance terrorism.

Funds transfers are received or sent from the same person to or from different accounts. This may indicate a layering technique, which is the process of moving funds through multiple accounts, institutions, or jurisdictions to obscure the audit trail and the source and ownership of the funds4. Money launderers may use this technique to avoid detection, reporting, or freezing of their funds by authorities or financial institutions.

Payment or receipts with no apparent link to legitimate contracts, goods or services. This may indicate a trade-based money laundering technique, which is the process of using trade transactions to disguise the movement of illicit funds, either by over- or under-invoicing, misrepresenting the quantity or quality of goods, or falsifying documents. Money launderers may use this technique to transfer value across borders, evade taxes or customs duties, or justify the movement of funds that have no legitimate origin or purpose.

The other option is incorrect because:

Regular and frequent transfers from the account of a large company said to be payment for goods bought on credit is not necessarily an indicator of money laundering associated with using EFTs. This may be a normal business practice for some companies that have a high volume of transactions or a long-term relationship with their suppliers or customers. However, this may also be a red flag if the company is not well-known, has no physical presence, has no apparent business activity, or is located in a high-risk jurisdiction. Therefore, this option requires further investigation and verification before concluding that it is an indicator of money laundering.

References:

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 104 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 105 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 107 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 106 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 108

 According to the Anti-Money Laundering Specialist (the 6th edition) study guide, when a financial institution receives a law enforcement inquiry, it should cooperate as much as possible and respond to all formal requests for information, unless there is a valid objection that can and should be made1. The institution should also file a suspicious transaction report (STR) if the inquiry or the customer’s activity triggers any red flags or indicators of money laundering or other financial crimes2. Additionally, the institution should monitor the account for suspicious activity and review the money laundering risk posed by the account, as these are part of the ongoing due diligence and risk assessment processes3. Closing the account immediately is not a recommended action, as it may alert the customer or interfere with the investigation4.

References:

1: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 121

2: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 122

3: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 123

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 124

A financial institution should examine the country or location where the customer is from or does business, the type and size of the business the customer runs, and the legal structure of the customer’s business, because these factors can indicate the level of money laundering risk associated with the customer. For example, some countries or locations may have weak anti-money laundering laws or high levels of corruption, some types or sizes of businesses may be more prone to generating or concealing illicit funds, and some legal structures may be more complex or opaque than others, making it harder to identify the beneficial owners or controllers of the customer.

References:

ACAMS CAMS Certification Video Training Course1, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 2: Know Your Customer (KYC) and Customer Due Diligence (CDD)

ACAMS CAMS Certification Study Guide2, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.2: Know Your Customer (KYC) and Customer Due Diligence (CDD), Pages 42-44

The first line training program is the training that is provided to the employees who are directly involved in the day-to-day operations of the business, such as sales, customer service, or compliance staff1. The first line training program should cover the essential knowledge and skills that are required for the employees to perform their roles effectively and in compliance with the anti-money laundering and counter-terrorism financing (AML/CFT) policies and procedures of the organization2. The first line training program should also be updated regularly to reflect any changes in the business environment, the regulatory framework, the customer base, the products and services, or the risk assessment of the organization2.

Among the four activities listed, the one that would require an update to the first line training program is the expansion to customer segments that will utilize newly established products. This is because the new customer segments and products may pose different or higher AML/CFT risks than the existing ones, and the employees need to be aware of these risks and how to mitigate them. For example, the new customer segments may include politically exposed persons, non-resident customers, or high-net-worth individuals, who may have higher exposure to corruption, tax evasion, or fraud risks3. The new products may include prepaid cards, mobile payments, or cryptocurrencies, which may have higher vulnerability to money laundering, terrorist financing, or cybercrime risks. Therefore, the first line training program should be updated to include the relevant information and guidance on how to identify, verify, monitor, and report these new customer segments and products, and how to apply the appropriate customer due diligence and transaction monitoring measures2.

The other three activities do not necessarily require an update to the first line training program, unless they involve significant changes in the AML/CFT policies and procedures of the organization. The implementation of a new system that provides information for monitoring customer accounts may improve the efficiency and effectiveness of the existing AML/CFT processes, but it does not change the nature or level of the AML/CFT risks. The maintenance of regulatory requirements for onboarding documentation collections of a customer base is a routine and ongoing task that should already be covered by the existing first line training program. The onboarding of a new customer type which was previously reviewed and risk rated does not introduce any new AML/CFT risks, as long as the risk rating and the corresponding controls are consistent with the organization’s risk appetite and policy.

References:

1: What is First Line of Defense? | Definition and Overview

2: Training and Awareness | FATF

3: Politically Exposed Persons (Recommendations 12 and 22) | FATF

: Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers | FATF

The Egmont Group is a global network of Financial Intelligence Units (FIUs) that aims to enhance the capabilities and cooperation of its members in combating money laundering, terrorist financing, and other financial crimes. The Egmont Group supports its FIU members by helping them to expand and systematize the exchange of financial intelligence and information, improve expertise and capabilities of personnel, and enable secure communication with one another12. The Egmont Group does not issue due diligence models for financial institutions, as this is the responsibility of national regulators and standard-setting bodies. The Egmont Group does not issue strategic products for law enforcement agencies and FIUs, as this is the role of other international organizations such as the Financial Action Task Force (FATF) and the United Nations Office on Drugs and Crime (UNODC). The Egmont Group does not expand the ability of FIUs to enforce laws and exchange information globally, as this depends on the legal and operational frameworks of each FIU and the bilateral or multilateral agreements they have with other FIUs.

References:

Egmont Group

Working Groups - Egmont Group

Overview of the Egmont Group of Financial Intelligence Units

The Egmont Group of Financial Intelligence Units | FinCEN.gov

Egmont Group - Qatar Financial Information Unit

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 .

References:

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

The bank’s internal investigation is aimed at understanding the activities and legitimacy of the client who wants to open multiple accounts for their swimming pool company, with each account assigned to a debit card for the company’s technicians. The purpose of these accounts, as stated by the client, is to facilitate the purchase of pool chemicals. To conduct a thorough investigation, the bank can consider several available sources of information. Let’s analyze each option:

A. Client’s credit bureau report: The client’s credit bureau report primarily contains information related to the individual’s credit history, including loans, credit cards, payment patterns, and any financial obligations. While this information may be useful in assessing the client’s creditworthiness, it may not provide substantial insight into the specific activities and legitimacy of the swimming pool company or the need for multiple accounts.

B. Local law enforcement investigation report: The local law enforcement investigation report may contain information about any criminal or suspicious activities involving the client or the swimming pool company, such as fraud, money laundering, tax evasion, or other offenses. However, this source may not be readily available to the bank, as it may require a formal request or a subpoena to access. Moreover, the report may not be comprehensive or up-to-date, as it may depend on the scope and progress of the law enforcement investigation.

C. Interview swimming pool technicians and chemical suppliers: The interview with the swimming pool technicians and chemical suppliers may provide some information about the nature and frequency of the transactions involving the pool chemicals, such as the amount, the price, the payment method, and the delivery mode. However, this source may not be reliable or verifiable, as the technicians and suppliers may be biased or influenced by the client. Moreover, the interview may not be feasible or practical, as it may require the bank to contact and arrange meetings with multiple parties, which may be time-consuming and costly.

D. Internet search showing how such business are typically operated: The internet search showing how such business are typically operated may provide some information about the industry standards and best practices for running a swimming pool company, such as the average number of technicians, the typical expenses, the common suppliers, and the expected revenue. This source may be useful in comparing and contrasting the client’s business model and operations with the industry norms and identifying any red flags or anomalies. Moreover, this source may be easily accessible and inexpensive, as it may only require the bank to use a web browser and a search engine.

Therefore, the best available source for the bank’s internal investigation on this client’s activities is option D.

References:

1: CAMS Certification Package - 6th Edition | ACAMS 2: CAMS Certifications: How to Get CAMS Certified | ACAMS 3: ACAMS CAMS Certification Video Training Course - Exam-Labs 4: Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition) 5: Bank’s Internal Investigation on Client’s Activities | CAMS Exam Prep 6: South Florida: Couple arrested for more than $2 million fraud 7: Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations

A customer visiting multiple branches of the MSB on the same day in order to transfer funds internationally is a potential indicator of structuring, which is a technique used by money launderers to avoid reporting thresholds or detection by authorities. A customer attempting to buy money orders under $3,000 USD in cash multiple times a day is also a possible sign of structuring, as well as an attempt to evade the identification and recordkeeping requirements for MSBs. Both scenarios should be included in the procedures for further review by the AML Officer.

References:

BSA/AML Risk Assessment for Money Services Businesses (MSBs), section “Risk Factors”, sub-section “Structuring”: “Structuring is the practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by the BSA and/or 31 CFR Chapter X. Structuring is illegal and is often indicative of money laundering or other illicit activity.”

Money Services Business (MSB) — AML Compliance Guide, section “AML Compliance Requirements for MSBs”, sub-section “Identification and Recordkeeping”: “MSBs must verify the identity of any person who conducts a transaction of $3,000 or more. They must also keep records of the transaction, including the name, address, date of birth, and identification number of the customer, as well as the amount, date, and method of payment.”

Implementing a sound customer due diligence (CDD) program is the most effective way to prevent money laundering through financial institutions, according to experts. CDD is the process of identifying and verifying the identity of customers and assessing their risk profile, source of funds, and expected activity. CDD helps financial institutions to detect and prevent money laundering by enabling them to know their customers, monitor their transactions, and report any suspicious or unusual behavior. CDD is also a key requirement of the international standards and best practices for anti-money laundering and combating the financing of terrorism (AML/CFT), such as the Financial Action Task Force (FATF) Recommendations and the Basel Committee on Banking Supervision (BCBS) Guidelines.

The other options are not as effective as CDD, as they are either too narrow or too broad in scope. Ensuring that transaction monitoring systems can identify terrorist financing is important, but it does not address the broader issue of money laundering, which may involve other types of criminal proceeds or activities. Collecting information on beneficial owners and foreign customers is a part of CDD, but it is not sufficient by itself, as it does not cover the risk assessment and ongoing monitoring aspects of CDD. Instituting a policy prohibiting the acceptance of funds intended for terrorist financing is a good practice, but it is not a preventive measure, as it relies on the assumption that the funds are already identified as such, which may not be the case.

References:

Customer Due Diligence - FATF-GAFI.ORG

Sound management of risks related to money laundering and financing of terrorism - Bank for International Settlements

CAMS Study Guide 6th Edition, page 36-37.

As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called "Specially Designated Nationals" or "SDNs." Their assets are blocked and U.S. persons are generally prohibited from dealing with them. So it's covering all

According to the CAMS Study Guide, page 173, “If an independent investigation provides grounds to interview the employee, the employee can be interviewed and, if necessary, terminated, but not advised that he or she is under investigation by law enforcement.” This is because informing the employee of the law enforcement investigation could compromise the integrity of the case and potentially expose the institution to legal liability. Therefore, option B is the correct answer.

References:

CAMS Study Guide, page 1731

CAMS Exam Questions and Free Practice Test, Question 2872

The USA PATRIOT Act is a comprehensive legislation that was enacted in 2001 to enhance the powers and tools of the US authorities to combat money laundering, terrorist financing, and other threats to the national security and the integrity of the financial system. The USA PATRIOT Act contains several provisions that affect the relationship between US banks and foreign banks that maintain correspondent accounts in the US.

One of these provisions is Section 319, which allows the US authorities to seize the funds of a foreign bank held with a US bank, if the foreign bank refuses to comply with a subpoena or a request for records related to the correspondent account. This provision is intended to prevent foreign banks from using their correspondent accounts in the US to facilitate transactions involving tainted funds, such as proceeds of crime, funds intended to support terrorism, or funds subject to sanctions or asset freezing orders. Section 319 also requires US banks to maintain records of the owners and agents of foreign banks that have correspondent accounts with them, and to terminate such accounts if requested by the US authorities.

Therefore, if a foreign bank maintains a correspondent account in the US, and the US authorities find out that the account has been used to facilitate a transaction involving tainted funds, the US authorities can seize the funds of the foreign bank held with the US bank, under the authority of the USA PATRIOT Act.

References:

CAMS Study Guide - 6th Edition, Chapter 1, Section 1.2, page 10

USA PATRIOT Act, Section 319, page 55-57

The USA PATRIOT Act: A Legal Analysis, Section III, page 9-10

[The USA PATRI

Wash trading is the term for trading through multiple accounts, where an individual generates offsetting profits and losses and transfers of positions through accounts that do not appear to be commonly controlled. Wash trading is a form of market manipulation that creates artificial trading activity and volume, and may be used to evade taxes, inflate prices, or launder money. Wash trading can also involve the use of third parties or intermediaries to conceal the true identity and source of funds of the trader.

References: = The main references for this question are the following sources:

The document titled “Money Laundering and Terrorist Financing Typologies and Trends in Canadian Securities Dealers” published by the Investment Industry Regulatory Organization of Canada (IIROC) in December 2019. You can access it by clicking here. This document states that “Wash trading is a form of market manipulation where an individual simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. Wash trading is illegal under securities law because it misleads investors and regulators about the true supply and demand of the securities involved. Wash trading can also be used to evade taxes, inflate prices, or launder money.”

The document titled “Market Manipulation” published by the Financial Industry Regulatory Authority (FINRA). You can access it by clicking here. This document states that “Wash sales are a form of market manipulation in which an investor simultaneously sells and buys the same security to create misleading, artificial activity in the marketplace. Wash sales are illegal under Section 9(a)(1)(A) of the Securities Exchange Act of 1934. Wash sales can be used to manipulate the price of a security, evade taxes, or launder money.”

 the compliance officer should cooperate with the law enforcement investigation, but only after receiving a formal written request that specifies the scope and purpose of the information sought. This is to ensure that the compliance officer complies with the legal and regulatory obligations of the bank, such as confidentiality, privacy, and data protection. The compliance officer should also document the request and the information provided, and report the incident to the senior management and the board of directors as appropriate.

References:

FFIEC BSA/AML Assessing the BSA/AML Compliance Program - BSA Compliance Officer, section “BSA Compliance Officer”, paragraph 3: “The BSA compliance officer is responsible for ensuring that the bank’s BSA/AML compliance program is implemented effectively, including timely updates in response to changes in regulations or business activities, and for managing all aspects of the BSA/AML compliance program. The BSA compliance officer is also responsible for ensuring that the bank’s BSA/AML compliance program is communicated to all personnel and that adequate training is provided to appropriate personnel.”

Guidelines on the role of AML/CFT compliance officers, section “Guidelines on the role of AML/CFT compliance officers”, paragraph 36: “The AML/CFT compliance officer should ensure that the institution cooperates with the competent authorities, including by providing them with all the information they require in a timely manner, in accordance with the applicable legal and regulatory framework.”

Anti-Money Laundering Compliance Officer Job Description, section “Responsibilities of an AML Compliance Officer”, bullet point 6: “Cooperate with law enforcement and regulatory bodies as required.”

This action is the most appropriate because it demonstrates the local manager’s responsibility and accountability for the sanctions compliance program. Sanctions screening is an important part of the Know Your Customer (KYC) and Anti-Money Laundering (AML) processes, as it helps to identify and prevent transactions with sanctioned individuals or entities, which could expose the financial institution to legal, regulatory, and reputational risks. Failing to perform sanctions screening could result in violations of sanctions laws and regulations, which could lead to fines, penalties, sanctions, or even criminal prosecution. Therefore, the local manager should immediately inform senior management of the issue, so that they can take corrective actions, such as implementing screening procedures, conducting a risk assessment, reviewing existing customers, reporting any potential violations, and providing training and guidance to the staff.

The other actions are not appropriate because they either do not address the root cause of the problem, or they could worsen the situation. Starting screening new customers without informing senior management could create a false sense of compliance, and it could also miss the existing customers who may be sanctioned. Immediately informing the regulators without informing senior management could undermine the trust and communication within the organization, and it could also trigger an investigation or enforcement action before the issue is resolved internally. Doing nothing because the department only handles a very small number of mortgages could be a sign of negligence or indifference, and it could also expose the financial institution to significant risks, as even one transaction with a sanctioned party could have serious consequences.

References:

CAMS Certification Package - 6th Edition | ACAMS, Chapter 4: Developing and Implementing an AML Training Program, pp. 97-98

CAMS Certifications: How to Get CAMS Certified | ACAMS, CAMS Study Guide, pp. 76-77

What is Sanctions Screening and How Does It Work? | Jumio, Introduction and Benefits of Sanctions Screening

Sanctions Screening: Challenges and Control Considerations, Background and Regulatory Expectations for Sanctions Screening

Sanction Screening: A Complete Guide | KYC AML Guide, What is Sanction Screening and Why is it Important?

The USA PATRIOT Act, enacted in 2001, is a comprehensive legislation that aims to enhance the US government’s ability to combat terrorism, money laundering, and other criminal activities. One of the aspects of the Act that has extraterritorial reach is the requirement for US financial institutions (FIs) to apply certain due diligence and reporting obligations to their correspondent accounts and private banking accounts for foreign FIs and non-US persons, respectively12. These obligations are intended to prevent foreign FIs and individuals from using the US financial system to facilitate money laundering, terrorist financing, or other illicit activities. The Act also authorizes the Secretary of the Treasury to impose special measures, such as recordkeeping, reporting, or prohibitions, on certain foreign jurisdictions, FIs, or transactions that are found to be of primary money laundering concern34. These special measures can have significant impact on the access and operations of foreign FIs and persons in the US financial market.

References:

1: USA PATRIOT Act, Title III, Subtitle A, Section 3121

2: 31 CFR 1010.610 - Due diligence programs for correspondent accounts for foreign financial institutions2

3: USA PATRIOT Act, Title III, Subtitle A, Section 3113

4: 31 CFR 1010.651 - Imposition of special measure against foreign jurisdictions, foreign financial institutions, classes of international transactions, or types of accounts of primary money laundering concern4

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, an AML training program should include the requirement that new staff receive training during employee orientation or shortly thereafter on bank procedures. This is because new staff need to be aware of the bank’s policies and procedures for complying with the money laundering regulations, such as customer due diligence, transaction monitoring, record-keeping, and reporting of suspicious activities. Training new staff as soon as possible also helps to reduce the risk of human errors or oversights that could facilitate money laundering or terrorist financing.

References:

: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 143

: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 144

: Technical factsheet Anti-money laundering (AML) training: frequently asked questions, page 1

This customer action indicates possible money laundering because it could be a sign of layering, which is the second stage of the money laundering process. Layering involves moving the illicit funds around to create distance and confusion between the source and the destination of the money. Transferring all funds to another bank on the same day of large cash deposits could be an attempt to avoid detection by the bank’s transaction monitoring system or by the authorities. It could also be a way to break the audit trail and obscure the origin of the funds.

The other customer actions are not necessarily indicative of money laundering, although they could raise some red flags depending on the context and the customer profile. Continually making weekly small cash deposits could be a sign of structuring, which is a technique to avoid reporting requirements by depositing amounts below the threshold. However, this could also be a legitimate behavior for a tutor who receives cash payments from students. Periodically initiating wire transfers to another account owned by a relative could be a sign of funneling, which is a technique to move funds between accounts that are not related to the business or personal activities of the customer. However, this could also be a legitimate behavior for a tutor who supports their family members financially. Opening a savings account and making frequent transfers from the checking account could be a sign of commingling, which is a technique to mix illicit funds with legitimate funds from a legal source. However, this could also be a legitimate behavior for a tutor who wants to save money for future expenses.

References:

CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and Methods, pp. 35-40

CAMS Certifications: How to Get CAMS Certified | ACAMS, CAMS Study Guide, pp. 28-32

ACAMS CAMS Certification Video Training Course - Exam-Labs, Module 2: Money Laundering Risks and Methods, Video 2.2: The Three Stages of Money Laundering

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 311, Answer C

 Bearer shares are unregistered equity securities owned by the possessor of the physical share documents. The issuing company does not record the identity or ownership of the shareholders, nor does it track the transfers of ownership. This means that the holder of the bearer share can claim ownership and exercise the rights associated with the share, such as voting and receiving dividends, by simply presenting the physical certificate. This also makes the transfer of ownership very easy, as it only requires the delivery of the physical document, without any formalities or intermediaries. Bearer shares are therefore attractive for those who seek anonymity, privacy, and flexibility in their corporate structures.

References:

Investopedia: Bearer Share

SuperMoney: Bearer Shares: Definition, Examples, and Implications

ACAMS: Bearer Shares

 A key risk indicator associated with terrorism financing is the link between the charity group and a known terrorist group. This indicates that the funds transferred to the charity group may be used to support the terrorist group’s activities, such as recruitment, training, propaganda, or attacks. Charities are often vulnerable to abuse by terrorist financiers, as they may operate in high-risk areas, have access to large amounts of cash, and enjoy public trust and legitimacy. Therefore, financial institutions (FIs) should conduct due diligence on the charity group, its directors, its beneficiaries, and its sources and uses of funds, and monitor the transactions for any red flags, such as unusual patterns, amounts, or destinations. FIs should also comply with the relevant sanctions and regulatory requirements, and report any suspicious or unusual activity to the authorities.

References:

1: FATF Guidance on Private Sector Information Sharing1

2: Mitigating the risks of terrorist financing | Crowe LLP3

3: ACAMS Study Guide for the CAMS Certification Examination3

A customer who is the brother of a prominent member of a foreign judiciary is considered a politically exposed person (PEP) or a family member of a PEP. PEPs are individuals who hold or have held positions of public trust or influence in a foreign country, such as heads of state, senior politicians, high-ranking military officers, judges, or executives of state-owned enterprises. PEPs pose a higher risk of money laundering, corruption, or bribery due to their access to public funds, influence over policy decisions, or connections to other powerful individuals. Therefore, financial institutions are required to perform enhanced due diligence (EDD) on PEPs and their family members, as well as monitor their transactions and activities more closely. EDD is a set of additional measures that go beyond the standard customer due diligence (CDD) to obtain more information about the customer, such as their source of wealth, source of funds, expected account activity, business relationships, and reputation. EDD also involves conducting ongoing reviews and updating the customer risk profile regularly. EDD helps the financial institution to mitigate the risks associated with PEPs and detect any signs of money laundering or other illicit activities.

References:

ACAMS Study Guide1, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pages 51-52

FATF Guidance on Politically Exposed Persons2, pages 9-10, 13-14, 17-18

Wolfsberg Group Guidance on Politically Exposed Persons3, pages 2-3, 6-7

When assessing and managing money laundering risks while operating in foreign jurisdictions different from that of the head office, an effective AML monitoring program should conform to the foreign jurisdiction policies to align with the head office policies. This ensures that the organization's AML/CFT risk management remains consistent across all jurisdictions, while allowing local compliance staff to assess and manage the risks specific to their jurisdiction. Additionally, the program should be tailored to the higher of standards between the jurisdictions, and should be consistent with the head office audits. Providing all foreign jurisdiction reports to the head office for approval is not necessary, as long as the program is consistent with the head office policies.

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

According to the Financial Action Task Force (FATF), a country's financial intelligence unit (FIU) plays a key role in safeguarding against money laundering and terrorist financing. One of the main functions of an FIU is to receive, analyze, and disseminate suspicious activity reports (SARs) submitted by financial institutions and other obligated entities. By analyzing SARs, an FIU can identify trends, patterns, and other intelligence related to money laundering and terrorist financing, which can assist in the pursuit of criminal activity. While an FIU may also generate currency transaction reports (CTRs) or other types of financial reports, these functions are not specific to safeguarding against money laundering and terrorist financing. Similarly, while monitoring monthly public statistics on the economy may be an important aspect of macroeconomic analysis, it is not a specific role of an FIU in safeguarding against money laundering and terrorist financing.

The individual responsible for setting the anti-money laundering software parameters should recommend ensuring that the alert parameters are based on risk, rather than on default software rules. This means that the software should be configured to generate alerts only when transactions or customers exhibit a high level of risk, based on factors such as the source and destination of funds, the amount and frequency of transactions, the type and purpose of the account, the customer profile and behavior, and the presence of any red flags or indicators of money laundering or terrorist financing. By aligning the alert parameters with the risk assessment of the financial institution, the software can reduce the number of false positives and focus on the most relevant and suspicious cases, thus improving the efficiency and effectiveness of the anti-money laundering staff.

References:

Setting AML Transaction Monitoring Thresholds 1, ComplyAdvantage, 2020.

Machine learning techniques for anti-money laundering (AML) analysis: a survey 2, Springer, 2018.

Anti Money Laundering (AML) Definition: Its History and How It Works 3, Investopedia, 2021.

A transaction monitoring system (TMS) is a tool that helps financial institutions detect and report suspicious activities related to money laundering, terrorist financing, and other financial crimes. A TMS needs to be implemented carefully and effectively to ensure its accuracy, reliability, and compliance with regulatory requirements.

One of the best practices for implementing a TMS is to perform systems integration testing (SIT) at key steps of development and user acceptance testing (UAT) prior to going live with the TMS. SIT is a process of verifying that the TMS can interact with other systems and data sources correctly and efficiently. UAT is a process of validating that the TMS meets the functional and operational expectations of the end-users and stakeholders.

By conducting SIT and UAT, the financial institution can identify and resolve any issues or defects in the TMS before it is deployed in the production environment. This can help avoid potential problems such as data quality issues, false positives, false negatives, system errors, performance issues, and regulatory breaches. Performing SIT and UAT can also help ensure that the TMS is aligned with the financial institution’s risk assessment, policies, procedures, and controls.

References:

Step 1 – Transaction Monitoring Implementation Best Practices

Anti-money laundering transaction monitoring system implementation considerations

ACAMS CAMS Certification Study Guide 6th Edition

According to the Certified Anti-Money Laundering Specialist (the 6th edition) Study guide, the CCO should advise the manufacturing customer that increased scrutiny of cross-border transfers may lead to delays and caution them to ensure that all necessary documentation is provided in order to facilitate a timely transfer. Additionally, the CCO should recommend that the customer contact the FATF to discuss the possibility of an independent review of the findings, as well as other options to mitigate the potential negative consequences.

 A financial institution should consult with its legal counsel before responding to a grand jury subpoena regarding a customer, as such subpoenas may involve complex legal issues and potential conflicts of interest. A grand jury subpoena is a legal order issued by a federal or state grand jury that compels a person or entity to produce documents, testify, or both, in connection with a criminal investigation. A financial institution that receives a grand jury subpoena should not disclose its existence or contents to the customer or any third party, unless authorized by law or the court, as doing so may constitute obstruction of justice or violate the secrecy rules of the grand jury. A financial institution should also assess and review all relevant information it has about the customer that is the subject of the subpoena, in accordance with its risk-based AML program, and consider filing a SAR if it identifies any suspicious activity.

References:

1: This article provides an overview of the legal and practical considerations for financial institutions when responding to subpoenas, including the types of subpoenas, the rules that apply, the confidentiality and privilege issues, and the procedural steps to follow.

2: This document provides answers to frequently asked questions regarding SARs and other AML considerations, including the question of how to handle grand jury subpoenas and other law enforcement inquiries.

According to the Basel Committee on Banking Supervision (BCBS), a sound KYC program should consist of four essential elements: (i) customer acceptance policy; (ii) customer identification; (iii) on-going monitoring of higher risk accounts; and (iv) risk management. Therefore, B and D are the correct choices among the given options. A customer acceptance policy defines the types of customers that the bank is willing to accept and the conditions for doing so. A risk management system ensures that the bank has adequate policies, procedures, and controls to identify, measure, monitor, and mitigate the risks arising from its KYC program.

References:

BCBS, Customer due diligence for banks, October 2001, p. 41

BCBS, Consolidated KYC Risk Management, October 2004, p. 42

A subpoena is a legal order that requires a person or an entity to produce documents, information, or testimony related to a legal matter. A financial intelligence unit (FIU) is a specialized unit within a financial institution that is responsible for detecting, analyzing, and reporting suspicious activities and transactions. When a bank receives a subpoena regarding one of its clients, the FIU should review the subpoena and perform a transaction review to determine if there is any evidence of money laundering, terrorist financing, fraud, or other criminal activity involving the client. The FIU should also respond fully to the subpoena by providing the requested information and documents, unless there is a valid reason to object or seek a protective order. The FIU should not adjust the client’s risk score, file a SAR, or close the client’s account based solely on the receipt of the subpoena, as these actions may be premature, inappropriate, or illegal. Adjusting the client’s risk score may require further investigation and due diligence. Filing a SAR may be unnecessary or misleading if the subpoena does not indicate any suspicious activity. Closing the client’s account may violate the bank’s contractual obligations, customer service standards, or anti-discrimination laws. Moreover, these actions may alert the client or the subject of the investigation to the existence of the subpoena, which may interfere with the legal process or jeopardize the safety of the bank or its employees.

References:

Subpoena Responses for Financial Institutions

Requests by Law Enforcement for Financial Institutions to Maintain Accounts

SUBPOENA COMPLIANCE UPDATE

[ACAMS Study Guide, 6th Edition, Chapter 5, p. 140]

The risk-based approach (RBA) is an essential foundation of the FATF Recommendations, as it allows countries, competent authorities and financial institutions to adopt a more flexible set of measures to target their resources more effectively and apply preventive measures that are commensurate to the nature of risks, in order to focus their efforts in the most effective way. The RBA is not optional, but a prerequisite for the effective implementation of the FATF Standards. The RBA requires the identification, assessment and understanding of the ML/TF risks to which the countries and FIs are exposed, and the implementation of AML/CFT measures that are proportionate and tailored to those risks. The RBA is not a “zero failure” approach, but a way to mitigate the risks in the most efficient and effective manner.

References:

FATF Recommendations, Introduction, page 11

FATF Guidance on the Risk-Based Approach to Combating Money Laundering and Terrorist Financing - High Level Principles and Procedures, page 3

Risk-based Approach (RBA), What is the Risk-based Approach (RBA)?

 A financial institution should regularly update its AML risk assessment in order to ensure that the results of the assessment are accurate and reflect the current money laundering and other illicit financial activity risks that the institution may face. This helps to ensure the institution has a comprehensive understanding of the risks associated with its activities and can implement adequate controls and procedures as necessary.

 According to the Egmont Group of Financial Intelligence Units Principles for Information Exchange Between Financial Intelligence Units, one of the channels for the exchange of information between FIUs is the Egmont Secure Web (ESW), which is a secure and encrypted communication system that allows FIUs to share information and expertise1. The ESW is accessible to all members of the FIU who have been authorized by the FIU head or his/her delegate1. The other options are not correct because:

B. Information sharing is not always conducted according to processes contained in Memoranda of Understanding (MOUs). The Egmont Group encourages FIUs to exchange information regardless of the existence of an MOU1.

C. Intelligence is not shared via messaging applications. This would not be a secure or reliable way of exchanging sensitive information.

D. Investigators are not allowed to request information from a foreign FIU directly. Requests for information must be made through the FIU of the requesting country1.

References:

Egmont Group of Financial Intelligence Units Principles for Information Exchange Between Financial Intelligence Units

The Egmont Group of Financial Intelligence Units | FinCEN.gov

The Egmont Group of The Egmont Group of Financial Intelligence Units

According to the CAMS Study Guide, EDD is a higher level of scrutiny applied to customers who pose a greater risk of money laundering or terrorist financing. EDD may include obtaining additional information on the customer’s identity, source of funds, business activities, beneficial owners, and expected transactions. Details on individuals with control over the account are relevant for EDD, as they may indicate the involvement of politically exposed persons (PEPs), sanctioned individuals, or other high-risk entities. Therefore, this information should be gathered as part of EDD for a high-risk customer.

References: CAMS Study Guide, 6th Edition, Chapter 4, page 121.

According to the CAMS manual 6th edition, the USA PATRIOT Act allows the US government to subpoena documents from foreign financial institutions (FIs) that have no presence in the US (option B). The manual states that "The USA PATRIOT Act provides US law enforcement agencies with the power to subpoena documents from foreign banks that maintain correspondent accounts with US banks or have no presence in the United States" (p. 77).

IT expanded the definition of criminal activity to all serious crimes. The first EU Directive on Money Laundering, adopted in 1990, was the first major international agreement to combat money laundering. It expanded the definition of criminal activity to all serious crimes and established drug trafficking as a predicate offense of money laundering. The Directive also extended the scope of money laundering beyond drug-related crimes, making it applicable to all serious crimes. This was a major step forward in the fight against money laundering, as it made it easier for law enforcement to investigate and prosecute money laundering cases.

 A deferred prosecution agreement (DPA) is a type of enforcement action that allows a financial institution to avoid criminal prosecution if it admits to wrongdoing, pays a fine, and agrees to remediate its AML program deficiencies within a specified period of time1. A cease and desist order (C&D) is another type of enforcement action that requires a financial institution to stop engaging in unsafe or unsound practices or violations of law, and to take corrective actions to address its AML program weaknesses2. Both of these actions are commonly used by regulators to address serious or systemic AML program failures by financial institutions, as evidenced by recent cases345.

References:

1: Deferred Prosecution Agreement - Wikipedia

2: FFIEC BSA/AML Appendices - Appendix R – Enforcement Guidance

3: FinCEN Announces $15 Million Civil Money Penalty against Bancrédito International Bank for Willful Violations of the Bank Secrecy Act

4: Lessons From The Seven Largest AML Bank Fines In 2021

5: Fines for AML Compliance Failures - ACAMS Today

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.

Non-compliance with AML regulatory obligations can have severe consequences for financial institutions. Among these, the most severe consequence is the loss of license. When a financial institution fails to meet AML requirements, regulators may revoke its license to operate. Losing the license effectively shuts down the institution’s ability to conduct business, impacting its existence and operations significantly12.

References:

1. Unit21 AML: 8 AML Penalties, Fines, and Sanctions + Examples You Should Avoid

2. Financial Crime Academy: Ensuring Compliance: The Power Of AML Regulatory Reporting

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.

References:

1: This document contains the FATF’s 40 Recommendations, which are the international standards for combating money laundering and terrorist financing. Recommendation 10 covers the CDD requirements for financial institutions, and paragraph 22 states that “If the financial institution is unable to comply with paragraphs 10 to 12, 15 and 17, it should not open the account, commence business relations or perform the transaction; or should terminate the business relationship; and should consider making a suspicious transactions report in relation to the customer.”

2: This document provides guidance on the implementation of the FATF’s Recommendations on transparency and beneficial ownership, which are relevant for CDD purposes. It explains the definition of beneficial owner, the risks associated with legal persons and arrangements, and the effective mechanisms to combat the misuse of such entities. It also provides examples of situations where financial institutions should exit the relationship with a client, such as when the client refuses to provide or update information on beneficial ownership or control, or when the client is a shell company or a trust with no legitimate economic purpose.

Financing terrorism generally refers to providing money or other support, such as personnel or technology, to terrorist activities. This can include providing funds to terrorist networks, providing services to support terrorist operations, and providing resources to support terrorist activities. In this case, paying producers and reporters for television and web messaging would be considered financing of terrorism, as it is providing support for terrorist activities.

According to the Financial Action Task Force (FATF) methodology, financial institutions (FIs) are required to consider filing a suspicious activity report (SAR) in situations where they suspect or have reasonable grounds to suspect that funds are the proceeds of criminal activity or related to terrorist financing. One such situation is when a beneficiary of a transaction is a politically exposed person (PEP). PEPs are individuals who hold prominent public positions or have close associations with such individuals. Their involvement in transactions can raise red flags due to the potential risk of corruption, money laundering, or other illicit activities1.

References:

1. Recommendation 20: Reporting of suspicious transactions

A. Promoting the record-keeping obligations of banks to the maximum amount of data necessary for the purposes of AML investigations: "The Fifth AML Directive emphasizes that record-keeping obligations of banks must extend to the maximum amount of data necessary for the purposes of anti-money laundering investigations" (CAMS Manual, 6th Edition, page 79).

C. Extending AML rules to entities that provide virtual currency services: "The 5AMLD expands the scope of the EU’s anti-money laundering rules to include virtual currency exchange platforms and custodian wallet providers" (CAMS Manual, 6th Edition, page 80).

Top of Form

Bottom of Form

The Basel Committee on Banking Supervision (BCBS) is an international body that sets standards and guidelines for the prudential regulation of banks. One of its key publications is the Customer Due Diligence for Banks, which outlines the essential elements of Know Your Customer (KYC) standards for banks. According to this document, customer acceptance, customer due diligence, and record-keeping policies and procedures should be changed as necessary to address variations in risk among each line of business within the organization. This means that banks should adopt a risk-based approach to KYC, taking into account the different types, levels, and sources of risk associated with different customers, products, services, transactions, and delivery channels. By doing so, banks can allocate their resources more efficiently and effectively, and mitigate the potential for money laundering, terrorist financing, and other financial crimes.

References:

Customer Due Diligence for Banks, BCBS, October 2001, p. 5, 14-15.

The Basel Committee: The Important Set Of International Banking Regulations, Financial Crime Academy, November 2023.

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.

References:

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

According to the USA PATRIOT Act, US authorities do have the power to subpoena records from foreign banks that maintain correspondent accounts with US banks. This is known as a "section 314(a) request," which allows law enforcement to obtain information related to suspected terrorist financing or money laundering.

However, US authorities are not limited to seizing only funds transferred under OFAC sanctions if there is an equivalent UN sanctions regime that has been contravened. The US government can impose its own sanctions that are independent of the UN, and can seize funds or take other actions to enforce those sanctions.

Therefore, the correct answers to the question are A and C:

A. If the funds are seized, then the foreign bank would be within its rights to dispute such seizure. C. The USA PATRIOT Act authorizes the Secretary of the Treasury or the Attorney General to subpoena records from the foreign bank that maintains a correspondent account with a US bank.

C. FSRBs play an essential role in identifying and addressing AML technical assistance needs for their individual member countries. The FSRBs are responsible for promoting the effective implementation of the FATF Recommendations at the regional level, including by assisting member countries in identifying technical assistance needs and facilitating the provision of such assistance.

D. FATF and FSRBs are free-standing organizations that share the common goals of combating money laundering and the financing of terrorism and proliferation. The FATF is an intergovernmental body that sets global standards for AML/CFT and promotes their effective implementation, while the FSRBs are regional organizations that work to promote the effective implementation of the FATF Recommendations at the regional level.

The main objective when a financial institution (FI) conducts an investigation is to track the movement of the money. Money laundering is a process of disguising the proceeds of criminal activity to make them appear legitimate. The movement of money is an essential element in the process of money laundering. Therefore, tracking the movement of funds is a crucial step in identifying and preventing money laundering. A financial institution must be able to recognize suspicious transactions and report them to the relevant authorities. An investigation is conducted to gather evidence and establish a clear understanding of the transaction flow, the parties involved, and the nature of the activity. This information is used to determine if the transaction is suspicious and if it violates any laws or regulations.

While keeping policies and procedures updated, keeping documentation, and knowing the customer are essential components of a comprehensive anti-money laundering (AML) program, these activities are not the primary objective of an investigation. Policies and procedures need to be updated to reflect changes in regulatory requirements and emerging money laundering risks. Documentation must be retained to provide evidence of the investigation process and outcomes. Knowing the customer is essential to identify and verify the customer’s identity and assess the risk associated with the relationship.

References:

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 3: AML Programs, Section 3.2: AML Program Components, Subsection 3.2.4: Transaction Monitoring and Investigation, pp. 87-88

Main Objective of Conducting Investigations - exam-answer.com

 According to the Anti-Money Laundering Specialist (the 6th edition) resources, one of the challenges of online financial technologies is the difficulty of verifying the identity and legitimacy of the customers and counterparties. This creates opportunities for money launderers and other criminals to exploit the anonymity and speed of online transactions to move and conceal illicit funds. The other options are not directly related to the money laundering risk posed by online financial technologies.

References:

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 5: Risk-Based Approach, page 133.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 7: Money Laundering Risks and Methods, page 203.

 The account officer has violated the principle of confidentiality by informing the customer about the legal request from law enforcement. This could amount to tipping off, which is a criminal offense in many jurisdictions. Tipping off could jeopardize the investigation, compromise evidence, and alert other potential suspects. The account officer should not discuss any details of the investigation with the customer, nor should he meet with the customer to do so. He should also report his actions to his manager and compliance department, and cooperate with law enforcement as required.

References:

ACAMS CAMS Certification Video Training Course1, Module 4: Conducting or Supporting the Investigation, Lesson 4.3: Confidentiality and Information Sharing

ACAMS CAMS Certification Study Guide2, Chapter 4: Conducting or Supporting the Investigation, Section 4.3: Confidentiality and Information Sharing, pp. 135-136

ACAMS CAMS Certification Exam Outline3, Domain 4: Conducting or Supporting the Investigation, Task 4.3: Maintain confidentiality of the investigation, p. 18

 the results of related audits and examinations are the most useful additional element to report to executive management on a regular basis. Audits and examinations are essential tools to assess the effectiveness and compliance of the anti-money laundering program across the organization. They can identify strengths, weaknesses, gaps, risks, and best practices in the program and provide recommendations for improvement. They can also help to monitor the implementation of corrective actions and remediation plans. Reporting the results of audits and examinations can help executive management to oversee the performance of the program, ensure accountability, and demonstrate commitment to the anti-money laundering objectives12

References: =

1: ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2, page 62

2: CERTIFICATION Candidate Handbook, page 16

A large cash deposit is a red flag for money laundering when it is inconsistent with the customer’s profile, behavior, or business activity. A customer who has never conducted a transaction in cash before may be trying to avoid detection or conceal the source of the funds. A customer who transacts in segments smaller than the reporting thresholds at various times during the day may be engaging in structuring or smurfing, which are techniques to evade currency transaction reporting requirements. A customer who follows a large cash deposit with an immediate wire transfer to an offshore secrecy haven may be attempting to layer or move the funds to a jurisdiction with weak anti-money laundering controls or high confidentiality. These scenarios indicate a high risk of money laundering and warrant further investigation and reporting.

A customer who operates a cash-based business may have a legitimate reason to make a large cash deposit, depending on the nature and scale of the business. However, this does not mean that the customer is exempt from scrutiny or monitoring, as cash-based businesses are also vulnerable to money laundering abuse. The bank should verify the source and purpose of the funds, and compare the deposit with the customer’s expected activity and turnover.

References:

CAMS Certification Package - 6th Edition, Chapter 4: Conducting and Supporting the Investigation Process, pp. 97-98.

Warning signs of money laundering | The Law Society, Section: Cash deposits and withdrawals.

Economic sanctions are penalties imposed by a country or a group of countries on another country, entity, or individual for foreign policy or security purposes. There are different types of economic sanctions, depending on the scope, objective, and mechanism of the sanctions. Some of the common types are:

Targeted sanctions: These are sanctions that aim to minimize the adverse effects on the general population and the environment, and focus on specific individuals, entities, sectors, or activities that are responsible for or involved in the undesirable behavior or conduct. Targeted sanctions can include travel bans, asset freezes, arms embargoes, and trade restrictions on certain goods or services. For example, the United States and the European Union have imposed targeted sanctions on various officials, entities, and sectors in Russia, Iran, Syria, Venezuela, and other countries for human rights violations, nuclear proliferation, terrorism, corruption, and other reasons.

Sectoral sanctions: These are sanctions that target a specific sector or industry of the economy of the sanctioned country, such as energy, finance, defense, or transportation. Sectoral sanctions aim to disrupt the economic activity and revenue of the targeted sector, and to create pressure on the government or regime to change its policies or behavior. For example, the United States has imposed sectoral sanctions on Iran’s oil, gas, petrochemical, and automotive industries, as well as its central bank and other financial institutions, to curb its nuclear program and support for regional proxies.

Comprehensive sanction: These are sanctions that impose a total or near-total ban on trade, investment, and other economic relations with the sanctioned country. Comprehensive sanctions are the most severe and broadest form of economic sanctions, and they aim to isolate the country from the global market and cause severe economic hardship and social unrest. Comprehensive sanctions are often accompanied by diplomatic isolation and military intervention. For example, the United States has maintained a comprehensive embargo on Cuba since 1962, prohibiting most trade, travel, and financial transactions with the island nation, as well as supporting its political opposition and dissidents.

References:

What Are Economic Sanctions?, Council on Foreign Relations

Types of Economic Sanctions, Profolus

Economic sanctions, Wikipedia

How Economic Sanctions Work, Investopedia

CAMS Certification Package - 6th Edition, ACAMS

CAMS Certifications: How to Get CAMS Certified, ACAMS

Broker-dealers cannot have correspondent accounts with a foreign bank that does not have a physical presence in any country. The USA PATRIOT Act has an extraterritorial effect in that it prohibits broker-dealers from having correspondent accounts with foreign banks that do not have a physical presence in any country. This rule is designed to help prevent money laundering and terrorist financing by making it more difficult for funds to be moved to or through jurisdictions with less stringent anti-money laundering laws.

Non-compliance with anti-money laundering (AML) laws and regulations can lead to severe consequences for both financial institutions and individuals. One of the indirect consequences is the imposition of punitive fines. These fines can vary based on the type of violation and the institution’s willingness to address the issue. Additionally, non-compliance may damage a company’s reputation, impacting its standing in the market and potentially leading to financial losses beyond the fines themselves123.

References:

Consequences of AML Non-Compliance

Understanding, Consequences & Changes in Anti-Money Laundering

Mastering Compliance: Effective AML Controls for Non-Bank Financial Institutions

AML Compliance: The Risks of Poor Practice and What Not to Miss

The rules imposed by the Office of Foreign Assets Control (OFAC) for legal entities and persons related to the US are:

Nationals of the US must comply with OFAC rules, regardless of where they are located in the world. This means that US citizens, permanent residents, and entities organized under US law are subject to OFAC sanctions and prohibitions, even if they operate or reside outside the US12.

Any foreign corporation is also penalized if it conducts transactions with sanctioned countries under OFAC rules. This means that non-US entities that engage in trade or financial dealings with OFAC-designated countries, entities, or individuals are liable to face civil or criminal penalties, as well as secondary sanctions that could restrict their access to the US market or financial system34.

The other options are not correct, because:

A subsidiary of a legal entity of the US, which is formally registered in a foreign country, is not exempt from OFAC rules. This means that foreign-incorporated entities that are owned or controlled by US persons or entities are also subject to OFAC sanctions and prohibitions, unless they are specifically authorized or licensed by OFAC12.

A foreign individual visiting the US for a short vacation is not obligated to follow OFAC rules. This means that non-US persons who are temporarily present in the US are not subject to OFAC sanctions and prohibitions, unless they are involved in transactions that have a US nexus or violate other US laws.

The head office of a foreign legal entity which has a branch in the US does not need to comply with OFAC rules. This means that non-US entities that have a presence or operation in the US are not subject to OFAC sanctions and prohibitions, unless they are involved in transactions that have a US nexus or violate other US laws.

References:

ACAMS CAMS Certification Video Training Course - Exam-Labs3

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

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 147:

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 148:

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 149:

When assessing the risk rating of customers, financial institutions should consider various factors that may indicate the potential for money laundering, terrorist financing, or other illicit activities. According to the ACAMS Study Guide for the CAMS Certification Examination1, some of the key risk factors are:

Customer risk: This refers to the characteristics of the customer that may affect their risk profile, such as their identity, occupation, source of funds, business activities, reputation, and political exposure. For example, customers who are politically exposed persons (PEPs), cash-intensive businesses, non-resident customers, or customers with complex ownership structures may pose a higher risk of money laundering or terrorist financing.

Geographic risk: This refers to the location of the customer, their business, or their transactions, and the level of risk associated with that location. For example, customers who are based in, operate in, or transact with jurisdictions that have weak anti-money laundering (AML) regulations, high levels of corruption, or are subject to sanctions or embargoes may pose a higher risk of money laundering or terrorist financing.

Product risk: This refers to the type of products or services that the customer uses or offers, and the level of risk associated with those products or services. For example, customers who use or offer products or services that are anonymous, complex, or facilitate cross-border transactions may pose a higher risk of money laundering or terrorist financing.

Other risk factors that may be considered include transaction risk, delivery channel risk, and industry risk2. However, these are not among the options given in the question.

References: = Some of the references that support this answer are:

ACAMS Study Guide for the CAMS Certification Examination, Chapter 4, Section 4.1, pages 97-99: “Customer Risk Factors”, “Geographic Risk Factors”, “Product Risk Factors”.

Customer Risk Rating: Connecting Customer Risk Rating With Due Diligence, Section “Customer Risk Rating Factors”: “Transaction Risk Factors”, “Delivery Channel Risk Factors”, “Industry Risk Factors”.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, an effective anti-money laundering program should be subject to periodic independent testing by a qualified party, such as an internal or external auditor, a consultant, or a compliance professional1. This ensures that the program is compliant with the applicable laws and regulations, and that it meets the standards of sound risk management and internal controls2. The regulatory authorities, a member of senior management, or the anti-money laundering specialist may not have the necessary expertise, objectivity, or independence to conduct a thorough and unbiased evaluation of the program.

References:

1: CAMS Study Guide, 6th Edition, Chapter 2, Section 2.3, page 51

2: CAMS Study Guide, 6th Edition, Chapter 2, Section 2.4, page 52

A. Geographic risks should be used to identify the priority of the Fl in this scenario. According to the CAMS Manual (6th Edition), "Geographic risk refers to the possibility that the location of a customer, transaction, or product may increase the likelihood of money laundering or terrorist financing because of weak or nonexistent AML/CFT controls" (p. 59). In this scenario, the expansion to an area of the world with weak AML laws would increase the Fl's geographic risk.

The key factor that would result in the decision for a financial institution (FI) to exit a client relationship is when the level of residual client risk exceeds the FI’s risk appetite. Residual client risk is the remaining risk after applying the FI’s risk mitigation measures, such as customer due diligence, transaction monitoring, and suspicious activity reporting. Risk appetite is the level and type of risk that the FI is willing and able to accept in pursuit of its business objectives. If the residual client risk is higher than the risk appetite, the FI may decide to terminate the relationship to avoid potential regulatory, reputational, or operational consequences.

The other options are not necessarily key factors for exiting a client relationship, because:

The client is a registered charity known to remit funds to high risk geographies where there is limited due diligence information available. This option may indicate a higher level of inherent client risk, but it does not necessarily mean that the FI should exit the relationship. The FI may be able to apply enhanced due diligence, ongoing monitoring, and risk-based controls to mitigate the risk and comply with the regulatory requirements. The FI may also consider the nature and purpose of the client’s activities, the source and destination of the funds, and the potential impact on the client’s beneficiaries.

Closing the client accounts will help reduce the number of transaction monitoring alerts. This option may suggest a possible benefit of exiting the relationship, but it is not a key factor for making the decision. The FI should not base its decision solely on the volume of transaction monitoring alerts, but rather on the quality and relevance of the alerts, the results of the investigation, and the risk assessment of the client. The FI should also ensure that its transaction monitoring system is properly calibrated and validated to avoid generating excessive or false alerts.

Client transactions generate ongoing transaction monitoring alerts that did not result in any SAR/STR filings. This option may indicate a need for reviewing and improving the transaction monitoring system or the investigation process, but it does not necessarily imply that the FI should exit the relationship. The FI should not assume that the absence of SAR/STR filings means that the client is low risk or that the alerts are irrelevant. The FI should conduct a thorough and timely investigation of the alerts and document the rationale for filing or not filing a SAR/STR. The FI should also consider the overall risk profile of the client and the nature and frequency of the transactions.

References:

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 3: AML Programs, Section 3.2: AML Program Components, Subsection 3.2.2: Risk Assessment, pp. 77-79

FFIEC BSA/AML Examination Manual, Section: Assessing Compliance with BSA Regulatory Requirements, Subsection: Suspicious Activity Reporting, pp. 4-5

Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations, Question 2, pp. 2-3

Failure to report suspected fraud activity is a serious breach of the anti-money laundering (AML) and anti-fraud obligations of a financial institution (FI). It could expose the FI to legal risks, such as civil lawsuits, criminal prosecutions, regulatory sanctions, and reputational damage. One possible legal risk is that the FI could be held liable for the losses suffered by the victims of the fraudster, either by the victims themselves or by a third party acting on their behalf, such as a government agency or a class action representative. This could result in significant financial costs and damages for the FI, as well as loss of trust and confidence from its customers and stakeholders.

References:

1: This web article explains what a suspicious activity report (SAR) is, who regulates it, when it is required, and what are the consequences of failing to file it.

2: This guide provides information on how to make a SAR, what to include, how to request a defence against money laundering (DAML), and what happens if you fail to report suspicious activity.

3: This blog post discusses the legal implications of not reporting an alleged crime, such as fraud, and gives examples of cases where individuals or entities were prosecuted or sued for their failure to report.

Money laundering through real estate transactions involves integrating illicit funds into the legitimate financial system while providing a relatively “safe” property investment. In this context, the most relevant factor to examine is the beneficial owner of the asset. Identifying the true owner behind a property helps uncover potential money laundering schemes. Criminals often use third parties, shell companies, or complex ownership structures to distance the transaction from the source of illicit funds. Investigating the beneficial owner’s identity is crucial for detecting and preventing real estate-related money laundering12.

References:

Understanding money laundering through real estate transactions

What Is Money Laundering? - Investopedia

According to the ACAMS CAMS Study Guide (the 6th edition), FIUs are central agencies that receive, analyze, and disseminate financial intelligence to support the detection and prevention of money laundering, terrorist financing, and other financial crimes1. FIUs have different legal powers and functions depending on their type and jurisdiction, but generally they can use various investigative techniques, such as requesting additional information from reporting entities, accessing databases, conducting analysis, and issuing guidance12. FIUs also have access to a wide range of financial information, such as suspicious activity reports, currency transaction reports, cross-border cash declarations, and other relevant data sources, to identify and assess potential illicit activities13. Moreover, FIUs can cooperate and exchange information with domestic and foreign counterparts, subject to certain legal and operational safeguards, to facilitate cross-border investigations and prosecutions of financial crimes14.

References:

ACAMS CAMS Study Guide (the 6th edition), Chapter 5: The Role of the Financial Intelligence Unit in Combating Money Laundering and Terrorist Financing, pages 153-1631

What are Financial Intelligence Units (FIUs)? | Dow Jones

Financial Intelligence Units - Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism - MONEYVAL - Coe

The role of financial intelligence units in combating money laundering (Chapter 6) - Money Laundering

According to the Basel Committee on Banking Supervision, a sound KYC program should include four essential elements: customer acceptance policy, customer identification, on-going monitoring of higher risk accounts, and risk management1. Customer acceptance policy defines the types of customers that the financial institution (FI) is willing to accept and the criteria for doing so. Customer identification involves verifying the identity and beneficial ownership of the customers and obtaining information on their activities and sources of funds. On-going monitoring of higher risk accounts involves reviewing the transactions and behavior of the customers that pose higher risks of money laundering or terrorist financing and updating their information and risk profiles. Risk management involves establishing appropriate policies, procedures, controls, and audit functions to ensure the effective implementation and oversight of the KYC program1.

References:

1: Basel Committee on Banking Supervision - Bank for International Settlements1

 Conducting small cash transactions at multiple locations during the same day is the strongest example of avoiding reporting thresholds. This is a common technique used by money launderers to evade the attention of financial institutions and regulators, who are required to report cash transactions above a certain amount (usually $10,000) to the authorities. By splitting the large sum of money into smaller amounts and depositing them at different branches or ATMs, the money launderer can avoid triggering the reporting requirement and conceal the source and destination of the funds. This practice is also known as smurfing or structuring12.

References:

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2, page 36

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.2, Structuring and Smurfing

1, Smurfing Money Laundering: Mechanics, Detection, and Prevention

2, AML & eWallets - The Risks & How To Comply | ComplyAdvantage

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.

FSRBs are regional bodies that work with FATF to promote the implementation of AML and CFT standards. FSRBs are made up of member countries that have agreed to work together to combat money laundering and the financing of terrorism [1]. The tools used by FSRBs to promote the implementation of AML and CFT standards include training measures, mutual evaluations of its members, technical assistance, and the sharing of information. FSRBs may also adopt recommendations and best practices based on the FATF’s 40 Recommendations.

The Egmont Group is an international body of Financial Intelligence Units (FIUs) from around the world. Its primary purpose is to serve as a forum for FIUs to exchange information, and it also sets international standards for AML/CFT measures. Additionally, the Egmont Group does not serve as a prudential regulator for global financial institutions or as an authoritative body in the field of anti-corruption.

Mutual Legal Assistance Treaties (MLATs) are characteristics of D. only involving two countries, E. cooperatively combating crime between countries, and F. being useful for gathering evidence and intelligence in a foreign country. MLATs are public and binding under international law (A), can be used for obtaining banking records from treaty partners (B), and provide a legal basis for transmitting evidence ©.

Making payments via a company located in a jurisdiction that is known to have lax anti-money laundering controls is a sign of suspicious activity and should be reported. When making a payment of this nature, the insurance company should be aware of the client's source of funds and the possible risks associated with the transaction.

Ref This transaction should result in a SAR/STR filing because it indicates possible structuring, which is a form of money laundering that involves breaking down large amounts of cash into smaller deposits to avoid detection or reporting requirements. Structuring is often done to conceal the source or destination of illicit funds, or to evade taxes, regulations, or sanctions. A small business owner who deposits checks just below the $10,000 USD threshold on a daily basis without providing a legitimate purpose raises a red flag for suspicious activity and should be reported to the relevant Financial Intelligence Unit.

References:

Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR)

What Is a Suspicious Activity Report (SAR)? Triggers and Filing

How to decide if SAR filing is needed

erence:

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.

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

According to the Basel Committee on Banking Supervision’s Customer Due Diligence for Banks1, banks should have policies and procedures to identify and manage high-risk customers, such as those who provide false or incomplete information, have complex or opaque beneficial ownership structures, or are involved in large or unusual transactions. In such cases, banks should apply enhanced due diligence measures, such as obtaining additional information or documentation, verifying the source and purpose of funds, conducting more frequent and intensive monitoring of account activity, and reporting any suspicious transactions to the relevant authorities. Therefore, the best course of action for the bank in this scenario is to implement enhanced due diligence procedures to monitor the account for suspicious activity, as option B suggests. Option A is not recommended, as it would imply that the bank accepts the customer without verifying his identity and background, which would expose the bank to money laundering and terrorist financing risks. Option C is not advisable, as it would terminate the relationship without investigating the origin and destination of the funds, which could hinder the efforts of law enforcement agencies to trace and recover illicit assets. Option D is also not appropriate, as it would involve sending a check to a customer whose address and identity are not confirmed, which could facilitate money laundering and fraud.

References:

5: Customer due diligence for banks - Bank for International Settlements, October 2001, pages 8-9, 13-14.

Law enforcement should obtain documentation from an institution when suspicious activity was identified by either requesting copies of the relevant documents from the accountable institution or acquiring a search warrant to obtain the documents. These are the legal and proper ways to access the supporting documentation that the institution is required to maintain for five years after filing a suspicious activity report (SAR). The institution must provide the documentation upon request by FinCEN or an appropriate law enforcement or supervisory agency, and should verify the identity and authority of the requestor. Law enforcement can also obtain a search warrant from a court if they have probable cause to believe that the documents contain evidence of a crime.

References:

Suspicious Activity Report Supporting Documentation

Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations, Question 1.

Obtaining Documentation from an Institution: Law Enforcement Procedures

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 section 313 of the USA PATRIOT Act, a covered financial institution (generally any U.S. bank or broker dealer in securities) is prohibited from establishing, maintaining, administering, or managing a correspondent account in the U.S. for, or on behalf of, a foreign shell bank. A foreign shell bank is defined as a foreign bank that does not have a physical presence in any country. The only exception to this prohibition is if the foreign shell bank is a regulated affiliate of a depository institution, credit union, or foreign bank that maintains a physical presence in the U.S. or a foreign country, respectively. In that case, the U.S. financial institution must obtain a written certification from the foreign bank that it does not provide banking services to any other foreign shell banks.

References:

Here’s Why A Process Agent Is Required Under a Certification by a Foreign Bank, Cogency Global, September 2020.

Definition of “Foreign Shell Bank” and “Foreign Bank”, FinCEN, April 2003.

USA PATRIOT Act, FinCEN, accessed February 2024.

this situation requires enhanced due diligence actions according to the AML principles of the Wolfsberg group. The Wolfsberg group is an association of 13 global banks that aims to develop standards and best practices for AML and CFT in the private banking sector. The group has issued a set of principles and guidance on how to conduct due diligence on private banking customers, especially those who pose higher risks, such as politically exposed persons (PEPs), customers from high-risk countries, and customers with complex or opaque structures. According to the Wolfsberg group, private banks should apply a risk-based approach to customer due diligence and perform enhanced measures for high-risk customers, such as obtaining senior management approval, verifying the identity and source of wealth of the customer and the beneficial owner, understanding the purpose and nature of the relationship, and conducting ongoing monitoring and review.

References:

ACAMS Study Guide 6th Edition, Chapter 4, Section 4.5, page 118: “The Wolfsberg Group”.

ExamTopics, Question 466: “Which private banking situation requires due diligence actions to be implemented according to the AML principles of the Wolfsberg group?”

According to the ACAMS CAMS Study Guide (the 6th edition), one of the key steps in conducting an effective investigation of a potential money laundering or terrorist financing activity is to gather all relevant information about the customer and the transaction, including the nature and purpose of the account, the source and destination of funds, the expected account activity, and the customer’s risk profile1. In this case, the compliance officer should meet with the staff who opened the new account for the public official to obtain this information and assess whether the account is consistent with the customer’s profile and needs, or whether it indicates a possible attempt to conceal or launder illicit funds. Waiting for the new account to receive funds, calling the competent authorities, or calling the official’s office are not appropriate actions at this stage, as they may compromise the investigation, alert the customer, or violate confidentiality rules1.

References:

ACAMS CAMS Study Guide (the 6th edition), Chapter 4: Conducting or Supporting the Investigation Process, page 1311

According to the Wolfsberg Group, a global association of leading banks that develops guidance and standards for the management of financial crime risks, both private and correspondent banks should monitor account and transactional activity after the proper identification and verification of customers, as part of their anti-money laundering and counter-terrorist financing (AML/CTF) measures12. This is consistent with the FATF Recommendation 10, which requires financial institutions to conduct ongoing due diligence on their business relationships, including scrutinising transactions to ensure that they are consistent with the customer’s risk profile and source of funds3. Monitoring account and transactional activity is a key component of the risk-based approach, as it enables banks to detect and report suspicious or unusual transactions, identify changes in customer behaviour or circumstances, and update customer information and risk assessments accordingly4.

References:

1: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012)

2: Wolfsberg Correspondent Banking Due Diligence Questionnaire (2017)

3: The FATF Recommendations - Financial Action Task Force

4: Risk-Based Approach for the Banking Sector - Financial Action Task Force

According to the Basel Committee on Banking Supervision, banks should apply a risk-based approach to customer due diligence, which means that they should adopt enhanced measures for higher-risk customers and simplified measures for lower-risk customers. Enhanced due diligence (EDD) may include obtaining additional information on the customer’s identity, source of funds, business activities, beneficial owners, and expected transactions, as well as conducting more frequent and intensive monitoring of the account activity. EDD is especially important for customers who are politically exposed persons (PEPs), who are from or have connections with high-risk countries or jurisdictions, or who are involved in high-risk industries or sectors. Therefore, performing EDD including enhanced ongoing monitoring of the account activity is the correct way for banks to deal with high-risk customers.

References: Basel Committee on Banking Supervision, CAMS Study Guide, 6th Edition, Chapter 4, page 121.

One of the criteria that the Financial Action Task Force (FATF) uses to define non-cooperative countries and territories (NCCTs) is the lack of adequate rules for the licensing and creation of financial institutions, especially those with no or minimal presence, and the lack of effective systems for checking the backgrounds of managers and beneficial owners of such institutions. This criterion aims to prevent the establishment and operation of shell banks or other entities that can be used for money laundering or terrorist financing purposes. The FATF requires that countries and territories should have laws and regulations that ensure that financial institutions are subject to adequate licensing or registration procedures, that the authorities have the power to deny or revoke licenses or registrations, and that the authorities have access to information on the identity, reputation, and financial soundness of the managers and beneficial owners of financial institutions.

References: = Some of the references that support this answer are:

About the Non-Cooperative Countries and Territories NCCT Initiative, Section “The review and listing process”: “The FATF established at that time four regional review groups (Americas, Asia/Pacific, Europe, Africa/Middle East) consisting of representatives from the FATF member governments that served as the main points of contact with the reviewed country or territory. … The review groups gathered relevant laws, regulations and other relevant information, analysed this information against the 25 NCCT criteria, and drafted a report that was sent to the jurisdictions for comment.”

Annual Review of Non-Cooperative Countries and Territories 2006-2007: Eighth NCCT Review, Annex 1: “List of Criteria for Defining Non-Cooperative Countries or Territories”, Criterion 1: “Licensing and creation of financial institutions, in particular those with no physical presence, and the ability to obtain information on the beneficial ownership and control of such institutions.”

FATF (Financial Action Task Force) Countries 2024 - World Population Review, Section “Blacklisted Countries”: “These are countries which were previously placed on the grey list and advised by the FATF to adopt the recommended financial security procedures, but have either failed or refused to do so. Blacklisted countries may be labeled as Non-Cooperative Countries or Territories (NCCTs).”

Layering is the second stage of the money laundering process, in which the launderer moves the funds around to create distance and confusion between the source and the destination of the illicit proceeds. Layering often involves multiple transactions, such as wire transfers, shell companies, trusts, and offshore accounts, that make it difficult to trace the origin and ownership of the funds. Layering is intended to disguise the audit trail and provide anonymity for the launderer12.

Placement is the first stage of the money laundering process, in which the launderer introduces the illicit proceeds into the financial system, often by breaking them into smaller amounts or using cash-intensive businesses12.

Structuring is a technique used in the placement stage, in which the launderer deposits or withdraws cash in amounts below the reporting threshold to avoid detection or suspicion12.

Integration is the third and final stage of the money laundering process, in which the launderer reintroduces the funds into the legitimate economy, often by purchasing assets, investing in businesses, or mixing them with legal income12.

References: 1: ACAMS (2020), Study Guide for the Certification Examination, 6th Edition, ACAMS, Miami, FL, USA, pp.  12-14. 2: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, Module 1.

According to the Financial Action Task Force (FATF), substantial growth in wealth during a short period of time is a red flag for money laundering or terrorist financing. Additionally, when a client is a family member of a politically exposed person (PEP) from a country known for corruption, it raises concerns about the potential for corruption, bribery, or influence peddling. In this case, the client's father became the president of Country B, which makes him a PEP.

The Office of Foreign Assets Control (OFAC) is a department of the US Treasury that administers and enforces economic and trade sanctions imposed by the US against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. The main purpose of the US Treasury Department for OFAC’s extraterritorial reach is to apply these sanctions to any person or entity that is subject to US jurisdiction, or that engages in transactions involving US persons, US dollars, or US goods or services. This way, the US can exert pressure on the targets of the sanctions and prevent them from accessing the US financial system or market. OFAC’s extraterritorial reach is authorized by Congressional legislation or presidential emergency powers, and is often based on UN Security Council resolutions or multilateral agreements.

References:

Office of Foreign Assets Control (OFAC): Definition, Sanctions

About OFAC | Office of Foreign Assets Control

OFAC’s Extraterritorial Reach: Purpose of the US Treasury Department

The customer’s relocation and expansion to different jurisdictions constitutes a triggering event that requires ongoing due diligence on this client, as it may indicate changes in the customer’s risk profile, business activities, or beneficial ownership. The bank should update the customer’s information, verify the identity and legitimacy of the new entities, and assess the level of money laundering and sanctions risks associated with the new locations12. The other options are not triggering events, as they are either consistent with the customer’s normal business operations or do not affect the customer’s risk profile.

References:

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4, page 931

ACAMS CAMS Certification Video Training Course, Module 4, Lesson 22

This represents the highest risk factor for terrorist financing because it may indicate that the charity is diverting funds to support terrorist organizations or activities, or that it is acting as a front or conduit for terrorist financing. Disbursement of funds to entities unrelated to the purpose of the charity may also violate the donor’s intentions, the charity’s mission, or the applicable laws and regulations. A charity with unaudited accounts may have weak internal controls, governance, or transparency, which may increase the risk of misappropriation, diversion, or misuse of funds.

References:

ACAMS CAMS Certification Video Training Course1, Module 2: Money Laundering Risks and Methods, Lesson 2.3: Money Laundering Risks and Methods by Sector

ACAMS CAMS Study Guide, 6th Edition2, Chapter 2: Money Laundering Risks and Methods, Section 2.3: Money Laundering Risks and Methods by Sector, pp. 40-41

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 2: Money Laundering Risks and Methods, Section 2.3: Money Laundering Risks and Methods by Sector, Slide 18

According to the Wolfsberg Group’s Statement on the Suppression of the Financing of Terrorism1, a compliance officer should include the following three procedures in revising an institution’s CTF efforts:

Consulting applicable lists and taking appropriate actions to determine if customers appear on such lists. This procedure is important to prevent terrorist organizations from accessing the financial services of the institution and to comply with the sanctions and regulations imposed by competent authorities. The compliance officer should implement procedures for checking the customers against the lists of known or suspected terrorists or terrorist organizations issued by relevant authorities and taking reasonable and practicable steps to verify the identity and status of the customers.

Reporting matches from lists of known or suspected terrorists to relevant authorities. This procedure is important to assist the authorities in their efforts to detect and disrupt terrorist financing and to fulfill the legal obligations of the institution. The compliance officer should report to the relevant authorities any matches from the lists of known or suspected terrorists or terrorist organizations consistent with the applicable laws and regulations regarding the disclosure of customer information.

Maintaining customer information to facilitate timely retrieval of such information. This procedure is important to enable the institution to respond promptly and effectively to the enquiries and requests from the authorities and to enhance the quality and accuracy of the customer data. The compliance officer should explore ways of improving the maintenance of customer information to facilitate the timely retrieval of such information.

References:

Wolfsberg Statement on Anti-Terrorism Financing

UNUSUAL CUSTOMER IDENTIFICATION CIRCUMSTANCES

• Customer furnishes unusual or suspicious identification documents or declines to produce originals for verification."

 According to the web search results, the Egmont Group is a united body of 170 Financial Intelligence Units (FIUs) that provides a platform for FIUs to securely exchange expertise and financial intelligence to combat money laundering, terrorist financing, and associated predicate offences12. The goal of the Egmont Group is to provide a forum for FIUs around the world to improve support to their respective governments in the fight against money laundering, terrorist financing, and other financial crimes345. The other options are not correct because they either do not capture the full scope of the Egmont Group’s activities, or they are not the primary focus of the Egmont Group.

References: 

The most important consideration when deciding whether to recommend closing the account is the requests from the competent authority, such as the Financial Intelligence Unit (FIU), the regulator, or the law enforcement. According to the FAQs related to Suspicious Transaction Reporting issued by the Financial Monitoring Unit of Pakistan1, reporting entities should not terminate the relationship with the customer after filing a STR, unless instructed by the competent authority. This is because closing the account may alert the customer of the STR, compromise the investigation, or hinder the collection of further evidence. Therefore, the reporting entity should consult with the competent authority before taking any action to close the account.

The other options are less important or irrelevant considerations. The institution’s anti-money laundering policy may provide some guidance on how to handle high-risk customers or accounts, but it should not override the requests from the competent authority. Customer relations and the Chief Executive’s reputational risk are not valid reasons to keep the account open if there is evidence of money laundering or terrorist financing. The reporting entity should act in accordance with the law and the best interests of the public, not the personal or business interests of the customer or the bank’s management.

References:

1: Frequently Asked Questions (FAQs) related to Suspicious Transaction Reporting, 5

The anti-money laundering officer should advise the account-opening officer to verify the identity of all the partners as an initial step. This is because opening a bank account for an offshore company with multiple owners from different jurisdictions poses a high risk of money laundering and terrorist financing. Therefore, the bank should apply enhanced due diligence measures to ensure that the offshore company and its owners are legitimate and not involved in any criminal activities. One of the key measures is to verify the identity of all the partners, not just the one who presents the power of attorney. This will help the bank to establish the beneficial ownership and control structure of the offshore company, as well as to detect any possible fraud, forgery, or coercion in the power of attorney document. The bank should also verify the authenticity and validity of the power of attorney, and the scope and purpose of the authority granted to the partner who requests the account opening.

The other options are less important or irrelevant as initial steps. Verifying the source of the deposit is also a part of the enhanced due diligence process, but it should be done after verifying the identity of the partners and the offshore company. Filing a suspicious transaction report with the appropriate Financial Intelligence Unit or the Egmont Group is a possible action that the bank may take if it detects any indicators of money laundering or terrorist financing in the account opening process, but it is not an initial step. The Egmont Group is an international network of Financial Intelligence Units that facilitates information exchange and cooperation, but it is not a reporting authority.

References:

ACAMS Study Guide, Chapter 3: Customer Identification and Verification, 1

ACAMS Study Guide, Chapter 4: Customer Risk Assessment, 2

ACAMS Study Guide, Chapter 5: Ongoing Monitoring, 3

Powers of attorney: opening a bank account, 4

According to the USA PATRIOT Act, the four minimum elements required for an anti-money laundering program for a foreign bank with branches in the United States are:

An ongoing employee training program. This is to ensure that the employees are aware of the anti-money laundering policies and procedures, the legal and regulatory requirements, the red flags and indicators of suspicious activity, and their roles and responsibilities in detecting and reporting money laundering and terrorist financing.

The designation of a compliance officer. This is to ensure that there is a person responsible for overseeing the implementation and effectiveness of the anti-money laundering program, ensuring compliance with the applicable laws and regulations, and liaising with the regulators and law enforcement agencies.

An independent audit function to test the program. This is to ensure that the anti-money laundering program is periodically reviewed and evaluated by an independent and qualified auditor, who can assess the adequacy and effectiveness of the program, identify any weaknesses or deficiencies, and recommend corrective actions or improvements.

The development of internal policies, procedures, and controls. This is to ensure that the foreign bank has a written and documented anti-money laundering program that establishes the standards, guidelines, and processes for preventing, detecting, and reporting money laundering and terrorist financing, and that the program is consistent with the risk profile and business activities of the foreign bank.

The development of a Know Your Customer program is not a minimum element required under the USA PATRIOT Act, although it is a recommended best practice and may be required by other laws or regulations.

References:

CAMS Study Guide - 6th Edition, Chapter 5, pages 141-142

CAMS Certification Exam Outline, Domain 2, Task 2.2, Skill 2.2.1

Anti-Money Laundering Initiatives Under the USA Patriot Act, FindLaw, March 2008

[The U.S. PATRIOT Act and AML: What You Need to Know], Dow Jones Risk & Compliance, June 2020

 The Fourth European Union Directive on money laundering (AMLD4) requires member countries to maintain registries of the beneficial owners of legal entities, such as companies, trusts, foundations, etc. This is to ensure that the true identity and ownership of the customers and the natural persons on whose behalf transactions are conducted are known to the obliged entities, such as banks, lawyers, accountants, etc., and to the competent authorities, such as regulators, supervisors, or law enforcement12. This requirement aims to prevent the misuse of legal entities for money laundering or terrorist financing purposes, and to enhance transparency and access to beneficial ownership information34.

References: 1: AMLD4, Article 30, 5; 2: AMLD4, Recital 25, 5; 3: AMLD4, Recital 26, 5; 4: AMLD4, Recital 27, 5.

According to the FATF Recommendations, the international standard for anti-money laundering and counter-terrorist financing, beneficial owners are the natural persons who ultimately own or control a customer or the natural persons on whose behalf a transaction is being conducted1 The beneficial ownership criterion is not based on the legal title or the nominal ownership of the funds, but on the effective control or the ultimate entitlement to the funds. Therefore, having signature authority over the account, being the person in whose name an account is opened, or being a trusted party in a correspondent banking relationship are not sufficient to determine the beneficial ownership of funds. These may be indicators of legal ownership or nominee arrangements, but they do not necessarily reflect the true ownership or control of the funds. The most effective criterion for determining the beneficial ownership of funds is having control over such funds or entitlement to such funds, either directly or indirectly, through ownership, voting rights, contractual agreements, trusts, or other means2345

References:

1: FATF Recommendations, 2012, Recommendation 10 and Interpretive Note

2: Beneficial Ownership Meaning and Regulation, Investopedia, 2022

3: Ultimate Beneficial Ownership: Understanding Where The Money Comes From, ComplyAdvantage, 2022

4: Beneficial ownership and Irish investment funds, A&L Goodbody, 2021

5: Asset Management and Investment Funds Legal and Regulatory Update, Arthur Cox, 2020

A money remittance business will most likely attract money launderers because it deals primarily in cash transactions, engages in international transactions, and conducts transactions for walk-in customers. These factors make money remittance businesses vulnerable to money laundering risks, such as:

Cash transactions: Cash is the preferred medium of exchange for money launderers, as it is anonymous, untraceable, and easily convertible. Money remittance businesses often deal with large amounts of cash, which can be used to place, layer, or integrate illicit funds into the financial system. Cash transactions also pose challenges for customer identification, record keeping, and transaction monitoring.

International transactions: Money remittance businesses facilitate cross-border transfers of funds, which can be used to move illicit funds from one jurisdiction to another, or to obscure the origin, destination, or purpose of the funds. International transactions also involve exposure to different legal, regulatory, and cultural environments, which may create inconsistencies or gaps in anti-money laundering (AML) and counter-terrorism financing (CTF) standards and practices.

Walk-in customers: Money remittance businesses often serve walk-in customers, who may not have an established relationship with the business, or who may use false or incomplete identification documents. Walk-in customers also increase the volume and complexity of transactions, which may make it difficult to detect suspicious or unusual activity, or to apply risk-based due diligence measures.

References:

ACAMS CAMS Certification Video Training Course1, Module 2: Money Laundering Risks and Methods, Lesson 2.3: Money Laundering Risks and Methods by Sector

ACAMS CAMS Study Guide, 6th Edition2, Chapter 2: Money Laundering Risks and Methods, Section 2.3: Money Laundering Risks and Methods by Sector, pp. 37-38

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 2: Money Laundering Risks and Methods, Section 2.3: Money Laundering Risks and Methods by Sector, Slide 16

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.

References:

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Sanctions, p. 63-64 2: U.S. Department of the Treasury Office of Foreign Assets Control, 3: CAMS Certification Package - 6th Edition | ACAMS, Chapter 4: FATF Recommendations, p. 77-78 4: Financial Action Task Force,

 Having inadequate privacy policies and procedures can expose an organization to legal risks such as industry or regulatory sanctions and charges of deceptive business practices. Industry or regulatory sanctions can result from violating the laws and regulations that govern data privacy and protection, such as the GDPR, the CCPA, or the GLBA. These sanctions can include fines, penalties, injunctions, or revocation of licenses. Charges of deceptive business practices can arise from misleading or false statements about how the organization collects, uses, or discloses personal data, or from failing to comply with its own privacy policies and procedures. These charges can lead to lawsuits, settlements, or enforcement actions by authorities such as the FTC or the state attorneys general.

References: =

The 4 Biggest Risks of Non-Compliance With Data Privacy Regulations

Security and privacy laws, regulations, and compliance: The complete guide

An Ethical Approach to Data Privacy Protection

Cash couriers are individuals who physically transport cash or other monetary instruments across borders or within a country, often to avoid detection by authorities or reporting obligations. Cash couriers are a common method used by terrorist financiers to move funds without leaving an audit trail, as cash is anonymous, portable, and widely accepted12.

References:

1: ACAMS CAMS Certification Video Training Course, Module 4: Terrorist Financing, Section 4.2: Methods of Terrorist Financing, Slide 9 2: ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4: Terrorist Financing, Page 97

According to the guidance issued by the Financial Crimes Enforcement Network (FinCEN) and the federal banking agencies, a financial institution is legally permitted to discuss any aspects of the reported activity with the law enforcement officer who contacts them about the suspicious transaction report (SAR), as long as the officer provides appropriate credentials and a written request for the information. The financial institution is also legally permitted to send the deposit documents referenced in the SAR, as they are part of the supporting documentation that may be requested by law enforcement1

However, the financial institution is not legally permitted to provide copies of the customer’s loan documents or explain the customer’s loan payment history, as they are not directly related to the reported activity and may contain confidential information that is protected by privacy laws or contractual agreements. The financial institution should only disclose the minimum amount of information necessary to respond to the law enforcement request and should not volunteer any information that is not relevant or requested12

References:

1: Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations, FinCEN and Federal Banking Agencies, 2021, Question 1

2: The best practices for effective Suspicious Activity Reporting, The Payments Association, 2020

Structuring is the intentional evasion of a reporting or recordkeeping requirement by breaking down a large transaction into smaller ones, or by using multiple accounts, institutions, or persons to avoid triggering the threshold for reporting or recordkeeping. Structuring is also known as smurfing, and it is a common technique used by money launderers to conceal the source, ownership, or control of illicit funds.

References: =

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2, Section 2.1.1, page 511

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.1, video time 7:00-8:002

ACAMS CAMS Certification Practice Exam, Question 134, page 2853

a vehicle that is historically most often used to hide beneficial ownership, which is an offshore company. An offshore company is a legal entity that is incorporated or registered in a foreign jurisdiction, usually with low or no taxes, high confidentiality, and lax regulation. Offshore companies can be used by money launderers and other criminals to conceal the true identity and ownership of the funds or assets that they control, and to evade taxes, reporting, or legal obligations in their home jurisdictions. Offshore companies can also be layered with other vehicles, such as trusts, foundations, or nominees, to create complex and opaque structures that make it difficult for authorities to trace the source and destination of illicit funds.

The other options are not necessarily vehicles that are most often used to hide beneficial ownership, although they may pose some risks or challenges depending on the circumstances and the risk profile of the customers and countries involved. Option A describes a professional association, which is a group of individuals or entities that share a common profession or interest, such as lawyers, accountants, or doctors. Professional associations may be involved in money laundering or terrorist financing as facilitators, intermediaries, or advisors, but they are not typically used to hide beneficial ownership. Option C describes a limited liability partnership, which is a legal entity that combines the features of a partnership and a corporation, and limits the liability of its partners. Limited liability partnerships may be used by money launderers or terrorist financiers to obscure the ownership or control of funds or assets, but they are not as common or as secretive as offshore companies. Option D describes a charitable organization, which is a non-profit entity that is established for a charitable, religious, educational, or other public benefit purpose. Charitable organizations may be abused by money launderers or terrorist financiers to divert funds or assets for illicit purposes, but they are not usually used to hide beneficial ownership.

References:

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 4, pages 86-87

 The compliance officer should provide regular updates of corrective action to the designated board committee, as they are ultimately responsible for the oversight of the organization’s anti-money laundering program. The board committee should be informed of the audit findings, the corrective action plan, the progress and challenges, and the completion of the remediation. This will help ensure that the board committee is aware of the risks and issues, and can provide guidance and support to the compliance officer and the management.

References: =

ACAMS CAMS Certification Study Guide 6th Edition, Chapter 2, page 671

ACAMS CAMS Certification Exam Outline, Domain 2, Task 2.52

ACAMS CAMS Certification Flashcards, Question 893

 A financial institution can verify the nature and purpose of a business and its legitimacy by using an independent information verification process, such as by accessing public and private databases. This method can help the financial institution to check the names of businesses against anti-money laundering (AML) watchlists, parse and analyze ownership information to determine beneficial ownership structure, and run the beneficial owners themselves through identity verification and AML watchlist checks1. This can also help the financial institution to comply with the regulatory requirements for customer due diligence (CDD), which include obtaining and analyzing sufficient customer information to understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile2. Other methods, such as reviewing a copy of the corporation’s latest audited reports and accounts, undertaking a company search or other commercial inquiries, or reviewing the company’s website, may not provide sufficient or reliable information to verify the nature and purpose of a business and its legitimacy.

References:

Customer due diligence for banks by the Basel Committee on Banking Supervision, October 2001.

How to Verify Legitimate Businesses and Merchants by Trulioo, March 2021.

QUE According to the ACAMS Study Guide, one of the skills of an effective AML investigator is to conduct investigative interviews using appropriate techniques and methods1. One of the techniques is to use open-ended questions that elicit detailed responses from the interviewee, and to avoid leading or suggestive questions that may reveal the investigator’s assumptions or suspicions1. Therefore, the best option is to ask question of a material nature about the suspected false statements without revealing the suspected deception, as this would allow the investigator to gather more information and evidence, and to test the consistency and credibility of the interviewee’s answers.

The other options are not advisable or effective, because:

A. Informing the suspect that deception is obvious and continuing the interview is not a good strategy, because it may antagonize the suspect and make them less cooperative or more defensive. It may also alert the suspect to the investigator’s knowledge and sources, and give them an opportunity to change or modify their story2.

B. Advising the suspect that the interview will be terminated if there is suspicion of deception is not a good strategy, because it may create a negative impression of the investigator and the investigation, and it may discourage the suspect from providing any useful information. It may also imply that the investigator has insufficient evidence or authority to pursue the case2.

C. Directing the interview in another direction until there is better rapport before returning back to the troubling question is not a good strategy, because it may waste time and resources, and it may lose the focus and momentum of the investigation. It may also signal to the suspect that the investigator is not confident or competent, and it may give the suspect a chance to prepare or rehearse their answers2.

References:

1: ACAMS Study Guide, 6th Edition, Chapter 4: Conducting and Supporting the Investigation, page 105. 2: 46 AML Investigator Interview Questions (And Sample Answers)

STION NO: 96

A bank employee recently opened an account for a new restaurant. Daily cash deposits over a three-month

period are close to $9,500.

What are two red flags that indicate possible money laundering or terrorist financing? (Choose two.)

A. The restaurant is located in a different city

B. The daily cash deposits are so close in amount

C. It is a new account that has daily cash deposits

D. The new account demonstrates a steady flow of income

Answer: BD

These two options are potential red flags for money laundering or terrorist financing because they could indicate an attempt to avoid the reporting threshold of $10,000 for cash transactions, or to conceal the source or origin of the funds. According to the ACAMS Study Guide, some common indicators of money laundering are:

Transactions structured to avoid recordkeeping or reporting requirements

Transactions inconsistent with the customer’s profile or business activity

Transactions involving the use of multiple accounts or locations

Transactions involving high-risk jurisdictions or entities

Transactions involving cash or complex crypto assets

The other two options are not necessarily red flags by themselves, as they could have legitimate explanations. For example, the restaurant could be located in a different city because of market demand, or the new account could demonstrate a steady flow of income because of the success of the business.

References:

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 2, page 41-42

FFIEC BSA/AML Appendices - Appendix F – Money Laundering and Terrorist Financing Red Flags, page 1-2

4 Red Flags of Money Laundering or Terrorist Financing, page 1

Money Laundering Red Flags | Key Behaviours and Indicators, page 1

According to the CAMS study guide, chapter 4, page 1191, transaction records include any records that reflect the movement of funds or assets, such as wire transfers, checks, deposits, withdrawals, securities trades, etc. Therefore, items 1, 2, and 4 are examples of transaction records that should be delivered in response to a legal request. Item 3, signature cards, are not transaction records, but rather account opening documents that contain the customer’s name, address, identification, and signature. These documents may be relevant for customer due diligence or identification purposes, but they do not reflect the transaction activities of the customer.

References:

1: ACAMS CAMS Study Guide - 6th Edition, Chapter 4, page 119:

According to the ACAMS CAMS Certification Video Training Course1, one of the red flags for money laundering is “transferring funds to or from foreign countries or jurisdictions that are known to have weak anti-money laundering standards or are considered high-risk for money laundering or terrorist financing” (Module 2, Lesson 3, Part 2). This is also consistent with the suspicious activity report (SAR) criteria, which require financial institutions to report transactions that “involve funds derived from illegal activity or are intended or conducted to hide or disguise funds or assets derived from illegal activity” or “involve the use of the financial institution to facilitate criminal activity” (31 CFR § 1020.320(a)(2)). Therefore, the customer’s request to transfer funds to accounts in three different foreign jurisdictions should be the focus of the SAR, as it may indicate an attempt to launder money or finance terrorism.

References:

ACAMS CAMS Certification Video Training Course

[31 CFR § 1020.320 - Reports by banks of suspicious transactions]

Precious metals, such as gold and silver, pose a high risk of money laundering because they have some features that make them attractive to criminals. According to the FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones1, these features include:

Some precious metals can be formed into other objects, making easier to transport. For example, gold can be melted and shaped into jewellery, coins, bars, or other items that can be easily concealed and moved across borders. This makes it difficult for law enforcement and customs authorities to detect and seize the illicit proceeds of crime.

Precious metals have high intrinsic value in a relatively compact form and are easy to convert into currency. For example, gold has a stable and universal value that can be exchanged for cash or other assets in any market. This makes it easy for criminals to store, transfer, and launder their illicit funds without leaving a trace in the formal financial system.

The other two options, C and D, are not as relevant to the risk of money laundering. The value of precious metals is determined by the market forces of supply and demand, and it is not easy to inflate or manipulate it. Precious metals can be used in many high-tech commercial applications, but this does not necessarily make them more valuable or more prone to money laundering.

References:

1: FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones, 2008,

2: Money laundering and terrorist financing risks and vulnerabilities associated with gold, 2015,

3: The anti-money laundering framework for precious stones and metals dealers in Singapore, 2021,

4: Gold and Money Laundering, 2019,

 The integration stage of money laundering is where the illicit funds are reintroduced into the legitimate financial system, making them appear as lawful income or assets. This may include using multiple accounts, transferring funds between different banks or jurisdictions, and engaging in various financial activities to legitimize the illicit funds. The integration stage aims to make the illicit funds appear legitimate and indistinguishable from lawful funds within the financial system1.

Option C is an example of the integration stage of money laundering involving a bank or another deposit-taking institution, as it involves moving the illicit funds from one bank account to another, creating a complex trail of transactions that obscures the origin and ownership of the funds. This technique is also known as wire transfer laundering or electronic funds transfer laundering2.

Option A is an example of the placement stage of money laundering, as it involves depositing the illicit funds into the financial system for the first time, using a front company as a cover for the illegal source of the funds. A front company is a legitimate business that is used to conceal or facilitate illicit activity.

Option B is an example of the layering stage of money laundering, as it involves converting the illicit cash into other forms of value that are less conspicuous and easier to move, such as negotiable instruments. Negotiable instruments are documents that promise payment to a specified person or the bearer, such as checks, money orders, or traveler’s checks.

Option D is not an example of the integration stage of money laundering involving a bank or another deposit-taking institution, as it does not involve any financial transactions or accounts. It is rather an example of the integration stage of money laundering involving the purchase of goods or services, such as a luxury vehicle, with the illicit funds that had previously been deposited and layered through the financial system.

References:

1: Integration Stage of Money Laundering: Bank or Deposit-Taking Institution

2: Process of Money Laundering: Placement, Layering, Integration - Tutorial

: ACAMS Study Guide 6th Edition, Chapter 2, page 32

: ACAMS Study Guide 6th Edition, Chapter 2, page 34

: The Three Stages Of Money Laundering And How Money Laundering Works

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 laundering and 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.

References:

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

According to the Wolfsberg Principles on Correspondent Banking1, an institution should consider the following three elements in its enhanced due diligence process for higher risk respondent bank customers:

The quality of the respondent’s AML and client identification controls: The correspondent should assess the adequacy and effectiveness of the respondent’s AML policies, procedures, and systems, as well as its compliance with applicable AML laws and regulations. The correspondent should also verify that the respondent has implemented appropriate customer identification and verification measures, and that it maintains sufficient records of its customers and transactions.

A risk-based determination as to whether or not the respondent is a shell bank: The correspondent should ensure that the respondent is not a shell bank, which is defined as a bank that has no physical presence in any country and is not affiliated with a regulated financial group. The correspondent should also avoid establishing or maintaining relationships with banks that are known to allow their accounts to be used by shell banks.

Whether a Politically Exposed Person (PEP) has an interest or management role in the respondent: The correspondent should identify and assess the potential risks associated with any PEPs who have an ownership or management interest in the respondent, or who are customers of the respondent. The correspondent should apply enhanced scrutiny and monitoring to such relationships, and obtain senior management approval before establishing or continuing them.

References:

Wolfsberg Correspondent Banking Principles 2022 by the Wolfsberg Group, October 2022.

Evaluating the risk scoring model and conducting the risk assessment itself may need to be performed annually, every eighteen to twenty-four months, before the launch of a new product, or when an acquisition of another financial institution occurs.

The correct next course of action is to request that the new product approval committee include the compliance officer. This is because the compliance officer has the responsibility to ensure that the new financial service complies with the applicable laws, regulations, and standards, and does not pose any undue risks to the institution or its customers. The compliance officer should be involved in the new product development process from the beginning, and provide guidance and feedback on the potential compliance implications and requirements of the new service12.

References:

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 6: Developing an Effective Anti-Money Laundering Program, p. 121-122 2: FATF Guidance: The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing, October 2013, p. 28,

An anti-money laundering officer should coordinate with human resources when implementing a new hire screening program, because human resources is responsible for managing the recruitment, hiring, and training of employees, as well as ensuring compliance with labor laws and regulations. A new hire screening program is a key component of an effective anti-money laundering (AML) program, as it helps to prevent the hiring of individuals who may pose a risk of facilitating money laundering, terrorist financing, or other financial crimes, or who may have a criminal or disciplinary history that could compromise the integrity of the institution. A new hire screening program should include background checks, verification of credentials and references, and assessment of skills and competencies relevant to the AML function. An anti-money laundering officer should work closely with human resources to establish the criteria, procedures, and documentation for the screening program, as well as to monitor its implementation and effectiveness.

References:

ACAMS CAMS Certification Video Training Course1, Module 4: Developing an AML Program, Lesson 4.2: Developing an AML Program

ACAMS CAMS Study Guide, 6th Edition2, Chapter 4: Developing an AML Program, Section 4.2: Developing an AML Program, pp. 81-82

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 4: Developing an AML Program, Section 4.2: Developing an AML Program, Slide 20

Under the USA PATRIOT Act, a U.S. bank that maintains a correspondent account for a foreign bank operating under an offshore license must obtain from the foreign bank the name and address of a person residing in the United States who is authorized to accept service of legal process for records related to the correspondent account1. This requirement is intended to facilitate the U.S. authorities’ access to information and records regarding the correspondent account and its underlying transactions, especially in cases where the foreign bank is located in a jurisdiction that does not cooperate with U.S. law enforcement or regulatory requests2.

References:

USA PATRIOT Act, Section 319(b)(2)(A)1

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 5, pp. 151-152

 According to the BSA/AML Manual1, one purpose of filing SARs is to identify violations or potential violations of law to the appropriate law enforcement authorities for criminal investigation. Therefore, when an institution receives a document request from law enforcement with regard to an STR that the institution has filed, it should cooperate and provide the documents that were previously collected to support the STR. This will help the law enforcement agency to conduct its investigation and follow up on the suspicious activity reported by the institution. The institution should also maintain the confidentiality of the STR and the document request, and avoid tipping off the customer or any other person involved in the suspicious activity.

References:

BSA/AML Manual1

Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations2

Suspicious Transaction Report STR3

The correct answer is B, C, and E, as these three present the highest anti-money laundering or sanctions risk and will require controls prior to launch. According to the FATF Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers1, P2P transactions pose significant challenges for AML/CFT compliance, as they may involve anonymous or pseudonymous parties, cross-border transfers, real-time settlement, and limited information on the beneficiaries. These factors increase the risk of money laundering, terrorist financing, and sanctions evasion, as well as the difficulty of detecting and reporting suspicious activity. Therefore, the institution should implement appropriate controls to mitigate these risks, such as:

Conducting enhanced due diligence on customers who use the P2P service, especially if they are located in high-risk jurisdictions or are involved in high-risk activities1.

Implementing transaction monitoring systems that can identify and flag unusual or suspicious patterns of behavior, such as large or frequent transfers, transfers to or from sanctioned entities or countries, or transfers that do not match the customer’s profile or expected activity12.

Applying the travel rule, which requires the originator and beneficiary VASPs (or financial institutions) to exchange and retain information on the parties involved in the transfer, such as their names, account numbers, addresses, and national identification numbers13.

Establishing information-sharing and cooperation mechanisms with other VASPs, financial institutions, and regulators, to facilitate the exchange of relevant data and intelligence on P2P transactions and customers14.

References: 1: Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers - FATF, page 13-16, 28-29, 32-33, 40-412: AML and Compliance Solution for The P2P Industry - Sanction Scanner3: P2P Money Laundering: How to Comply - ComplyAdvantage4: 2024 National Money Laundering Risk Assessment - U.S. Department of the Treasury, page 17.

According to the ACAMS study guide, one of the red flags for money laundering in loan transactions is “the use of shell companies or other legal entities whose ownership is not transparent or whose beneficial owners are unknown” (p. 223). Money launderers may use such entities to hide their identity and the source of their funds, or to create complex layers of transactions to obscure the trail of money. The other options are not necessarily indicative of money laundering risk, as they could be explained by legitimate factors such as the location of the property, the repayment schedule, or the choice of attorney.

References:

ACAMS. (2020). Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.

MLO Mentor: Anti-Money Laundering 1

Compliance Obligations of Certain Loan or Finance Company Affiliates of Federally Regulated Banks and Other Financial Institutions 2

According to the CAMS study guide, chapter 4, page 851, bearer shares are shares that do not have the name of the owner registered on them, and the ownership is transferred by the physical delivery of the share certificate. This means that the true beneficial owner of the company can be hidden or changed without any record or notification. Bearer shares are considered a high-risk factor for money laundering and terrorist financing, as they can facilitate the movement and concealment of illicit funds through anonymous corporate vehicles. Therefore, the company having bearer shares should cause the most suspicion of money laundering among the options given.

The other options are not necessarily indicative of money laundering, although they may have some risk implications depending on the context and the customer profile. Option A, the jurisdiction being a known tax haven, may suggest that the company is seeking to avoid or minimize taxes, but this does not imply that the company is involved in money laundering, as there may be legitimate tax planning or optimization purposes. Option C, the corporation director being a European citizen, may indicate that the company has some cross-border or international activities, but this does not imply that the company is involved in money laundering, as there may be valid business or personal reasons for the director’s nationality. Option D, no financial statements being filed for 3 years, may suggest that the company is not complying with the accounting or reporting standards of the jurisdiction, but this does not imply that the company is involved in money laundering, as there may be other explanations or mitigating factors for the lack of financial statements.

References:

1: ACAMS CAMS Study Guide - 6th Edition, Chapter 4, page 85:

Physical certificates are documents that represent ownership of securities, such as stocks or bonds, that are issued by a company or a government. Physical certificates present a money laundering risk to broker-dealers for two reasons:

The trade information on a physical certificate can be easily altered, such as the name of the owner, the date of issuance, or the number of shares. This can facilitate the concealment or falsification of the origin, ownership, or value of the securities, and enable the laundering of illicit funds through the purchase or sale of the securities.

Physical certificates may be provided to nominees for deposit or settled in off-market transactions, such as private placements, bearer bonds, or direct transfers. This can bypass the normal reporting or recordkeeping requirements of the broker-dealer, and avoid the scrutiny or verification of the identity, source of funds, or beneficial ownership of the securities.

References:

Two Reasons Physical Certificates Pose Money Laundering Risks to Broker …

CAMS Certifications: How to Get CAMS Certified | ACAMS

ACAMS Online Certificates | ACAMS

According to the CDD Rule, covered financial institutions must establish and maintain written procedures that are reasonably designed to identify and verify beneficial owners of legal entity customers and to include such procedures in their anti-money laundering compliance program1. These procedures should also be updated as necessary to reflect changes in the law or the institution’s risk profile2. Moreover, the institution should provide adequate training to its employees on the new requirements and monitor their compliance3.

References:

1: FinCEN Guidance, FIN-2020-G002, August 3, 2020, p. 1

2: Your responsibilities under money laundering supervision - GOV.UK, Section: Customer due diligence requirements

3: Customer identification: Know your customer (KYC) | AUSTRAC, Section: Training and awareness

 According to Article 1(3) of Directive (EU) 2015/849 (4th Anti-Money Laundering Directive, 4AMLD), “knowledge, intent or purpose” required as an element for money laundering may be inferred from objective factual circumstances. This means that the prosecution does not need to prove the actual state of mind of the offender, but can rely on the evidence of the surrounding facts and circumstances that indicate the offender’s awareness or intention to launder money. This is consistent with the approach of the Financial Action Task Force (FATF), which defines money laundering as the intentional act of concealing or disguising the origin of criminal proceeds.

References:

Directive - 2015/849 - EN - Fourth Anti-Money Laundering Directive - EUR-Lex, Article 1(3).

Preventing abuse of the financial system for money laundering and terrorist financing, Summary.

New Directive on Criminalisation of Money Laundering - eucrim, Introduction.

 Under USA PATRIOT Act Section 311, the U.S. government can impose special measures against a foreign jurisdiction, institution, or transaction that is of primary money laundering concern1. These measures can range from requiring additional recordkeeping and reporting to prohibiting or restricting the opening or maintaining of correspondent or payable-through accounts for the designated entity2. A payable-through account is a type of correspondent account that allows customers of a foreign bank to access the U.S. financial system by writing checks or making wire transfers from the foreign bank’s account at a U.S. bank3.

In this case, the U.S. government has enacted special measures against a designated entity that has a payable-through account with an EU bank, which in turn has a correspondent banking relationship with a U.S. bank. One of the possible actions that the U.S. bank might be required to take regarding the EU bank’s services for the designated entity is to obtain additional information about customers permitted to use this account. This is to ensure that the U.S. bank can identify and monitor the transactions and activities of the designated entity and its customers, and to prevent any money laundering or terrorist financing risks4.

The other actions listed are not likely to be required by the U.S. government under Section 311. Ensuring the designated entity’s confidential information is not shared with other entities is not a special measure, but a general obligation of any financial institution under privacy laws. Verifying that the EU bank serves the designated entity is not a relevant action, since the U.S. government has already designated the entity as a primary money laundering concern. Performing enhanced due diligence on the EU bank is not a specific action related to the payable-through account, but a broader requirement for any correspondent account under Section 312 of the USA PATRIOT Act5.

References:

1: USA PATRIOT Act | FinCEN.gov1 2: 311 Actions | U.S. Department of the Treasury2 3: Overview of Correspondent Banking and “De Risking” Issues - CRS Reports3 4: U.S. TREASURY DEPARTMENT OFFICE OF PUBLIC AFFAIRS4 5: Fact Sheet: Overview of Section 311 of the USA PATRIOT Act5

"The decision of whether or not to file a suspicious transaction report (also known as a suspicious activity report or SAR in the United States) often involves weighing the aggravating and mitigating factors arising from the research conducted during the investigative process. Financial institutions should draft procedures that document the factors to consider when determining whether a suspicious transaction report (STR) is appropriate."

Section 313 of the USA PATRIOT Act prohibits U.S. financial institutions from establishing, maintaining, administrating or managing correspondent accounts for foreign shell banks. A foreign shell bank is a foreign bank that does not have a physical presence in any country. To ensure compliance with this prohibition, U.S. financial institutions must obtain from each foreign bank that maintains a correspondent account the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest. This information must be updated within 30 days of any change.

References:

USA PATRIOT Act | FinCEN.gov, Section 313

US PATRIOT ACT | State Street

 A significant reduction in suspicious transaction report (STR) filings at a particular branch could indicate that the branch is not properly identifying and reporting suspicious activities, or that the branch is experiencing a change in customer behavior or risk profile. Therefore, the most appropriate action for an anti-money laundering specialist is to review the branch exception reports, which are reports that highlight transactions or activities that deviate from the expected or normal patterns, based on the customer profiles and risk assessments. By reviewing the branch exception reports, the specialist can determine whether there are any changes in activity that warrant further investigation or reporting, or whether there are any gaps or weaknesses in the branch’s compliance program or procedures.

The other options are not as appropriate as reviewing the branch exception reports, as they do not directly address the issue of suspicious activity reporting. Placing the branch on the watchlist may be a subsequent action, but it does not provide immediate insight into the reason for the reduction in STR filings. Analyzing the branch activity reports may show whether there has been a decrease in branch activity, but it does not explain why the activity has decreased, or whether the remaining activity is suspicious or not. Reviewing the staff records may reveal whether inexperienced personnel are in critical positions without appropriate training, but it does not account for other factors that may affect the branch’s compliance performance, such as management oversight, internal controls, or customer risk.

References: ACAMS CAMS Certification Study Guide (6th edition), page 361; ACAMS CAMS Certification Video Training Course, Module 2, Lesson 12; What Is a Suspicious Activity Report (SAR)? Triggers and Filing3; Reporting suspicious transactions to FINTRAC4.

The decision of whether or not to file a suspicious transaction report (also known as a suspicious activity report or SAR in the United States) often involves weighing the aggravating and mitigating factors arising from the research conducted during the investigative process. The final decision should be documented and supported by the reasoning that was used to make the determination. The transaction has already been investigated which led to the requesting of the document. The document checked out and the question did not specify the document was suspicious, therefore we can conclude an STR does not need to be completed and thus should move to document the reason why an STR wasn't completed.

The Office of Foreign Assets Control (OFAC) is a US agency that administers and enforces economic and trade sanctions based on US foreign policy and national security goals1. OFAC has a list of sanctions programs and country information for various regions and topics, such as Russia, Iran, North Korea, Cuba, and more2. If a charity is headquartered in a country on the OFAC list, it means that the US government has imposed restrictions or prohibitions on transactions or dealings with that country, its government, entities, or individuals. This poses a high risk of violating the sanctions regulations and exposing the bank to legal, regulatory, or reputational consequences. Therefore, the bank may decide to terminate the banking relationship with the charity to avoid such risks.

The other options are not sufficient reasons to terminate the banking relationship, as they may not indicate illegal or suspicious activities by the charity. A high turnover rate of official positions may be due to various factors, such as organizational changes, staff turnover, or personal reasons. It does not necessarily imply that the charity is involved in money laundering or terrorist financing. However, the bank should verify the identity and authority of the new officials and update the customer due diligence information accordingly. The charity may have several incoming international funds transfers because it receives donations or grants from different sources or countries. This is not unusual for an international charity, as long as the funds are consistent with its stated purpose and activities. The bank should monitor the transactions and report any anomalies or red flags to the relevant authorities. The flow of funds both in and out may be complex and hard to trace because the charity operates in multiple jurisdictions or sectors, or has a decentralized or layered structure. This may increase the risk of money laundering or terrorist financing, but it does not necessarily mean that the charity is engaged in such activities. The bank should conduct enhanced due diligence and ongoing monitoring of the charity’s transactions and beneficiaries, and apply a risk-based approach to mitigate the potential risks.

References: 1: Sanctions List Search Tool | Office of Foreign Assets Control 2: Sanctions Programs and Country Information | U.S. Department of the Treasury

This is the correct answer because the institution must ensure that the beneficiaries of the transfers are not on a terrorist watch list, such as the United Nations Security Council Consolidated List, the U.S. Treasury Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons List, or the European Union Terrorism List. These lists contain the names of individuals, entities, and groups that are subject to sanctions or other measures due to their involvement or association with terrorism or terrorist financing. The institution must screen the beneficiaries of the transfers against these lists and report any matches or hits to the relevant authorities. Failing to do so may expose the institution to legal, regulatory, or reputational risks, as well as facilitate the financing of terrorism.

References:

ACAMS CAMS Certification Video Training Course1, Module 3: International AML/CTF Standards, Lesson 3.2: International AML/CTF Standards

ACAMS CAMS Study Guide, 6th Edition2, Chapter 3: International AML/CTF Standards, Section 3.2: International AML/CTF Standards, pp. 57-58

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 3: International AML/CTF Standards, Section 3.2: International AML/CTF Standards, Slide 12

Institutions that violate anti-money laundering laws may face various risks and consequences, such as legal, regulatory, reputational, and operational risks. As demonstrated by the 2012 HSBC settlement with United States authorities, two of the most significant risks are:

Forfeiture of assets. This means that the institution may have to surrender some or all of its assets that are related to the money laundering activities or violations. For example, HSBC agreed to forfeit $1.256 billion as part of its deferred prosecution agreement with the US Department of Justice1.

Civil money penalties. This means that the institution may have to pay fines or penalties to the government or other regulatory agencies for violating the anti-money laundering laws or regulations. For example, HSBC agreed to pay $665 million in civil money penalties to various US regulators, including the Office of Foreign Assets Control, the Federal Reserve Board, and the Office of the Comptroller of the Currency1.

The other two options, C and D, are not as common or relevant to the 2012 HSBC settlement. Loss of bank charter/license may occur in extreme cases where the institution is deemed unfit to operate or poses a serious threat to the financial system. Imprisonment of bank employees may occur if the employees are found guilty of criminal charges, such as fraud, conspiracy, or wilful violation of anti-money laundering laws. However, these outcomes are usually reserved for individuals, not institutions, and depend on the specific facts and circumstances of each case.

References:

1: HSBC announces settlements with authorities, 2012,

2: Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and HSBC Holdings plc, 2012,

3: HSBC settles on record US fee, 2012,

4: HSBC pays record $1.9bn fine to settle US money-laundering accusations, 2012,

5: HSBC to pay $1.9bn in US money laundering penalties, 2012,

According to the Wolfsberg Principles on Private Banking, the bank should apply additional diligence to customers who present a higher risk of money laundering or other financial crimes. Some of the indicators for defining such customers are:

Persons residing in or having funds from countries with inadequate AML standards, sanctions, embargoes, or other measures that indicate a higher risk of money laundering or terrorist financing12.

Persons engaged in business activities known to be susceptible to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, art and antiquities, etc13.

Persons determined to be Politically Exposed Persons (PEPs), who are individuals who hold or have held positions of public trust or influence, or their family members or close associates, and who may pose a higher risk of corruption, bribery, or abuse of power14.

Persons who receive funds from a correspondent banking relationship are not necessarily required additional diligence, unless they fall under any of the above categories or other risk factors. Correspondent banking is a service provided by one bank to another bank to facilitate cross-border transactions, and it is subject to its own set of AML standards and due diligence measures5.

References:

Wolfsberg Anti-Money Laundering Principles for Private Banking (2012) 1

FATF High-Risk and Other Monitored Jurisdictions

FATF Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals

FATF Guidance on Politically Exposed Persons (Recommendations 12 and 22)

FATF Guidance on Correspondent Banking Services

This method is indicative of potential money laundering and terrorist financing activity because it involves several red flags, such as:

The use of cash, which is anonymous and difficult to trace

The urgency of the transfer, which may suggest a need to move funds quickly before they are detected

The destination of the transfer, which may be a high risk country with weak anti-money laundering (AML) and counter-terrorism financing (CTF) controls or sanctions

The lack of information about the client and the beneficiary, which may indicate a lack of due diligence or customer identification

These factors may indicate that the client is trying to conceal the source, ownership, or purpose of the funds, or that the funds are related to illicit activities such as money laundering or terrorist financing.

References:

ACAMS CAMS Certification Video Training Course1, Module 2: Money Laundering Risks and Methods, Lesson 2.2: Money Laundering Methods

ACAMS CAMS Study Guide, 6th Edition2, Chapter 2: Money Laundering Risks and Methods, Section 2.2: Money Laundering Methods, pp. 35-36

ACAMS CAMS Examination Preparation Seminar, 6th Edition3, Chapter 2: Money Laundering Risks and Methods, Section 2.2: Money Laundering Methods, Slide 14

According to the FATF Recommendations, the competent authority that should directly receive suspicious or unusual transaction reports is the financial intelligence unit (FIU). The FIU is a central, national agency responsible for receiving, analyzing and disseminating information related to money laundering and terrorist financing. The FIU should have operational independence and autonomy, and should be able to exchange information with other domestic and foreign authorities. The FIU should also provide feedback to the reporting entities on the use and value of their reports.

References: =

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

FATF Recommendations, Recommendation 29: Financial Intelligence Units

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.

References: =

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

Designating a country as being of “prime money laundering concern” allows the U.S. government to impose one or more of five special measures under Section 311 of the USA PATRIOT Act12. These special measures are intended to protect the U.S. financial system from the risks posed by the designated country, such as money laundering, terrorist financing, or other illicit activities. The fifth special measure, which is the most severe, authorizes the Treasury Department to prohibit U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for foreign financial institutions that involve the designated country12. Correspondent accounts are accounts that enable foreign banks to access the U.S. financial system and provide services to their customers, while payable-through accounts are accounts that allow foreign banks to offer their customers direct access to the U.S. financial system3. Closing these accounts effectively cuts off the designated country from the U.S. financial system and imposes significant costs and burdens on its financial sector.

References:

1: 311 Actions | U.S. Department of the Treasury

2: Press Releases - U.S. Department of the Treasury

3: Anti-Money Laundering Laws and Regulations USA 2023-2024

 Section 311 of the USA PATRIOT Act grants the Secretary of the Treasury the authority to designate foreign jurisdictions, financial institutions, classes of transactions, or types of accounts as being of primary money laundering concern, and to impose one or more of five special measures on them. These special measures range from requiring enhanced recordkeeping and reporting to prohibiting U.S. financial institutions from opening or maintaining correspondent accounts for the designated entities. The purpose of these special measures is to protect the U.S. financial system from money laundering and terrorist financing risks posed by the designated entities.

References:

USA PATRIOT Act | FinCEN.gov

FACT SHEET for Section 312 of the USA PATRIOT Act Final Regulation and Notice of Proposed Rulemaking | FinCEN.gov

International Financial Crime: Treasury’s Roles and Responsibilities Should Be Updated - GovInfo

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.

References:

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,

The USA PATRIOT Act imposes several requirements on U.S. financial institutions when dealing with foreign financial institutions, especially those that pose a high risk of money laundering or terrorist financing. Two of these requirements are:

Performing enhanced due diligence on shell banks: A shell bank is a bank that has no physical presence in any country and is not affiliated with a regulated financial group. The USA PATRIOT Act prohibits U.S. financial institutions from opening or maintaining correspondent accounts for shell banks, and requires them to take reasonable steps to ensure that their correspondent accounts are not being used by shell banks indirectly12.

Performing due diligence on correspondent accounts: A correspondent account is an account established by a financial institution to receive deposits from, make payments on behalf of, or handle other financial transactions for a foreign financial institution. The USA PATRIOT Act requires U.S. financial institutions to collect and verify certain information about the foreign financial institution, such as its ownership, licensing, and anti-money laundering policies, and to assess the risk of money laundering or terrorist financing associated with the correspondent account13.

References:

CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pages 82-84

CAMS Certifications: How to Get CAMS Certified | ACAMS, Candidate Handbook, page 14

ACAMS CAMS Certification Video Training Course - Exam-Labs, Video 3.4: Correspondent Banking and Money Laundering Risks

A customer who is nervous, uneasy, or in a hurry to cash a large cashier’s check may be trying to launder money or evade reporting requirements. The teller should complete the transaction as normal, but also flag the customer’s account for further monitoring and review. The teller should look for any unusual or suspicious patterns of activity, such as frequent large cash transactions, transfers to or from high-risk jurisdictions, or transactions that do not match the customer’s profile or expected behavior. The teller should also document the transaction and the customer’s demeanor, and report any findings or concerns to the appropriate authority within the bank.

The teller should not confer with the bank’s account going forward, as this may alert the customer to the bank’s suspicion or compromise the investigation. The teller should not file a SAR on the customer, unless there are other grounds to suspect money laundering or terrorist financing, as this may be premature or unnecessary. The teller should not file a CTR on the customer by the end of the day, unless the transaction exceeds the threshold of $10,000, as this is a legal requirement for cash transactions in the US.

References:

[ACAMS Study Guide for the CAMS Certification Examination, 6th Edition], Chapter 4: Conducting or Supporting the Investigation Process, pp. 103-104, 107-108.

Suspicious Activity Reporting - Overview, Federal Financial Institutions Examination Council, April 2018, pp. 1-2, 4-5.

Currency Transaction Reporting - Overview, Federal Financial Institutions Examination Council, April 2018, pp. 1-2, 4-5.

17 AML Analyst Interview Questions and Answers, CLIMB, July 15, 2022.

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.

References:

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

According to the CAMS study guide, chapter 1, page 91, placement is the first stage of money laundering, where the illicit funds are introduced into the financial system. This stage involves the highest risk of detection, as the money launderers may use various methods to avoid suspicion, such as structuring, commingling, or using cash-intensive businesses. Placement is followed by layering and integration, which are the second and third stages of money laundering, where the illicit funds are moved and disguised through multiple transactions and entities, and then integrated into the legitimate economy as seemingly legal assets.

The other options are not the financial stages of money laundering, although they may be related to some aspects or techniques of money laundering. Option A, integration, is the final stage of money laundering, not the first. Option B, structuring, is a method of placement, not a stage of money laundering. Structuring, also known as smurfing, is the practice of breaking down large amounts of cash into smaller deposits or transactions to avoid reporting thresholds or scrutiny. Option C, off shoring, is a term that refers to the relocation of assets or activities to another jurisdiction, usually for tax or regulatory advantages. Off shoring may be used by money launderers to exploit the differences or loopholes between jurisdictions, but it is not a stage of money laundering.

References:

1: ACAMS CAMS Study Guide - 6th Edition, Chapter 1, page 9:

The correct answer is A and C. Law enforcement should determine who are the signatories on the account and examine the flow of money from the company to the individual in an effort to determine if it is legitimate. These steps would help to identify the source and destination of the funds, the purpose and nature of the transactions, and the possible involvement of money laundering or other financial crimes. Asking the bank for the history of the multi-level marketing company (B) may not be relevant or useful, as the company may have a legitimate business model or a false front. Examining possible Suspicious Activity Report information received from the local Financial Intelligence Units (D) may be helpful, but it is not a necessary step, as the bank may not have filed any reports or the reports may not contain sufficient information.

References:

ACAMS CAMS Certification Video Training Course1, Module 4: Conducting or Supporting the Investigation Process, Lesson 1: Investigating Techniques for Law Enforcement

ACAMS CAMS Certification Study Guide2, Chapter 4: Conducting or Supporting the Investigation Process, Section 4.1: Investigating Techniques for Law Enforcement, pp. 125-126

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.

References:

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

According to the Wolfsberg Financial Crime Principles for Correspondent Banking1, a shell bank is defined as a bank that has no physical presence in the jurisdiction in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision. Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low level staff does not constitute physical presence. Therefore, a shell bank meets the criteria A, B, and D, as it does not conduct business at a fixed address, does not employ one or more individuals or maintain operating records at that address, and is not subject to inspection by the banking authority that licensed it. Criterion C is not specific to shell banks, as any bank, whether shell or not, may or may not be subject to AML laws that require it to implement an AML program, depending on the jurisdiction.

References:

Wolfsberg Financial Crime Principles for Correspondent Banking1, Section: Definitions, pp. 3-4.

According to the web search results, one of the methods that FATF-style regional bodies (FSRBs) use to understand the inherent money laundering and terrorist financing risks in their regions is to conduct regional-level research and analysis of the money laundering and terrorist financing methods and trends using standards and templates used for FATF typologies reports12. Typologies are the various techniques used to launder money or finance terrorism, and typologies reports are the documents that describe these techniques, identify the vulnerabilities and risks, and provide case studies and best practices to prevent and detect them3. The FATF and its FSRBs produce typologies reports on a regular basis, covering different topics and sectors relevant to their regions and the global community3. By conducting regional-level research and analysis, FSRBs can enhance their understanding of the specific money laundering and terrorist financing threats and challenges faced by their member countries, and provide them with useful guidance and recommendations to mitigate these risks12.

The other options are not correct because they are either not the methods used by FSRBs to understand the inherent money laundering and terrorist financing risks in their regions, or they are not consistent with the FATF standards and expectations. Requiring member countries to develop statistical metrics over money laundering and terrorist financing crimes may be a useful way to measure the effectiveness of their anti-money laundering and counter-terrorist financing (AML/CFT) systems, but it is not a method used by FSRBs to understand the risks in their regions. Rather, it is a requirement imposed by the FATF on all countries to collect and maintain comprehensive statistics on matters relevant to the effectiveness and efficiency of their AML/CFT systems4. Requiring participating financial institutions of their members to file suspicious transaction reports (STRs) to the regional body may be a violation of the FATF standards, which state that financial institutions should report any suspicious transactions to the financial intelligence unit (FIU) of their country, not to any regional or international body5. Moreover, STRs are confidential and protected by legal provisions, and should not be disclosed to any third party without the consent of the FIU5. Conducting global research on money laundering and terrorist financing trends and reporting their findings in their own typologies report may be a duplication of the FATF’s work, as the FATF is the global standard-setter and policy-maker for AML/CFT, and produces typologies reports that cover the global trends and issues3. FSRBs should focus on the regional-level research and analysis, and coordinate and cooperate with the FATF and other FSRBs to share information and experiences12.

References: 5678910

The auditor should include the regulatory violation in the audit report and report it to the board of directors. This is because the auditor has the responsibility to report any findings of non-compliance or material weaknesses in the institution’s internal controls, policies, and procedures. The auditor should also provide recommendations for corrective actions and follow-up on their implementation. The board of directors has the ultimate oversight and accountability for the institution’s compliance program and should be informed of any significant issues or risks that may affect the institution’s reputation, operations, or regulatory status12.

References:

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 6: Developing an Effective Anti-Money Laundering Program, p. 125-126 2: The Wolfsberg Group, The Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, October 2014, p. 7,

According to the CAMS Certification Package - 6th Edition1, the decision to keep or close an account after filing a suspicious transaction report (STR) should be based on a risk-based approach that considers the nature and severity of the suspicious activity, the customer profile and relationship, the regulatory and legal obligations, and the reputational and operational risks for the institution. The financial impact, the administrative costs, and the number of accounts closed are not the primary factors in determining the appropriate course of action. Therefore, the correct answer is B. Procedures to ascertain the potential risk to the organization.

References:

CAMS Certification Package - 6th Edition1, Chapter 5: Risk Management, Section: Account Closure, pp. 211-212.

The Financial Action Task Force (FATF) 40 Recommendations address the transparency and beneficial ownership of legal persons (such as companies, foundations, associations, etc.) and legal arrangements (such as trusts, fiducies, anstalts, etc.) in Recommendations 24 and 25. These recommendations aim to prevent the misuse of legal persons and arrangements for money laundering, terrorist financing and other illicit purposes, by requiring countries to ensure that accurate and up-to-date information on the natural persons who ultimately own or control them (the beneficial owners) is available to the competent authorities in a timely manner.

References:

CAMS Study Guide - 6th Edition, Chapter 4, page 112

CAMS Certification Exam Outline, Domain 1, Task 1.2, Skill 1.2.2

Guidance on Transparency and Beneficial Ownership, FATF, October 2014

Recommendation 24: Transparency and beneficial ownership of legal persons, FATF

[Recommendation 25: Transparency and beneficial ownership of legal arrangements], FATF