CAMS Certified Anti-Money Laundering Specialist (the 6th edition) Questions and Answers

The Office of Foreign Assets Control (OFAC) is a department of the U.S. Treasury that administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals1. OFAC regulations cover all persons and entities within the U.S., all U.S.-domiciled entities and their foreign branches, and all U.S. citizens, wherever located or employed2. These include U.S. banks, U.S. corporations, U.S. subsidiaries of foreign corporations, U.S. residents, and U.S. citizens living or traveling abroad3. OFAC regulations do not cover foreign-based entities that have U.S. customers, unless they are owned or controlled by U.S. persons or entities4.

References: 1: Home | Office of Foreign Assets Control 2: eCFR :: 31 CFR Chapter V – Office of Foreign Assets Control, Department of the Treasury 3: FFIEC BSA/AML Office of Foreign Assets Control - Office of Foreign Assets Control 4: Office of Foreign Assets Control (OFAC): Definition, Sanctions

 If an employee of a financial institution is found to have assisted in money laundering or any other criminal activity, the institution should take appropriate disciplinary action and report the employee to the relevant authorities. This is not only a legal obligation, but also a sound compliance practice to protect the institution’s reputation and integrity. Disciplining the employee without informing the authorities would be insufficient and potentially expose the institution to further legal risks. Ignoring the employee’s involvement or requiring additional training for all employees would be ineffective and inappropriate responses.

References:

ACAMS CAMS Certification Package - 6th Edition, Chapter 5: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pp. 121-1221

ACAMS CAMS Certification Package - 6th Edition, Chapter 6: AML Compliance Program, pp. 143-1441

ACAMS CAMS Certification Video Training Course, Module 5: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 5.2: International Standards and Best Practices2

ACAMS CAMS Certification Video Training Course, Module 6: AML Compliance Program, Lesson 6.4: Internal Controls2

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

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

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

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

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)

The Patriot Act, enacted in 2001, introduced several provisions to enhance the anti-money laundering and counter-terrorist financing (AML/CFT) measures for U.S. banks and their foreign correspondent relationships. Some of the potential issues for foreign financial institutions (FFIs) maintaining correspondent accounts with U.S. banks under the Patriot Act are:

Cancellation of correspondent banking relationships: The Patriot Act requires U.S. banks to conduct due diligence and enhanced due diligence on their foreign correspondent accounts, and to terminate any account that poses a significant risk of money laundering or terrorist financing. This may result in the cancellation of correspondent banking relationships with FFIs that do not meet the U.S. standards or cooperate with the U.S. authorities. The loss of correspondent banking relationships may affect the FFIs’ ability to access the U.S. financial system and provide services to their customers.

Forfeiture of funds in a U.S. interbank account: The Patriot Act authorizes the U.S. government to seize and forfeit any funds in a U.S. interbank account that are involved in or traceable to money laundering or terrorist financing activities. This means that FFIs may face the risk of losing their funds in a U.S. interbank account if they or their customers are suspected or accused of engaging in illicit activities. The forfeiture of funds may have significant financial and reputational consequences for the FFIs and their customers.

Prohibition of correspondent accounts for shell banks: The Patriot Act prohibits U.S. banks from establishing or maintaining correspondent accounts for shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group. This means that FFIs that are shell banks or have relationships with shell banks cannot access the U.S. financial system through correspondent accounts. The prohibition of correspondent accounts for shell banks aims to prevent the use of shell banks as vehicles for money laundering and terrorist financing.

References:

CAMS Study Guide, 6th Edition, Chapter 4: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pp. 81-841

USA PATRIOT Act, Title III: International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, Sections 312, 319, and 3132

Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, October 2014, pp. 3-43

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

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the best practices for hiring an AML officer is to do a thorough background check, including verifying the candidate’s credentials, qualifications, references, and reputation1. This is because the AML officer plays a crucial role in ensuring the compliance and integrity of the financial institution, and therefore must have the necessary skills, knowledge, experience, and ethics to perform the job effectively and professionally. A background check can also help to identify any potential conflicts of interest, criminal records, or regulatory sanctions that may affect the candidate’s suitability for the position1. The other options are incorrect because:

B. Confering with the regulatory agency may not be necessary or appropriate, as the hiring decision is ultimately the responsibility of the financial institution, and the regulatory agency may not have any specific or relevant information or guidance on the candidate2.

C. Hiring the individual, relying on the recommendation of the correspondent, may not be sufficient or prudent, as the correspondent may have different standards, expectations, or interests than the financial institution, and may not have conducted a comprehensive or objective assessment of the candidate3.

D. Hiring the individual on a probationary basis may not be feasible or fair, as the AML officer role requires a high level of trust, authority, and responsibility, and the financial institution may not be able to evaluate the candidate’s performance or potential in a short period of time4.

References:

1: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 147

2: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 148

3: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 147

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 148

 An automated transaction monitoring system is a tool that analyzes transactions and customer behavior for signs of money laundering or other financial crimes, and generates alerts when suspicious or unusual activity is detected. The system relies on a set of rules and parameters that define what constitutes normal and abnormal transactions, based on the risk profile and business nature of the financial institution or business. These rules and parameters need to be periodically reviewed and updated to ensure that they are effective and compliant with the latest regulations and best practices.

One of the factors that would most likely result in a change in the monitoring system parameters is when the national Financial intelligence Unit (FIU) issues new risk indicators. The FIU is a central authority that collects, analyzes, and disseminates financial intelligence related to money laundering, terrorist financing, and other financial crimes. The FIU also provides guidance and feedback to financial institutions and businesses on how to comply with their anti-money laundering (AML) obligations and improve their transaction monitoring systems. The FIU may issue new risk indicators based on its analysis of emerging trends, typologies, and threats in the financial sector, or based on international standards and recommendations. These risk indicators are intended to help financial institutions and businesses identify and report suspicious transactions more effectively and efficiently.

Therefore, when the FIU issues new risk indicators, the financial institution or business should review its existing monitoring system parameters and adjust them accordingly to reflect the new risks and scenarios. For example, the FIU may issue new risk indicators related to the use of cryptocurrencies, virtual assets, or online platforms for money laundering or terrorist financing. In that case, the financial institution or business should update its monitoring system parameters to include new rules, thresholds, or patterns that capture these activities and generate alerts for further investigation.

References:

1: The Complete Guide to Transaction Monitoring: Everything to Know

2: AML Scenarios: Transaction Monitoring Challenges

3: Setting AML Transaction Monitoring Thresholds

4: Automated Transaction Monitoring – Considerations for System Implementation

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

International wire transfers are considered to be of highest money laundering risk because they can facilitate the rapid and anonymous movement of funds across borders and jurisdictions, making it difficult for law enforcement and regulators to trace the origin and destination of the funds, and to identify the beneficial owners and controllers of the accounts involved. International wire transfers can also be used to layer and integrate illicit proceeds into the legitimate financial system, by disguising the source, ownership, and purpose of the funds. International wire transfers can involve multiple intermediaries, complex payment chains, and inconsistent or incomplete information, which can increase the risk of money laundering and terrorist financing. Therefore, international wire transfers are subject to enhanced due diligence, record-keeping, and reporting requirements under various anti-money laundering and counter-terrorist financing (AML/CTF) regulations and standards, such as the Financial Action Task Force (FATF) Recommendations1, the European Union (EU) Funds Transfer Regulation2, and the United States (US) Bank Secrecy Act3.

References:

1: FATF (2012), International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, FATF, Paris, France, Recommendation 16 and Interpretive Note to Recommendation 16. 2: Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1) 4 3: 31 U.S.C. §§ 5311-5330 and 31 C.F.R. Chapter X

V

You cannot make international money transfers unless the money is credited to the account. So first priority saving account, subsequent risk international wire transfer

"A savings account, as well as a checking account, can be one of the riskiest financial instruments for money laundering operations given the ease with which it can be opened and operated".

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

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, when a financial institution receives a law enforcement request to keep an account open that may be associated with suspicious or criminal activity, it should take the following two steps:

Maintain account records for at least five years after the request expires. This is to ensure that the financial institution can provide evidence of its compliance with the law enforcement request and the applicable anti-money laundering regulations. The five-year retention period is based on the international standard set by the Financial Action Task Force (FATF) and adopted by many jurisdictions12.

Ask for a written request from the law enforcement agency that defines the duration. This is to protect the financial institution from potential liability and to clarify the scope and purpose of the law enforcement request. The written request should specify the time period for which the account should remain open, the reason for the request, the contact information of the law enforcement officer, and the legal authority for the request34.

References:

Anti-Money Laundering Specialist (the 6th edition) study guide, page 57

FATF Recommendation 11, paragraph 2

Anti-Money Laundering Specialist (the 6th edition) study guide, page 58

Money Laundering website, article on “Law Enforcement Requests to Keep Accounts Open”

https://www.fincen.gov/resources/statutes-regulations/guidance/requests-law-enforcement-financial-institutions-maintain

 the bank teller should not provide any information to the police officer without consulting the compliance officer first. The compliance officer is responsible for ensuring that the bank follows the applicable laws and regulations regarding customer privacy, data protection, and anti-money laundering. The compliance officer can verify the authenticity and validity of the request, determine the appropriate response, and obtain any necessary approvals or authorizations before releasing any information. The bank teller should not reject the request outright, as this could be seen as uncooperative or obstructive. The bank teller should also not provide the information after management approval, as this could bypass the compliance officer’s role and expose the bank to legal or regulatory risks.

References:

Bank Records and Financial Privacy Laws - FindLaw1

Anti-Money Laundering (AML) Risk Assessment | ACAMS2

What is the Difference Between Smurfing and Structuring?3

A suspicious transaction report (STR) is a document that financial institutions must file with the relevant authorities when they detect or suspect any activity that may be related to money laundering, terrorist financing, or other criminal offences. An STR should include the details of the customer, the transaction, the reason for suspicion, and any other relevant information.

One of the indicators of suspicious activity is the use of financial instruments, such as checks, money orders, or cashier’s checks, that are drawn on other institutions and deposited in amounts under the currency reporting thresholds. This may suggest that the customer is trying to avoid the detection and reporting of large cash transactions, which is a technique known as structuring or smurfing. Structuring is illegal and may indicate that the customer is laundering money from illicit sources or evading taxes.

Another indicator of suspicious activity is the use of financial instruments that are sequentially numbered, meaning that they have consecutive serial numbers. This may suggest that the customer has obtained the instruments from the same source or issuer, and that they are using them to launder money or finance illegal activities. Sequentially numbered instruments may also indicate that the customer is involved in fraud, such as check kiting or counterfeit checks.

Therefore, if a bank conducts a quarterly review on a retail customer’s account and finds that the customer has made a number of large deposits of financial instruments drawn on other institutions in amounts under the thresholds, and that the instruments were sequentially numbered, the bank will most likely file an STR. This is because this activity does not fit the customer’s historical profile, and it raises a high level of suspicion that the customer is engaged in money laundering or other criminal activities.

References:

CAMS Study Guide - 6th Edition, Chapter 4, Section 4.2, page 108

Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations, Question 5, page 7

Anti-money laundering – handling suspicious activity, Section 6.3, page 3

Tell us about suspicious activity that may be linked to money laundering, Section 3, page 1

 According to the AML Directive of the EU, obliged entities, such as banks and other financial institutions, are required to apply enhanced vigilance in business relationships and transactions involving high-risk third countries, which are those identified by the Commission as having strategic deficiencies in their anti-money laundering and countering the financing of terrorism regimes1. The types of enhanced vigilance requirements are basically extra checks and control measures which are defined in article 18a of the Directive1. However, these requirements are not exhaustive, and obliged entities should also implement additional mitigating measures that are complementary to the enhanced customer due diligence procedures, in accordance with a risk based approach1. This means that obliged entities should assess the level of risk posed by each customer, product, service, transaction, or delivery channel, and apply appropriate measures to mitigate those risks2. The additional mitigating measures may include, for example, obtaining additional information on the customer and the beneficial owner, applying additional elements of enhanced monitoring, increasing the frequency and intensity of transaction testing, or requiring the first payment to be carried out through an account in the customer’s name with a bank subject to similar customer due diligence standards1.

References:

1: Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (Text with EEA relevance)

2: Guidance on Risk Factors, EBA, 2021

According to the ACAMS CAMS Study Guide, one of the methods that attorneys may use to facilitate money laundering is to make payments to third parties on behalf of their clients, using funds from their client accounts. This may obscure the source and destination of the funds, and create a false appearance of legitimate transactions. Therefore, making payment to various people is a red flag for potential money laundering in this situation.

References:

ACAMS CAMS Study Guide, 6th Edition, page 117

FATF Report on Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals, June 2013, page 341

AML/CFT Red Flags for Lawyers, AML-CFT.net, October 20202

The compliance officer should inform the bank’s legal counsel and follow their instructions when informed of the regulator’s notice. This is the most prudent and professional course of action, as it ensures that the compliance officer acts in accordance with the bank’s policies and procedures, as well as the applicable laws and regulations. The compliance officer should also document the communication and cooperation with the legal counsel and the regulator, and preserve all relevant records and evidence relating to the matter. The compliance officer should not take any action that could compromise the integrity or confidentiality of the investigation, such as destroying records, insisting on the president’s resignation, or informing the president of the suspicions.

References:

ACAMS CAMS Certification Study Guide, 6th Edition, page 47

ACAMS CAMS Certification Exam Outline, 6th Edition, Domain 2, Task 2.4

ACAMS CAMS Certification Video Training Course, Module 2, Lesson 2.4

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 337

The Wolfsberg Principles for Private Banking are a set of guidelines for private banking relationships that aim to prevent and detect money laundering and terrorist financing risks. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners in certain circumstances that may indicate a higher risk of money laundering or terrorist financing. Among the options given, A, B, and C are the correct choices that reflect the circumstances listed in the Principles.

Foreign jurisdictions are countries or territories other than the one where the bank operates or where the client or beneficial owner resides. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are connected to foreign jurisdictions, especially those that have weak or inadequate anti-money laundering standards, or that are subject to sanctions, embargoes, or similar measures.

High Risk Countries are countries or territories that are identified by credible sources, such as the Financial Action Task Force (FATF), as having inadequate anti-money laundering standards, or as being a source, transit, or destination of illicit funds. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are connected to high risk countries, and apply enhanced measures to mitigate the risks.

High Risk activities are activities that involve clients and beneficial owners whose source of wealth or funds originates from sectors or industries that are known to be vulnerable to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, or art and antiquities. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are engaged in high risk activities, and verify the legitimacy and origin of their wealth and funds.

References: = The main reference for this question is the document titled “Wolfsberg Anti-Money Laundering Principles for Private Banking (2012)” published by the Wolfsberg Group. You can access it by clicking here. You can also find more information about the Wolfsberg Principles and their application on the Wolfsberg Group website and the Lexology website.

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

 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 multinational institution may face challenges in conducting a full investigation of unusual activity across its foreign operations, due to the different legal and regulatory frameworks that apply in each jurisdiction. One of the main obstacles is the local privacy and data protection laws that may restrict the access, transfer, or disclosure of customer information, especially personal or sensitive data, to other entities within the same group or to external parties, such as law enforcement or regulators. Therefore, the institution should be aware of the local laws and regulations that govern the collection, processing, and sharing of customer data, and ensure compliance with them12.

References:

ACAMS Study Guide, 6th Edition, page 191

Which statement about a multinational institution’s ability to fully investigate unusual activity in all its foreign operations is correct? - Exam4Training

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A multinational institution may face challenges in conducting a full investigation of unusual activity across its foreign operations, due to the different legal and regulatory frameworks that apply in each jurisdiction. One of the main obstacles is the local privacy and data protection laws that may restrict the access, transfer, or disclosure of customer information, especially personal or sensitive data, to other entities within the same group or to external parties, such as law enforcement or regulators. Therefore, the institution should be aware of the local laws and regulations that govern the collection, processing, and sharing of customer data, and ensure compliance with them12.

References:

ACAMS Study Guide, 6th Edition, page 191

Which statement about a multinational institution’s ability to fully investigate unusual activity in all its foreign operations is correct? - Exam4Training

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

 According to the Egmont Group of Financial Intelligence Units, which is a global network of FIUs that promotes information exchange and cooperation, FIUs making requests to another FIU should disclose the reason and purpose for the request, and provide feedback on how the information was used12. These actions are intended to enhance mutual trust, transparency, and accountability between FIUs, and to facilitate the effective use of financial intelligence and information for combating money laundering, terrorist financing, and other financial crimes12. FIUs making requests should also respect the confidentiality and data protection requirements of the FIU receiving the request, and avoid imposing unreasonable or unduly restrictive conditions12.

FIUs making requests should not send the same request to all FIUs, as this would be inefficient, unnecessary, and potentially harmful. FIUs should only send requests to FIUs that are relevant and competent to provide the information they need, based on the nature and scope of the case12. Sending the same request to all FIUs could overload the system, create duplication, and compromise the security and confidentiality of the information12. FIUs making requests should also make best efforts to provide complete and factual information, but this is not an action they should take when submitting a request, but rather when responding to a request from another FIU12.

References:

Egmont Group of Financial Intelligence Units Operational Guidance for FIU Activities and the Exchange of Information

Principles for Information Exchange Between Financial Intelligence Units

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

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

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

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.”

Organized crime groups often use front companies to disguise the origin and destination of their illicit funds, and to integrate them into the legitimate economy. Front companies are businesses that appear to be engaged in lawful activities, but are actually controlled by criminals for money laundering purposes.

One reason why organized crime groups use front companies is to gain control over an entire sector of the economy, such as construction, transportation, or gambling. By using multiple front companies, they can create a network of interrelated businesses that can manipulate prices, evade taxes, and influence public contracts. This can give them a competitive advantage over legitimate businesses, and allow them to launder large amounts of money through seemingly legitimate transactions.

Another reason why organized crime groups use front companies is to comingle their illicit funds with those of legal businesses. By using the bank accounts of front companies, they can deposit cash from criminal activities along with the revenues from legitimate operations, making it harder to trace the source of the funds. They can also transfer funds between different front companies, or use them to pay for goods and services, creating layers of transactions that obscure the money trail.

References:

CAMS Study Guide - 6th Edition, Chapter 2, Section 2.2, page 43

A Guide to the 6th Anti-Money Laundering Directive, Part 2, page 9

Money Laundering and Financial Crimes, Chapter 2, page 29

 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

Wire stripping is the process of removing or altering the identifying information associated with a wire transfer to make it difficult to trace the origin or destination of the funds. This technique is commonly used in money laundering schemes to conceal the illicit source of funds and avoid detection by authorities or sanctions screening systems. In this case, the bank’s operations team deliberately removed the reference to the sanctioned company from the wire transfer message, thus violating the FinCEN “Travel Rule” and facilitating the evasion of sanctions.

References:

Wire Stripping in Anti Money Laundering Parlance

Wire Transfer Red Flags: Understanding Money Laundering and Fraud Risks

Wire Stripping

According to the third European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing1, Member States may allow the identity verification of the beneficiary under the policy to be carried out at or before the time of payout or before the beneficiary intends to exercise rights vested under the policy, provided that the following conditions are met:

the beneficiary is identified as a natural or legal person or a legal arrangement, and the verification of the identity is not possible earlier, due to the nature of the product or the transaction;

there is a low risk of money laundering or terrorist financing, taking into account the type of policy, the product features, the premium amount, and the distribution channel;

the Member States adopt appropriate risk-sensitive measures to prevent the misuse of the policy during the life of the relationship.

This provision is intended to accommodate the specificities of the life insurance sector, where the beneficiary may not be known at the time of the conclusion of the contract, or may change during the life of the policy. However, the Directive also requires that the identity verification of the beneficiary is carried out as soon as possible after the establishment of the business relationship, and that the insurance undertaking applies enhanced customer due diligence measures when the beneficiary is a politically exposed person.

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 (OJ L 309, 25.11.2005, p. 15) 2

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.”

https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/wolfsbergstandards/10.%20Wolfsberg-Private-Banking-Prinicples-May-2012.pdf

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 Wolfsberg Anti-Money Laundering (AML) Principles for Correspondent Banking, one of the key aspects of establishing and maintaining a correspondent relationship is to conduct a risk-based due diligence on the respondent bank, which includes obtaining approval from at least one person other than the person sponsoring the relationship12. This is to ensure that the correspondent bank has a clear understanding of the nature, purpose, and expected activity of the relationship, as well as the respondent bank’s ownership, governance, AML policies, and customer base12.

Another aspect of the Wolfsberg AML Principles is to recognize and assess the factors that may increase the risk inherent in a correspondent relationship, such as the involvement of politically exposed persons (PEPs), the presence of downstream (nested) correspondents, the geographic location of the respondent bank and its customers, and the types of products and services offered by the respondent bank12. These factors may require enhanced due diligence, monitoring, and reporting of suspicious activities by the correspondent bank, as well as the application of appropriate risk mitigation measures12.

References:

1: Wolfsberg Correspondent Banking Principles 20221

2: Wolfsberg Anti-Money Laundering Principles for Correspondent Banking2

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

The following were the key features of the Second Directive:

• It extended the scope of the First Directive beyond drug-related crimes. The definition of “criminal activity” was expanded to cover not just drug trafficking, but all serious crimes, including corruption and fraud against the financial interests of the European community.

• It explicitly brought bureaux de change and money remittance offices under AML coverage.

• It clarified that knowledge of criminal conduct can be inferred from objective factual circumstances.

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

References:

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

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

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

According to the Anti-Money Laundering Specialist (the 6th edition) by ACAMS, the independent testing of an institution’s anti-money laundering program should be conducted by a person who reports directly to the Board of Directors or a Board Committee. This ensures that the person conducting the testing has the necessary authority, independence, and objectivity to evaluate the program’s adequacy and effectiveness, and to report any findings or recommendations to the senior management1. The person conducting the testing should also have the appropriate knowledge, skills, and experience in the anti-money laundering field, and should be familiar with the institution’s products, services, customers, and risks2.

The other options are not necessarily suitable or qualified to perform the independent testing of an institution’s anti-money laundering program. For example:

A certified specialist in the anti-money laundering field may have the relevant expertise and credentials, but may not have the required independence or reporting line to conduct the testing. For instance, if the certified specialist is an employee of the institution who is involved in the implementation or operation of the anti-money laundering program, then there may be a conflict of interest or a lack of objectivity in the testing process1.

A former anti-money laundering officer from a similar institution may have the relevant experience and background, but may not have the current knowledge or familiarity with the institution’s anti-money laundering program, policies, procedures, or systems. Moreover, the former anti-money laundering officer may have a personal or professional relationship with the institution or its staff, which may compromise the independence or integrity of the testing process1.

A retired government regulator or federal law enforcement officer may have the relevant authority and credibility, but may not have the specific skills or qualifications to conduct the testing. For instance, the retired regulator or law enforcement officer may not be well-versed in the latest anti-money laundering standards, regulations, or best practices, or may not be able to apply them to the institution’s unique risk profile, products, services, or customers1.

References:

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

What Is An AML Compliance Program? | ComplyAdvantage

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

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 USA PATRIOT Act is a comprehensive legislation that was enacted in response to the terrorist attacks of September 11, 2001, and aimed to strengthen the US government’s ability to prevent, detect, and prosecute money laundering and terrorist financing. Among its many provisions, the USA PATRIOT Act contains several sections that have extraterritorial reach, meaning that they apply to foreign entities or activities that have a nexus with the US. Three of these sections are:

Section 319(b), which allows for the US Attorney General or the Secretary of the Treasury to issue a subpoena or other legal order to any foreign bank that maintains a correspondent account in the US, requiring the production of records relating to such account or any account at the foreign bank, including records maintained outside the US12. This section also allows foreign banks to voluntarily designate a registered agent in the US to accept service of such subpoenas or orders12.

Section 313, which prohibits US financial institutions from establishing, maintaining, administering, or managing correspondent accounts for foreign shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group34. This section also requires US financial institutions to take reasonable steps to ensure that their correspondent accounts with foreign banks are not being used to provide banking services indirectly to foreign shell banks34.

Section 311, which authorizes the Secretary of the Treasury to designate foreign jurisdictions, financial institutions, classes of transactions, or types of accounts as being of “primary money laundering concern” and to impose special measures to address such concerns . These special measures may include requiring US financial institutions to obtain and retain information on the beneficial owners of foreign accounts, prohibiting or imposing conditions on the opening or maintaining of correspondent or payable-through accounts for foreign financial institutions, or requiring US financial institutions to identify the customers of their foreign correspondent account holders . The Secretary of the Treasury may also order a US financial institution to terminate a correspondent account within 10 days if the foreign bank fails to comply with a subpoena or other request for information under Section 319(b) .

References:

1: USA PATRIOT Act, Section 319(b)

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

3: USA PATRIOT Act, Section 313

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 120

: USA PATRIOT Act, Section 311

: ACAMS, CAMS Certification Package - 6th Edition, Chapter 4, page 119

 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

REPORTING OF SUSPICIOUS TRANSACTIONS [https://www.fatf- gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf] If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, by law, to report promptly its suspicions to the financial intelligence unit (FIU). According to the Financial Action Task Force‘s (FATF) Recommendation 20, a suspicious transaction report (STR) or a suspicious activity report (SAR) is filed by a financial institution or, by a concerned citizen, to the local Financial Intelligence Unit if they have reasonable grounds to believe that a transaction is related to criminal activity. [https://aml-cft.net/library/suspicious-transaction-report-str-suspicious-activity-report-sar/]

According to the Wolfsberg Group, a correspondent bank should evaluate the distribution of downstream correspondents and identify any direct or indirect issues when it permits “nested” relationships, which are arrangements where a respondent bank provides correspondent banking services to other banks that are not customers of the correspondent bank. This step is important to understand the types of financial institutions to whom the services are being offered and the potential risks they pose. The correspondent bank should also obtain information on the nature and extent of the nested activity, the due diligence performed by the respondent bank on the nested banks, and the controls and monitoring in place to prevent financial crime.

References:

Wolfsberg Correspondent Banking Principles 20221, Section 4.5: Nested Relationships

Guidance on Correspondent Banking Services2, Section 3.2.2: Nested Correspondent Banking Relationships

According to the FATF Recommendation 10, financial institutions should conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds. This is one of the core measures of customer due diligence (CDD) that aim to prevent and detect money laundering and terrorist financing risks.

References: = The main reference for this question is the document titled “International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation - The FATF Recommendations” published by the FATF in February 2018. You can access it by clicking here. You can also find more information about the CDD measures and the risk-based approach on the FATF website, the CFATF website, the Central Bank of Ireland website, and the Medium blog.

According to the CAMS Certification Package - 6th Edition1, a financial institution that processes a wire transfer is required to file a suspicious transaction report (STR) in the jurisdiction where it is located, if it detects any red flags or indicators of money laundering, terrorism financing, or other financial crimes. The financial institution does not need to file an STR in the jurisdictions of the originator or the beneficiary of the wire transfer, unless it has a branch or a subsidiary there. Therefore, the correct answer is A. The transaction in Country A.

References:

CAMS Certification Package - 6th Edition1, Chapter 4: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section: Wire Transfers, pp. 161-162.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, individuals who violate anti-money laundering laws can face severe consequences, such as imprisonment, fines, asset forfeiture, and sanctions. These penalties can apply not only to the perpetrators of money laundering, but also to the employees, managers, directors, and officers of financial institutions or other entities that fail to comply with their anti-money laundering obligations. Therefore, violations of anti-money laundering laws can pose a significant risk to individuals, both personally and professionally.

References:

Anti-Money Laundering Specialist (the 6th edition) study guide, page 9

ACAMS website, section on CAMS certification

Money Laundering website, article on “The Consequences of Non-Compliance with Anti-Money Laundering Laws”

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. https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirem ents/0

When an FI is being investigated for possible money laundering, it is important that it cooperates with the law enforcement agencies (LEAs) in a professional and transparent manner. This means that the FI should take the following steps:

Maintain centralized control over all requests and responses to ensure completeness and timely responses. This will help the FI to avoid duplication, inconsistency, or omission of information, as well as to track the status and progress of the requests and responses. It will also facilitate the communication and coordination between the FI and the LEAs, and demonstrate the FI’s willingness to cooperate12.

Review subpoenas and other information requests by senior management and an investigations group or counsel. This will help the FI to assess the scope, relevance, and legality of the requests, as well as to identify any potential risks, conflicts, or sensitivities. It will also enable the FI to prepare and provide the requested information in an accurate and timely manner, and to seek clarification or negotiation if necessary13.

The other options are not advisable, as they may indicate a lack of cooperation, obstruct the investigation, or damage the FI’s reputation. For example:

Making employees, including corporate officers, unavailable for interviews and refusing documents upon receipt of a subpoena may be considered as non-compliance, evasion, or contempt of court, and may result in legal sanctions or penalties4.

Addressing the document destruction policy to ensure the relevant documents are destroyed may be seen as tampering with evidence, destroying records, or concealing information, and may constitute a criminal offence or a breach of regulatory obligations5.

Not answering inquiries from the media directly, but rather replying, “No comment” may create a negative impression, fuel speculation, or invite criticism, and may harm the FI’s image, credibility, or trustworthiness.

References:

Cooperation between FIUs, Law Enforcement Authorities, and Prosecutors

AML and Financial crimes investigation

Mechanisms for interaction of law enforcement agencies in the field of counteracting and combating money laundering

Recommendation 30: Responsibilities of law enforcement and investigative authorities

Money laundering and illicit finance

According to Section 319(b) of the USA PATRIOT Act, U.S. financial institutions that provide correspondent accounts to foreign banks must maintain records of the owners of the foreign banks and the name and address of a U.S. resident authorized to accept service of legal process for records regarding the correspondent accounts. This requirement is intended to prevent foreign shell banks from accessing the U.S. financial system and to facilitate the investigation and prosecution of money laundering and terrorist financing activities involving foreign banks.

References:

US PATRIOT ACT | State Street

Foreign Correspondent Banking Fact Sheet - U.S. Department of the Treasury

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

 Reciprocity is one of the high-level principles that govern the relationship between the FATF and the FSRBs. It means that both the FATF and the FSRBs should respect and acknowledge each other’s work, such as standard setting, mutual evaluations, and follow-up processes. Reciprocity also implies that the FATF and the FSRBs should have similar mechanisms or practices for ensuring effective participation of their members in their activities.

References: = The main reference for this question is the document titled “High-Level Principles and Objectives for FATF and FATF-style regional bodies” published by the FATF in February 2019. You can access it by clicking here. You can also find more information about the FSRBs and their roles on the FATF website and the Sygna blog.

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

The line of business is responsible for creating, implementing and maintaining policies and procedures, as well as communicating these to all personnel. It must also establish processes for screening employees to ensure high ethical and professional standards and deliver appropriate training on AML policies and procedures based on roles and functions performed so employees aware of their responsibilities. To facilitate this, employees should be trained as soon as possible after being hired, with refresher training as appropriate.

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 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

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”.

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

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

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 5, pages 108-109

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

According to the ACAMS CAMS Certification Study Guide (6th edition), one of the challenges of information sharing within a financial group is the compliance with privacy and data protection rules that may vary across jurisdictions. Therefore, before sharing information about a customer with an affiliate, a bank should consider whether such sharing is permitted by the applicable laws and regulations, and whether the customer has consented to it. The other options are not relevant factors for information sharing in the case of an investigation.

References: ACAMS CAMS Certification Study Guide (6th edition), page 971; ACAMS CAMS Certification Video Training Course, Module 4, Lesson 22

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 38, one of the steps that a financial institution should take when it suspects money laundering activity is to file a suspicious transaction report (STR) or a suspicious activity report (SAR) to the relevant authorities. This will alert the regulators and law enforcement of the potential money laundering scheme and provide them with valuable information to trace the funds and identify the perpetrators.

Another step that a financial institution should take is to identify any unusual or suspicious wire transfers initiated by casas de cambio to jurisdictions outside of Mexico that bear no apparent business relationship with that casa de cambio. This could indicate that the casas de cambio are involved in layering and integration stages of money laundering, where they are moving the illicit funds across borders and disguising their origin and ownership. The financial institution should monitor and document these wire transfers and report them to the authorities if necessary.

Option B is not a relevant step to trace funds through the bank, as it does not provide any information about the source, destination, or purpose of the funds. A decrease in the sale of large denomination U.S. bank notes to casas de cambio by the bank could be due to various factors, such as market demand, exchange rates, or regulatory changes, and does not necessarily indicate money laundering activity.

Option C is also not a relevant step to trace funds through the bank, as it does not indicate any connection to the suspected money laundering scheme. Deposits by casas de cambio that include third-party items, such as sequentially numbered monetary instruments, could be legitimate transactions that are part of the normal business operations of the casas de cambio. Unless there is evidence that these deposits are related to the sale of large denomination U.S. bank notes or the Mexican syndicate, they are not useful for tracing the funds.

References:

ACAMS Study Guide 6th Edition, Chapter 2, page 38

Combating Money Laundering and Other Forms of Illicit Finance

Sting Operation Snares Casa de Cambio for Allegedly Laundering Millions Through U.S. Banks

Option A indicates potential money laundering activity by a lawyer, as it involves the use of a trust account to receive and transfer funds from unknown sources in high risk jurisdictions, without any apparent legitimate purpose or explanation. This could be a sign of layering, where the money launderer attempts to conceal the origin and ownership of the illicit funds by moving them through multiple accounts and jurisdictions. Option B does not necessarily indicate money laundering, as the source of the funds is a reputable entity and the transfer could be explained by a legitimate transaction or service. Option C does not necessarily indicate money laundering, as the bank draft could be a payment for a legal service or a settlement between parties. Option D does not necessarily indicate money laundering, as the cash deposit could be a fee for a legal service or a donation, and the amount could be below the reporting threshold to avoid unnecessary paperwork or scrutiny.

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

One of the most common methods of money laundering in the insurance industry is to purchase a policy with illicit funds and then request a refund of the premiums, either partially or fully, before the policy matures. This way, the money launderer can receive a legitimate payment from the insurance company, effectively washing the dirty money. This technique is also known as premium fraud or early surrender12

According to the Financial Crimes Enforcement Network (FinCEN), the most significant money laundering and terrorist financing risks in the insurance industry are found in life insurance and annuity products, because such products allow a customer to place large amounts of funds into the financial system and seamlessly transfer such funds to disguise their true origin34

Some indicators of potential money laundering through insurance products are: 12

The customer pays the premiums with cash, cashier’s checks, money orders, or other anonymous or unusual payment methods.

The customer overpays the premiums or makes multiple payments in excess of the required amount.

The customer cancels the policy during the free-look or grace period and requests a refund to a different account or a third party.

The customer purchases a policy that is inconsistent with their income, age, or risk profile.

The customer shows little interest in the benefits or terms of the policy, but is more concerned about the cancellation or surrender options.

References:

1: AML in Insurance: How to Detect & Combat Money Laundering, ComplyAdvantage, 2022

2: Anti Money Laundering (AML) In Insurance Industry In 2021, Financial Crime Academy, 2023

3: Money laundering in the insurance industry, Insurance Commission, 2022

4: Money laundering in the insurance industry, Atty. Dennis B. Funa, Business Mirror, 2016

[5]: Anti-Money Laundering Requirements: FAQs for Insurance Companies, FinCEN, 2005

https://egmontgroup.org/en/content/about

"The Egmont Group is a united body of 165 Financial Intelligence Units (FIUs). The Egmont Group provides a platform for the secure exchange of expertise and financial intelligence to combat money laundering and terrorist financing (ML/TF). This is especially relevant as FIUs are uniquely positioned to cooperate and support national and international efforts to counter terrorist financing and are the trusted gateway for sharing financial information domestically and internationally in accordance with global Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) standards.

 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

 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: https://egmontgroup.org/

https://2009-2017.state.gov/j/inl/rls/nrcrpt/2015/vol2/239473.htm\

 these are the essential components of an effective anti-money laundering program for any financial institution, especially an offshore one. According to the CAMS Study Guide, 6th Edition, an anti-money laundering program should include the following elements1:

A risk assessment that identifies and evaluates the money laundering and terrorist financing risks faced by the institution, and the measures taken to mitigate them.

A compliance program that establishes policies, procedures, and controls to prevent, detect, and report money laundering and terrorist financing activities, and to comply with the applicable laws and regulations of the host and chartering countries.

A designated compliance officer who is responsible for overseeing the implementation and maintenance of the compliance program, and for liaising with the relevant authorities and stakeholders.

A training program that provides regular and appropriate education and awareness to senior management and staff on their roles and responsibilities in relation to anti-money laundering and terrorist financing, and on the latest trends and typologies in these areas.

An independent audit function that reviews and tests the adequacy and effectiveness of the compliance program, and reports the findings and recommendations to senior management and the board of directors.

The Basel Committee on Banking Supervision’s capital adequacy requirements for the host country (answer A) are not directly related to anti-money laundering, but rather to the prudential regulation and supervision of banks. They are important for ensuring the financial soundness and stability of banks, but they are not sufficient to prevent or combat money laundering and terrorist financing2.

References:

1: CAMS Study Guide, 6th Edition, Chapter 5: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), page 139-140. 2: Basel Committee on Banking Supervision, Bank for International Settlements.

 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 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, https://home.treasury.gov/policy-issues/financial-sanctions  3: CAMS Certification Package - 6th Edition | ACAMS, Chapter 4: FATF Recommendations, p. 77-78 4: Financial Action Task Force, http://www.fatf-gafi.org/countries/#high-risk

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

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

Money laundering and terrorist financing are both forms of financial crime that involve the movement of illicit funds. However, they differ in the source and purpose of the funds. Money laundering is the process of disguising the origin, ownership, or destination of funds that are derived from illegal activities, such as drug trafficking, fraud, or tax evasion. Terrorist financing is the provision or collection of funds, by legitimate or illegitimate means, for the purpose of carrying out terrorist acts. Therefore, the anti-money laundering specialist should consider the following factors in developing a compliance program:

Related practices are used to conceal the nature of the funds. Both money launderers and terrorist financiers use similar methods to hide the true identity, source, or destination of the funds, such as using shell companies, front organizations, complex transactions, cash couriers, or cryptoassets. A compliance program should include measures to identify and verify the customers, beneficial owners, and counterparties involved in the transactions, as well as to monitor and report any suspicious or unusual activities.

Similar techniques are used to move funds. Both money launderers and terrorist financiers use the same stages of placement, layering, and integration to move funds through the financial system. Placement is the introduction of illicit funds into the legitimate financial system, such as by depositing cash, purchasing assets, or transferring funds electronically. Layering is the separation of the funds from their source, such as by using multiple accounts, jurisdictions, or intermediaries. Integration is the re-entry of the funds into the legitimate economy, such as by investing in businesses, real estate, or securities. A compliance program should include measures to detect and prevent the movement of illicit funds through the financial system, such as by applying risk-based due diligence, record-keeping, and transaction limits.

References:

CAMS Certification Package - 6th Edition | ACAMS

CAMS Certifications: How to Get CAMS Certified | ACAMS

ACAMS CAMS Certification Video Training Course - Exam-Labs

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

According to the FATF typology report 2000-20011, lawyers can provide a range of functions that can be useful to a potential money launderer, such as:

Creating complex legal arrangements, such as trusts, foundations, or corporations, that can obscure the identity and ownership of the beneficial owners or the origin and destination of the funds.

Buying and selling property, such as real estate, art, or jewelry, that can be used to transfer or store illicit proceeds or to provide a legitimate cover for the source of funds.

Performing financial transactions on behalf of a client, such as opening bank accounts, transferring funds, issuing checks, or exchanging currencies, that can facilitate the movement or concealment of illicit funds.

Providing legal advice, on the other hand, is not a function that can be directly exploited by a money launderer, unless the advice is related to the above functions or to the avoidance or evasion of anti-money laundering laws and regulations.

References:

1: FATF Terrorist Financing Typologies Report - Financial Action Task Force2

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, http://www.fatf-gafi.org/media/fatf/documents/reports/money-laundering-through-transportation-cash.pdf

 MSBs are frequently accused of being high risk for money laundering because they offer services that can facilitate the movement and conversion of illicit funds, such as currency exchange, money transmission, cheque cashing, and online payment. However, not all MSBs pose the same level of risk, and the degree of regulatory oversight and compliance requirements for MSBs may differ significantly depending on the jurisdiction they operate in. Some countries may have robust anti-money laundering (AML) regimes for MSBs, while others may have weak or inconsistent regulations, or even no regulations at all. This creates challenges and vulnerabilities for MSBs that operate across borders, as they may face different expectations and obligations from different authorities, or encounter gaps or loopholes in the AML framework. Moreover, some MSBs may operate informally or illegally, without registering or obtaining licenses from the relevant regulators, making them harder to detect and supervise. Therefore, MSBs are often perceived as high risk for money laundering, as they may be exploited by criminals who seek to take advantage of the regulatory discrepancies or deficiencies among countries.

References:

Understanding risks and taking action for money service businesses1

What Is A Money Services Business?2

Money Services Business (MSB) Information Center3

Money Services Business (MSB): Types, Examples, & AML Compliance4

The Black Market Peso Exchange (BMPE) is a trade-based money laundering technique commonly used by narcotics traffickers in Colombia and Mexico. The central feature uses a money trader to ensure that US drug sales revenue doesn’t cross any borders. Instead, those dollars are used to purchase any number of legitimate commodities from unsuspecting businesses on behalf of legitimate South American businesspersons, whose legitimate imports are used to obtain pesos for the drug cartels. This method is closely associated with international trade because it involves the exchange of goods and currencies across different countries, and it exploits the discrepancies between the official and unofficial exchange rates.

References:

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

Black Market Peso Exchange in Money Laundering - Financial Crime Academy

What is BMPE ? - Sanction Scanner

Overview - FinCEN.gov

Bank A should file a suspicious transaction report (STR) on the transaction in Country A, as it is the financial institution that observes and processes the suspicious activity in its jurisdiction. According to the FATF Recommendations, financial institutions should report any transaction that they have reason to suspect is related to money laundering, terrorist financing, or other criminal activities, regardless of the amount involved1. The STR should include information about the originator, the beneficiary, and the purpose of the transaction, as well as the reasons for suspicion2. Bank A should also comply with any legal or regulatory requirements in Country A regarding the reporting of cross-border wire transfers3.

References:

1: FATF Recommendation 20 - Reporting of suspicious transactions

2: FATF Interpretive Note to Recommendation 20

3: FATF Recommendation 16 - Wire transfers

The purchaser being a nominee is a red flag that indicates high potential for money laundering in a real estate purchase. A nominee is a person or entity that acts on behalf of another person or entity, usually to conceal the identity or beneficial ownership of the real owner. Money launderers may use nominees to purchase real estate with illicit funds, and then transfer the property to the real owner or sell it for a profit. This way, they can obscure the source and ownership of the funds, and integrate them into the legitimate economy12.

References:

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 3, pp. 77-78

FATF, Money Laundering and Terrorist Financing through the Real Estate Sector, June 20073, pp. 19-20

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.

A bank’s risk assessment is a process of identifying, measuring, and mitigating the potential risks that the bank faces in its operations, products, services, and customers. According to the ACAMS Study Guide, a bank should focus on the following areas when performing a risk assessment1:

The type and location of the institution’s clients. This involves analyzing the customer base, the types of accounts and transactions, the source and destination of funds, the level of due diligence and verification, and the risk profile of the customers. For example, a bank should consider whether its customers are individuals or entities, domestic or foreign, politically exposed persons, high-net-worth individuals, non-profit organizations, or cash-intensive businesses. The location of the customers may also indicate the level of exposure to money laundering, terrorist financing, sanctions, or tax evasion risks.

The nature and breadth of the services and products the institution provides. This involves evaluating the range and complexity of the products and services offered by the bank, the delivery channels, the payment methods, and the innovation and technology involved. For example, a bank should consider whether it offers wire transfers, correspondent banking, trade finance, private banking, trust and fiduciary services, prepaid cards, mobile banking, or cryptocurrency services. The nature and breadth of the services and products may also affect the level of transparency, traceability, and compliance of the transactions.

The geographic locations where the institution does business. This involves assessing the jurisdictions where the bank operates, where its customers reside, where its counterparties are located, and where the funds flow. For example, a bank should consider whether it has branches, subsidiaries, or affiliates in high-risk countries, whether it serves customers from high-risk countries, whether it engages in cross-border transactions, and whether it complies with the local laws and regulations of the countries where it does business. The geographic locations where the institution does business may also influence the level of exposure to political, legal, regulatory, or reputational risks.

References:

1: ACAMS Study Guide, Chapter 2: Risk Assessments, 1

The board of directors is ultimately responsible for ensuring that the financial institution has an effective anti-money laundering program that complies with the applicable laws and regulations. If the institution receives a regulatory enforcement action, the board should take prompt and corrective actions to address the deficiencies and mitigate the risks of further violations or penalties. One of the most important actions is to instruct the compliance officer to develop a plan to remediate the institution’s anti-money laundering program, which should include a root cause analysis, a gap assessment, a timeline, and a budget. The board should also monitor the implementation and progress of the remediation plan, and communicate with the regulators on a regular basis.

The other options are not appropriate actions for the board of directors to take in response to a regulatory enforcement action. Terminating the compliance officer and staff may not solve the underlying issues of the anti-money laundering program, and may create more disruption and instability. Purchasing and installing a new suspicious activity monitoring system may not be necessary or sufficient to address the deficiencies, and may entail additional costs and challenges. Hiring an attorney to protest the enforcement action may not be in the best interest of the institution, and may antagonize the regulators and escalate the situation.

References:

CAMS Certification Package - 6th Edition | ACAMS, Chapter 5: Risk Management, Section 5.2: Regulatory Examinations and Enforcement Actions, pp. 171-174.

CAMS Certifications: How to Get CAMS Certified | ACAMS, CAMS Examination Preparation Guide, Section 3: Regulatory Compliance, pp. 23-24.

These designated nonfinancial businesses and professions (DNFBPs) include — casinos when customers engage in financial transactions equal to or above a designated threshold………. — real estate agents when they are involved in transactions for clients concerning buying and selling properties; — dealers in precious metals and stones when they engage in any cash transaction with a customer at or above a designated threshold; — lawyers, notaries and independent legal professionals and accountants when they prepare or carry out transactions for clients concerning buying and selling real estate; …….; and — trust and company service providers when they prepare or carry out transactions for a client concerning certain activities ….

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: https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-4.pdf

The clients are not willing to have their names provided to the bank is a red flag that should stop the agent from discussing this potential purchase further, as this could indicate that the clients are trying to evade customer due diligence (CDD) or know your customer (KYC) requirements, or hide their beneficial ownership or source of funds. According to the U.K. Money Laundering Regulations 2017, real estate agents must conduct CDD on their customers and any beneficial owners, and verify their identity and address1. The U.K. also has a register of people with significant control (PSC) over companies, which requires companies to disclose their beneficial owners2. The use of private companies and wire transfers could also be a sign of layering, a money laundering technique that involves moving funds through multiple accounts or entities to obscure their origin3.

References:

1: U.K. Government, Money Laundering Regulations 2017, Part 2: Customer Due Diligence, Section 5-6 2: U.K. Government, People with significant control (PSC) register, Overview 3: ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorist Financing, Page 19

The branch manager should conduct further investigation before taking any other action, as this activity may indicate possible money laundering or fraud. The branch manager should review the transaction records of the customers and the teller, and look for any unusual or suspicious patterns, such as large or frequent cash deposits, round amounts, structured transactions, or inconsistent information. The branch manager should also interview the teller and the customers, and ask them about the nature and purpose of their relationship, the source and use of funds, and the reason for choosing the same teller. The branch manager should document the findings and report any suspicious activity to the appropriate authorities, if necessary.

References:

CAMS Study Guide, 6th Edition, Chapter 3, Section 3.21

CAMS Study Guide, 6th Edition, Chapter 4, Section 4.21

CAMS Exam Questions and Free Practice Test, Question 322

"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."

Dealers in antiques, precious metals, precious stones, jewelry, and art are advised to follow these practices to reduce the element of money laundering risk:

Verify the identities of all new vendors and customers and conduct due diligence on them. This is to ensure that the dealers know who they are dealing with and can assess the risk level of each customer or vendor. Due diligence may include obtaining and verifying identification documents, checking against sanctions lists or watchlists, obtaining information on the source and purpose of funds, and applying a risk-based approach to the level and frequency of due diligence.

Avoid accepting cash payment from the buyers. This is to prevent the dealers from being used as a conduit for laundering illicit cash or facilitating cash smuggling. Cash transactions are more difficult to trace and may indicate attempts to evade reporting or record-keeping requirements. Dealers should encourage the use of non-cash payment methods, such as bank transfers, cheques, or credit cards, and keep records of all payment transactions.

Insist all vendors submit an appropriate license issued by enforcement agencies authorizing the sale. This is to ensure that the dealers are not involved in the trade of stolen, smuggled, or counterfeit goods, which may be linked to money laundering or other criminal activities. Dealers should verify the authenticity and validity of the licenses and keep copies of them for record-keeping purposes.

References:

FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones, pages 9-10, 13-14, 17-18, 21-22

AML-CFT Handbook for Dealers in Precious Metals and Stones, pages 25-26, 37-38, 52-53

The anti-money laundering framework for precious stones and metals dealers in Singapore, pages 7-8, 11-12, 15-16

Dealers in Precious Metals, Stones or Jewels Required to Establish Anti-Money Laundering Programs, pages 2-3, 6-7, 10-11

The FATF 40 Recommendations are the international standards for combating money laundering, terrorist financing, and proliferation financing. They provide a comprehensive and consistent framework of measures that countries should implement in their national systems. Recommendation 5 of the FATF 40 Recommendations states that countries should criminalize the financing of terrorism, terrorist acts and terrorist organizations. This means that countries should adopt laws that make it an offence to provide or collect funds or other assets with the intention or knowledge that they will be used to carry out terrorist acts or support terrorist organizations. Countries should also ensure that such offences are punishable by effective, proportionate and dissuasive sanctions. Furthermore, countries should ensure that terrorist financing offences extend to any person who wilfully provides or collects funds or other assets by any means, directly or indirectly, with the unlawful intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out terrorist acts or support terrorist organizations. Therefore, the correct answer is D. Criminalize, as this is the action that countries should take related to the financing of terrorist acts in accordance with the FATF 40 Recommendations.

References:

FATF website

FATF 40 Recommendations - February 2012

FATF Recommendation 5 - Criminalisation of Terrorist Financing

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 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: https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-1.pdf

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

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, https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/Wolfsberg-Correspondent-Banking-Principles-2014.pdf

According to Section 313 of the USA PATRIOT Act, U.S. financial institutions are prohibited from maintaining correspondent accounts for foreign shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group. Therefore, a non-U.S. bank must provide the name and address of all shell banks that it maintains accounts for, if any, to its U.S. correspondent. This is to ensure that the U.S. financial institution does not indirectly provide services to shell banks, which pose a high risk of money laundering and terrorist financing.

According to Section 319 (b) of the USA PATRIOT Act, U.S. financial institutions that provide a correspondent account to a foreign bank must maintain records of the owners of the foreign bank and the name and address of a U.S. person who is authorized to receive service of legal process for records regarding the correspondent account. This is to facilitate the access of U.S. law enforcement authorities to information related to the correspondent account in case of an investigation or a subpoena.

The other two options, B and C, are not required by the USA PATRIOT Act, although they may be part of the due diligence or enhanced due diligence procedures that U.S. financial institutions apply to their foreign correspondent accounts, as per Section 312 of the USA PATRIOT Act.

References:

USA PATRIOT Act

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

US PATRIOT ACT

CAMS Exam: USA PATRIOT Act Requirements for Opening a Correspondent Account

According to section 312 of the USA PATRIOT Act, U.S. financial institutions that maintain correspondent accounts for foreign financial institutions must apply due diligence to such accounts. The due diligence must include obtaining information relating to the foreign bank’s anti-money laundering program, as well as the identity of any person who owns 10% or more of the foreign bank, unless the foreign bank is publicly traded. These requirements are intended to prevent the use of correspondent accounts by foreign shell banks or other entities that may pose a high risk of money laundering or terrorist financing.

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

US PATRIOT ACT | State Street

CAMS Exam: USA PATRIOT Act Requirements for Opening a Correspondent Account

Undermining the Legitimate Private Sector: One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers are known to use front companies: businesses that appear legitimate and engage in legitimate business but are in fact controlled by criminals who commingle the proceeds of illicit activity with legitimate funds to hide the ill-gotten gains. These front companies have a competitive advantage over legitimate firms as they have access to substantial illicit funds, allowing them to subsidize products and services sold at below market rates. This makes it difficult for legitimate businesses to compete against front companies. Clearly, the management principles of these criminal enterprises are not consistent with traditional free market principles, which results in further negative macroeconomic effects

Art and Antiquities: Conduits for Money Laundering and Terrorist Financing

Why Fight the Antiquities Trade?

More recently, groups like Daesh (Islamic State [IS]), al-Qaida, the Taliban and their affiliates have been engaged in ****cultural racketeering and terrorism in Iraq, Syria, Yemen, Afghanistan and elsewhere, converting patrimony into cash for weapons and troops****.

https://www.un.org/press/en/2015/sgsm17427.doc.htm

As Terrorists Diversify Fundraising Tactics, Greater Efforts Needed to Shut Down Illicit Channels, Secretary-General Tells Finance Ministers’ Meeting

Terrorists continue to adapt their tactics and diversify their funding sources. Today, Da’esh runs a multi-million-dollar economy in territories under its control. Da’esh terrorists raise money through the oil trade, extortion, undetected cash couriers, kidnapping for ransom, trafficking of humans and arms and racketeering. They loot and sell precious cultural property, shamelessly profiting from the destruction of humanity’s common heritage.

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

A customer’s account appears to function as a funnel account whereby cash deposits occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made

All of the three options reflect money laundering risk indicators in relation to a securities account, as they could suggest attempts to conceal the source or destination of illicit funds, or to avoid detection or reporting by authorities. According to the FATF Guidance for a Risk-Based Approach for the Securities Sector1, some of the common indicators of money laundering in securities transactions include:

A high level of activity in securities accounts inconsistent with the customer’s profile or investment objectives

Frequent or large movements of funds between accounts or institutions, especially involving high-risk jurisdictions or offshore locations

Use of debit cards or other payment instruments to access funds from securities accounts

Use of complex or unusual transactions or structures without apparent economic or legal purpose

References: 1 FATF Guidance for a Risk-Based Approach for the Securities Sector, pages 43-44.

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

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 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 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

http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF%20Recommendations%202012.pdf

The charity frequently withdrawing cash from the bank indicates possible terrorist financing, as cash transactions are often used to conceal the source, destination, and purpose of funds. Cash transactions also make it difficult to trace the flow of funds and identify the beneficiaries. Terrorist financiers may use charities as a cover to collect and distribute funds for their activities, and may exploit the cash-based nature of charitable donations to avoid detection12.

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 methods and trends used by criminals and terrorists to exploit the vulnerabilities of the financial system. This research and analysis is done using the standards and templates developed by the FATF for its typologies reports, which are documents that describe the common features, techniques, and patterns of money laundering and terrorist financing activities. By producing their own typologies reports, FSRBs can identify the specific risks and challenges faced by their member countries and jurisdictions, and provide guidance and recommendations on how to mitigate them.

References:

What are the 9 FATF-Style Regional Bodies (FSRBs)? - Sygna, What are FATF and FSRB typologies?

FATF-Style Regional Bodies (FSRBs) - Asia/Pacific Group on Money Laundering, What are the main duties of FSRBs?

Financial Action Task Force - Wikipedia, Typologies.

According to the ACAMS study guide, one of the training elements that should be delivered to new tellers during employee orientation is “large cash transaction reporting procedures” (p. 224). This is because tellers are often the first line of defense against money laundering and have the responsibility to identify and report any transactions that exceed the threshold of $10,000 or are otherwise suspicious. The other options are not relevant for tellers, as they are more suitable for higher-level or specialized staff.

References:

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

AML Requirements for Tellers 1

Deposit Compliance Training Courses 2

As the compliance officer is providing overview of the "bank's anti-money laundering program to a group of new tellers during employee orientation"

 The financial institution should perform further investigation to verify the legitimacy of the tour guide’s explanation and the source of funds. If the investigation reveals any suspicious or unusual activity, such as inconsistent cash flow patterns, involvement of high-risk customers or jurisdictions, or indications of money laundering or terrorist financing, the financial institution should report the activity to the authorities and consider terminating the relationship. The financial institution should also document the investigation and its findings, and update the customer’s risk profile accordingly.

References:

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

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

ACAMS MoneyLaundering.com, Article: “How to Conduct Effective Customer Due Diligence”

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

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

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

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

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

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

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

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

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

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

References:

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

The European Union Money Laundering Directives (AMLDs) are issued periodically by the European Parliament to prevent money laundering and terrorist financing and establish a consistent regulatory environment across the EU1. They apply to all member states of the European Union and require them to enact laws and/or regulations to comply with the directives2. The directives are legally binding and set forth minimum standards and obligations for financial institutions and other entities within the member states3. The directives do not set forth non-binding best practices, but rather harmonize the AML/CFT rules and procedures across the EU4. The directives do not have extraterritorial impact and do not apply to states that have diplomatic relations with member states, unless they are part of the European Economic Area (EEA) or have equivalent AML/CFT regimes5.

References: 1: Guide to EU Anti Money Laundering Directives (AMLD) - ComplyAdvantage 2: Directive - 2015/849 - EN - Fourth Anti-Money Laundering Directive - EUR-Lex 3: EU context of anti-money laundering and countering the financing of terrorism - European Commission 4: EU Anti-Money Laundering Directives (AMLD) | LSEG - Refinitiv 5: Anti-money laundering and countering the financing of terrorism legislative package - European Commission

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

References:

BSA/AML Manual1

Suspicious Activity Reporting - Overview2

Suspicious Activity Report (SAR) Basics3

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

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

References:

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

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

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

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

The bank should request a formal letter be submitted to verify the validity of the request, as this is the best practice to ensure compliance with the law and protect customer privacy. The bank should not confirm or deny the existence of a customer relationship, nor provide any information without proper authorization. The bank should also not inform the board of directors before responding to the request, as this could compromise the confidentiality of the investigation or alert the customer.

References:

ACAMS CAMS Certification Video Training Course, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.3: Data Protection and Privacy, Slide 10

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Page 51

The board of directors has the ultimate responsibility within a bank for ensuring that the bank has a comprehensive and effective BSA/AML program and oversight framework that is reasonably designed to ensure compliance with applicable regulations. According to the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual, the board of directors must approve the BSA/AML compliance program, which includes the BSA/AML policy, internal controls, independent testing, designated BSA/AML compliance officer, and training1. The board of directors must also provide sufficient resources, ensure qualified staff, and hold senior management accountable for implementing and adhering to the BSA/AML compliance program1.

References:

1: FFIEC BSA/AML Examination Manual, Board of Directors and Senior Management Oversight

According to 18 U.S.C. § 1956, the money laundering statute, the property involved in a financial transaction must represent the proceeds of some form of unlawful activity, which is defined as a specified unlawful activity (SUA). SUAs include over 250 crimes in six categories, such as RICO predicate offenses, certain offenses against foreign nations, acts constituting a criminal enterprise under the Controlled Substances Act, and federal health care offenses. Therefore, in order to pursue a money laundering conviction, the government must prove that at least one SUA was committed and that the property involved in the transaction was derived from that SUA.

References:

18 U.S. Code § 1956 - Laundering of monetary instruments, (a)(1) and ©(7).

957. Money Laundering—18 U.S.C. §§ 1956 & 1957, first paragraph.

Specified Unlawful Activities (SUA), first paragraph.

Wire transfers to high-risk jurisdictions and large cash deposits from a high-risk jurisdiction are two red flags that may indicate money laundering. These activities suggest that the customer is trying to move funds from or to a country that has weak anti-money laundering (AML) controls, or that is known to be a source or destination of illicit funds12. Wire transfers can also be used to obscure the origin or destination of the funds, or to layer transactions through multiple accounts or intermediaries3. Large cash deposits can indicate that the customer is trying to avoid the reporting or record-keeping requirements that apply to cash transactions, or that the customer is dealing with proceeds from illegal activities45. The other two options are not necessarily red flags, as the bank may have legitimate reasons to allow cash deposits, and the client may reside in a high-risk jurisdiction for legitimate reasons.

References: 1: FFIEC BSA/AML Examination Manual, Appendix F: Money Laundering and Terrorist Financing Red Flags, Geographic Concerns, 6; 2: AML Red Flags – What are the Top 10 Indicators?, ComplyAdvantage, 5; 3: FFIEC BSA/AML Examination Manual, Appendix F: Money Laundering and Terrorist Financing Red Flags, Transaction Has Unusual Features, 6; 4: FFIEC BSA/AML Examination Manual, Appendix F: Money Laundering and Terrorist Financing Red Flags, Unusual Source of Funds, 6; 5: Money Laundering Red Flags | Key Behaviours and Indicators, High Speed Training, 8.

The specialist should recommend directing the teller (cashier) to file a suspicious transaction report (STR). This is because the teller (cashier) has failed to comply with the bank’s internal policies and procedures for reporting unusual or suspicious activity, which is a key component of an effective anti-money laundering (AML) program1. The teller (cashier) should have filed an internal report of unusual activity as soon as he or she noticed the suspicious transactions, regardless of the personal circumstances or the length of service of the customer involved2. Failing to do so could expose the bank to regulatory sanctions, reputational damage, or legal liability3.

The other options are not appropriate recommendations for the specialist to make in this situation. Continuing to monitor the accounts is not sufficient, as it does not address the past non-compliance or the potential money laundering risk posed by the suspicious transactions. Refreshing anti-money laundering training for the teller (cashier) is not enough, as it does not ensure that the teller (cashier) will report the suspicious transactions or prevent future violations. Suspending the teller’s (cashier’s) employment is too harsh, as it does not take into account the teller’s (cashier’s) long and exemplary work record, the personal hardship faced by the teller’s (cashier’s) family, or the possibility of remedial actions or corrective measures4.

References:

1: Internal Controls | FinCEN.gov1 2: Reporting Suspicious Transactions - ACAMS2 3: The Consequences of Non-Compliance with AML Regulations - Blog | Unit213 4: Employee Discipline in the Workplace: A Guide for Managers4

Accountants can be involved in money laundering schemes in various ways, either knowingly or unknowingly. Some of the common methods that accountants can use to launder money are:

Overstating income to hide excess cash: This method involves inflating the revenues or profits of a business to conceal the origin of illicit funds. For example, an accountant can create fake invoices or receipts to justify the deposit of cash from illegal sources into the business account. This can make the cash appear as legitimate income from the business operations.

Acting as a conduit for transferring cash between accounts: This method involves using the accountant’s own account or a third-party account to move funds around and obscure the audit trail. For example, an accountant can receive cash from a client and deposit it into their own account, then transfer it to another account or withdraw it in a different location. This can make it difficult to trace the source and destination of the funds.

Acting as a designee for someone who wishes to hide their identity: This method involves using the accountant’s name or credentials to open accounts or conduct transactions on behalf of a client who wants to remain anonymous. For example, an accountant can act as a nominee director or shareholder for a shell company that is used to launder money. This can make it appear as if the accountant is the owner or beneficiary of the funds, while the actual owner or beneficiary is hidden.

References:

Money Laundering: What It Is and How to Prevent It - Investopedia, The Process of Laundering Money

Revealed: accountants aiding money laundering - Accountancy Age, Accountants’ methods

Accountants in the anti-money laundering front line, Accountants’ obligations

https://www.ojp.gov/pdffiles1/Digitization/119840NCJRS.pdf

 The investigator should escalate these concerns to the bank anti-money laundering officer, who is responsible for overseeing the implementation and effectiveness of the bank’s AML/CFT policies and procedures, as well as ensuring compliance with relevant laws and regulations. The bank anti-money laundering officer can then decide on the appropriate course of action, such as conducting further investigation, reporting to the regulators, or terminating the relationship with the customer. The other options are not suitable for escalating these concerns, as they may not have the authority, expertise, or responsibility to handle such matters.

References:

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 4, pp. 113-114

FATF Guidance: The Role of Hawala and Other Similar Service Providers in Money Laundering and Terrorist Financing, October 20131, p. 19

Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 20172, p. 10

The FATF communicates its findings regarding jurisdictions with strategic AML/CFT deficiencies by issuing two formal documents three times per year, namely the FATF Public Statement and the Improving Global AML/CFT Compliance: On-going Process document1. These documents identify the jurisdictions that have serious and/or systemic deficiencies in their AML/CFT regimes and the progress they have made in addressing them. The FATF also calls on its members and other jurisdictions to apply counter-measures or enhanced due diligence measures to protect the international financial system from the risks emanating from these jurisdictions1.

References: =

1: High-risk and other monitored jurisdictions - Financial Action Task Force (FATF)

The correct answer is C, as mapping scenarios are helpful in mitigating the weakness of not generating alerts when activity is consistently abnormal over a long period of time. Mapping scenarios are used to compare a customer’s activity with their expected activity based on their profile, risk rating, or historical behavior1. By using mapping scenarios, the organization can identify customers whose activity deviates significantly from their normal or expected patterns, and flag them for further investigation. Mapping scenarios can also help detect changes in customer behavior over time, and alert the organization of any potential money laundering or terrorist financing risks.

References: 1: AML Scenarios: Transaction Monitoring Challenges - Unit21, page 1.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the employee should report the conversation to the compliance officer because the colleague is engaging in tipping off, which is a serious violation of anti-money laundering laws and regulations. Tipping off is the act of informing a person or entity that they are the subject of a suspicious transaction report or an investigation, or providing any information that may compromise or impede the investigation. Tipping off can result in criminal penalties, civil liabilities, and disciplinary actions for the individual and the institution. Therefore, the employee has a duty to report the colleague’s misconduct to the compliance officer, who is responsible for ensuring compliance with the anti-money laundering policies and procedures, and taking appropriate corrective actions.

References:

CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), page 97

CAMS Certifications: How to Get CAMS Certified | ACAMS, CAMS Examination Preparation, page 8

ACAMS CAMS Certification Video Training Course - Exam-Labs, Module 3: Compliance Standards for Anti-Money Laundering and Combating the Financing of Terrorism, video 3.4: Tipping Off and Confidentiality

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 8, Answer B

According to the BSA/AML Manual1, a financial institution is required to file a SAR for any transaction conducted or attempted by, at, or through the institution that involves or aggregates at least $5,000 in funds or other assets, and the institution knows, suspects, or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part): (a) involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity; (b) is designed to evade any requirements of the BSA or its implementing regulations; © has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or (d) involves use of the institution to facilitate criminal activity. In this case, Bank A is the institution that processes the wire transfer and deems it suspicious, based on its own assessment of the transaction and the customer. Therefore, Bank A is responsible for filing a SAR for the transaction in Country A, where it is located and where the transaction takes place. Bank A does not need to file a SAR for the transaction in Country B or Country C, as it does not have jurisdiction or authority over those countries or the other banks involved. However, Bank A may share information about the suspicious transaction with Bank B or Bank C, subject to certain conditions and limitations, as described in the BSA/AML Manual1.

References:

BSA/AML Manual1

Suspicious Activity Reporting - Overview2

Suspicious Activity Report (SAR) Basics3

From Microsoft Start Partners

Another simpler way of looking at the problem is by seeing this case as a Correspondent Banking relationship:

-A is the primary correspondent bank.

-B is the respondent bank.

-C is the receiving bank (of the wire transfer).

Since A is conducting the transaction on behalf of B's customer via the correspondent relationship deemed suspicious, it is the transaction in Country A by the correspondent bank that files the STR. Also, per the regular process, it is on the transaction, not the bank, that the STR is filed against.

 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 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

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.

Correspondent banking is a service that allows banks to access financial services in different jurisdictions through intermediary banks, known as correspondent banks. Correspondent banking can facilitate cross-border transactions, foreign exchange, and other financial activities for banks and their customers. However, correspondent banking also poses various risks, such as money laundering, terrorist financing, fraud, corruption, tax evasion, and sanctions evasion. Correspondent banks may have no direct relationship with the customers of the respondent banks, making it difficult to verify their identity and monitor their transactions. Correspondent banks may also rely on the compliance programs of the respondent banks, which may not meet the standards of the correspondent banks’ jurisdictions.

One of the risk factors that increases the risk for a correspondent bank is being a major service provider to money service businesses (MSBs). MSBs are entities that provide money transmission, currency exchange, check cashing, prepaid cards, and other similar services. MSBs are often considered high-risk customers, because they may serve as conduits for illicit funds, especially if they operate in jurisdictions with weak anti-money laundering regulations or oversight. MSBs may also have a large and diverse customer base, making it challenging to conduct customer due diligence and transaction monitoring. Therefore, correspondent banks that provide services to MSBs may face higher exposure to money laundering and other financial crimes, and may need to apply enhanced due diligence and risk mitigation measures.

References:

Understanding Risk in Correspondent Banking

GUIDANCE ON CORRESPONDENT BANKING SERVICES

Correspondent Bank: Definition and How It Works

Correspondent banking – why it’s important to understand the risks

The potential client is attempting to commit the illegal activity of using insider information to trade securities. Insider information is any material, non-public information that could affect the price or value of a security, such as earnings reports, mergers, acquisitions, or regulatory actions. Insider trading is the act of buying or selling securities based on insider information, which gives the trader an unfair advantage over other investors who do not have access to such information. Insider trading violates the principles of market integrity, fairness, and transparency, and can undermine investor confidence and trust. Insider trading is also a form of market abuse and financial crime, and is subject to civil and criminal penalties.

References:

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorism Financing, Section 1.3: Financial Crime, Subsection 1.3.3: Market Abuse, pp. 25-26

ACAMS CAMS Certification Video Training Course, Module 1: Risks and Methods of Money Laundering and Terrorism Financing, Lesson 1.3: Financial Crime, Sublesson 1.3.3: Market Abuse, Video Time: 2:00-3:30

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition), Question 12, Answer C

The Financial Action Task Force (FATF) recommends that financial institutions pay special attention to non-face-to-face business relationships or transactions when dealing with new or developing technologies. These include digital channels, online platforms, and virtual interactions. The increased use of technology for remote transactions poses unique risks related to customer identification, authentication, and due diligence. Financial institutions must implement robust controls to mitigate these risks and ensure compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) requirements12.

References:

FATF Opportunities and Challenges of New Technologies for AML/CFT

FATF: New Technologies for AML/CFT

FATF Recommendation 15: New technologies

The Office of Foreign Assets Control (OFAC) administers and enforces economic sanctions programs [1][2], which are designed to protect US national security, foreign policy, and economic interests. Transactions that would otherwise be prohibited can be allowed through an OFAC licensing process, in which the OFAC evaluates the request to determine that the transaction does not undermine US policy objectives.

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

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 ©.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the main challenges of providing on-line services to customers is the verification of their identity and the authentication of their transactions1. The lack of face-to-face contact and the use of electronic documents increase the risk of identity fraud, impersonation, and account takeover2. Therefore, financial institutions offering on-line services need to implement robust customer due diligence (CDD) measures, such as using multiple sources of information, verifying biometric data, and applying risk-based monitoring3.

References:

1: CAMS Study Guide, 6th Edition, Chapter 4, Section 4.1, page 103

2: CAMS Study Guide, 6th Edition, Chapter 4, Section 4.2, page 104

3: CAMS Study Guide, 6th Edition, Chapter 4, Section 4.3, page 105

 The customer activity that should trigger a suspicious transaction report is purchasing travelers checks (cheques) for trips to a Non-Cooperative Countries and Territories (NCCTs). This could indicate an attempt to evade currency reporting requirements, avoid sanctions or embargoes, or facilitate money laundering or terrorist financing through high-risk jurisdictions12. NCCTs are countries or territories that have been identified by the Financial Action Task Force (FATF) as having serious deficiencies in their anti-money laundering and counter-terrorist financing regimes, and that pose a threat to the international financial system3.

The other options are not necessarily grounds for a suspicious transaction report, although they may require further due diligence or monitoring depending on the customer profile and the nature of the transaction. For example:

The increased activity is due to money order deposits. This could be a legitimate source of income for the customer’s export business, or it could be a way of disguising the origin or destination of the funds. The anti-money laundering specialist should verify the identity and background of the customer and the issuers of the money orders, and check for any red flags or suspicious indicators4.

Wire transfers are coming from a Financial Action Task Force member country. This could be a normal business practice, or it could be a sign of involvement in trade-based money laundering or other illicit activities. The anti-money laundering specialist should assess the customer’s source of funds, business rationale, and market conditions, and monitor for any changes or inconsistencies.

The client changed his address without advising the institution. This could be a simple oversight, or it could be a way of concealing the customer’s true location or identity. The anti-money laundering specialist should update the customer’s information, verify the new address, and check for any adverse media or sanctions.

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 1, page 11: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-1.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 2, page 29: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-2.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 4, page 77: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-4.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 5, page 97: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-5.pdf

The Asian/Pacific Financial Action Task Force-Style Regional Body (APG) helps its members implement recommendations from the FATF by facilitating the adoption and implementation of internationally accepted AML measures by member jurisdictions (CAMS Manual, 6th Edition, Page 22). The APG also encourages cooperative AML efforts in the region, which can include information-sharing and mutual evaluations to assess member compliance with FATF recommendations (CAMS Manual, 6th Edition, Page 25). Therefore, options C and D are the correct answers.

The customer directing the payment of the money borrowed to an unrelated third party is a red flag for potential money laundering, as it could indicate layering or integration of illicit funds. The other options are not necessarily indicative of money laundering, although they could warrant further monitoring or due diligence depending on the customer profile and risk assessment.

References:

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 3, page 97, section “Red Flags for Life Insurance Policies”.

ACAMS CAMS Certification Video Training Course, Module 3, Lesson 3.2, “Red Flags for Life Insurance Policies”.

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

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).”

these are the enhanced customer due diligence measures that the 5th EU Money Laundering Directive requires for high-risk third country nationals. According to the directive, entities must obtain the approval of senior management for establishing or continuing the business relationship, obtain information on the reasons for intended or performed transactions, and obtain information on the source of funds and source of wealth of the customer and of the beneficial owner(s). These measures are intended to increase the transparency and scrutiny of the customers and their transactions, and to prevent the misuse of the financial system for money laundering or terrorist financing purposes.

References:

ACAMS Study Guide 6th Edition, Chapter 2, Section 2.3, page 56: “The EU’s Fifth Anti-Money Laundering Directive”.

ExamTopics, Question 456: “According to the 5th EU Money Laundering Directive, member states require entities to apply enhanced customer due diligence measures with respect to business relationships or transactions involving high-risk third country nationals. Which are included in these requirements? (Choose three.)”

According to the Financial Action Task Force (FATF) standards for suspicious activity reports (SARs) information sharing within a financial group, "Financial institutions should establish adequate procedures to ensure that confidentiality of information is maintained and that information is only used for purposes permitted under national law. Where the parent institution is located in a country that does not permit such sharing, financial institutions should take measures to address this limitation" (CAMS Manual, 6th Edition, page 476). Therefore, financial institutions must establish sufficient safeguards concerning the confidentiality of information shared for AML purposes.

According to the ACAMS Study Guide for the CAMS Certification Exam (6th edition), page 215, one of the best practices for banks to prevent and detect mortgage fraud is to conduct internal investigations when there are red flags or suspicions of fraud involving bank employees. The investigation should include reviewing the employee’s loan files, interviewing the employee and other relevant parties, verifying the information and documents provided by the employee, and documenting the findings and actions taken. Filing a suspicious activity report (SAR) may be appropriate after the investigation is completed and the bank has reasonable grounds to suspect fraud. Filing a police report or initiating civil litigation may also be options depending on the outcome of the investigation and the bank’s policies, but they are not the first steps to take when the bank suspects an employee of mortgage fraud.

References:

ACAMS Study Guide for the CAMS Certification Exam (6th edition), page 2151

Mortgage Fraud: Understanding and Avoiding It2

Mortgage Fraud: What You Need To Know3

Under the Egmont Group Principles, information exchange among financial intelligence units (FIUs) should be conducted freely, spontaneously, and upon request, on the basis of reciprocity. This means that FIUs should be willing to share information without the expectation of reciprocity on how the information will be used. The goal is to facilitate the cooperation and exchange of information among FIUs to combat money laundering, terrorist financing, and other financial crimes.

According to the Certified Anti-Money Laundering Specialist (CAMS) Sixth Edition manual, the AML compliance officer should inform senior leadership and the board of the investigation (page 124) and monitor the progress of the investigation by keeping clear records (page 127). Additionally, the AML compliance officer should provide all information to the FIU as soon as possible to avoid delays (page 126).

According to the CAMS Manual, when a financial institution is being investigated by the financial intelligence unit (FIU), the AML compliance officer should inform senior leadership and the board of the investigation and monitor the progress of the investigation by keeping clear records. The manual states:

"The AML compliance officer should inform senior leadership and the board of any investigations and then monitor the progress of the investigation by keeping clear records of what has been requested and submitted, deadlines and extensions granted, and any findings or reports received. This will allow the financial institution to respond effectively and efficiently to the investigation and take appropriate action if necessary." (CAMS Manual, Section 7.4.1 - Financial Intelligence Units, p. 366)

This is stated in the Certified Anti-Money Laundering Specialist (the 6th edition) manual on page 595, which states: “Potential indicators of money laundering associated with Trust and Company Service Providers include the use of legal persons in jurisdictions with strict secrecy laws, structuring cash deposits into third party accounts, multi-jurisdictional wire transfers with no legal purpose, and frequent deposits to or withdrawals from bank accounts.”

The Financial Action Task Force (FATF) is an inter-governmental body that sets standards and monitors compliance with anti-money laundering and counter-terrorist financing (AML/CFT) measures. The FATF conducts periodic mutual evaluations of its members and other jurisdictions to assess their level of implementation of the FATF Recommendations, which are the international AML/CFT standards. The FATF also identifies jurisdictions with strategic deficiencies in their AML/CFT regimes that pose a risk to the international financial system, and places them on two public lists: the High-Risk Jurisdictions subject to a Call for Action (also known as the black list) and the Jurisdictions under Increased Monitoring (also known as the grey list). The FATF works with these jurisdictions to address their deficiencies and monitors their progress through regular follow-up reports and on-site visits. The FATF may remove a jurisdiction from the list if it has made sufficient and sustainable progress in implementing the required reforms and has effectively addressed the identified strategic deficiencies. Therefore, receiving a favorable mutual evaluation is the most likely reason for the FATF to remove a jurisdiction from the list, as it indicates that the jurisdiction has met the FATF standards and has a robust AML/CFT system in place.

Conducting successful annual self-assessments, entering into a mutual legal assistance treaty, or joining the Wolfsberg Group are not sufficient reasons for the FATF to remove a jurisdiction from the list, as they do not necessarily reflect the overall compliance with the FATF Recommendations or the resolution of the strategic deficiencies. Moreover, the Wolfsberg Group is a private association of global banks that develops guidance and best practices for the financial sector on AML/CFT issues, and is not affiliated with the FATF.

References:

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorism Financing, page 11.

ACAMS CAMS Certification Video Training Course, Module 1: Risks and Methods of Money Laundering and Terrorism Financing, Lesson 1.4: FATF and the 40 Recommendations.

About the Non-Cooperative Countries and Territories NCCT Initiative, FATF website.

 According to the USA PATRIOT Act, a shell bank is defined as “a bank that has no physical presence in any country” (Section 313(a)(1)). A physical presence means “a place of business that is maintained by a bank and is located at a fixed address, other than solely a post office box or an electronic address, in a country in which the bank is authorized to conduct banking activities, at which location the bank employs one or more individuals on a full-time basis and maintains operating records related to its banking activities” (Section 313(a)(2)). Therefore, option A is the correct answer, as it describes a bank that has no physical presence or employees in any country. Options B, C, and D are not correct, as they describe banks that have some form of physical presence or affiliation with another bank in a country.

References:

USA PATRIOT Act, Title III, Subtitle A, Section 313, Prohibition on United States Correspondent Accounts with Foreign Shell Banks, 1.

ACAMS Study Guide for the Certified Anti-Money Laundering Specialist (the 6th edition), Chapter 4: International Standards and Global Initiatives, page 103.

According to the Basel Committee on Banking Supervision guidelines, the internal audit function should evaluate the adequacy and effectiveness of the bank’s compliance function and its compliance risk management framework1. This includes assessing the compliance risk inherent in the bank’s activities, products, services, and systems, as well as the compliance policies, procedures, controls, and reporting mechanisms2. The internal audit function should also review the transactions and records of the bank to ensure compliance with applicable laws, regulations, and internal standards3.

The other statements are incorrect because:

B. An internal audit program of adequacy of the bank’s compliance function should be established, but should not include review of transactions. This statement is false because the internal audit function should review the transactions and records of the bank to ensure compliance, as mentioned above3.

C. The compliance function and internal audit function should be combined. This statement is false because the compliance function and the internal audit function should be separate and independent from each other, to avoid conflicts of interest and ensure objectivity and credibility.

D. The auditors should not discuss internal audit findings with compliance management to maintain independence. This statement is false because the internal audit function should communicate and coordinate with the compliance function on a regular basis, to share information, insights, and recommendations, and to avoid duplication of work. However, the internal audit function should maintain its independence and report directly to the board of directors or the audit committee.

References:

1: The internal audit function in banks, Principle 10, p. 9

2: The internal audit function in banks, Principle 10, p. 10

3: The internal audit function in banks, Principle 10, p. 11

: The internal audit function in banks, Principle 2, p. 4

: The internal audit function in banks, Principle 10, p. 11

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.

 The internal review would most likely recommend that the institution provide product-specific anti-money laundering training to all relevant employees, not just actuaries. This is because life insurance products can be used for money laundering purposes, such as purchasing policies with illicit funds, surrendering policies for cash value, or using policies as collateral for loans. Therefore, all employees who are involved in selling, servicing, or processing life insurance products should be aware of the money laundering risks and red flags associated with these products, and how to report any suspicious activity. The institution should also ensure that the training is timely, effective, and tailored to the specific roles and responsibilities of the employees.

The other options are not as relevant or appropriate as the correct answer. Option A is too broad, as not all staff need to be trained on anti-money laundering, only those who are relevant to the institution’s business activities and exposure to money laundering risks. Option C is too narrow, as it only focuses on actuaries and does not address the need for training other employees who may deal with life insurance products. Option D is not sufficient, as e-learning alone may not be effective in ensuring that employees understand and retain the anti-money laundering content, and the institution should also conduct follow-up assessments to measure the impact and outcomes of the training.

References:

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), page 57.

ACAMS CAMS Certification Video Training Course, Module 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 3.5: Training and Testing.

Best Practices for Anti-Money Laundering Compliance - DIRO Original, Section 3: Adequate Training.

The financial institution should freeze the funds or assets of designated persons and entities once this decision is approved by the Board. This is to comply with the obligation to implement targeted financial sanctions imposed by the United Nations Security Council (UNSC) or other relevant authorities. Freezing means preventing any access, use, transfer, or disposal of the funds or assets by the designated persons and entities or by any other person on their behalf. The financial institution should also report the freezing action to the competent authority and the relevant sanctions committee12.

Option A is not a sufficient step to comply with sanctions requirements, but rather a tool to facilitate compliance. Adopting automatic screening systems to detect designated persons and entities can help the financial institution to identify potential matches and flag them for further investigation. However, screening systems are not infallible and may generate false positives or false negatives. Therefore, the financial institution should also conduct manual checks and verification of the screening results13.

Option B is not a relevant step to comply with sanctions requirements, but rather a measure to mitigate money laundering and terrorist financing risks. Conducting enhanced due diligence for prohibited entities on the sanctions list may be useful to obtain more information about the nature and purpose of the business relationship, the source and destination of the funds, and the beneficial ownership and control structure of the entity. However, enhanced due diligence does not replace the obligation to freeze the funds or assets of the designated persons and entities14.

Option C is not an appropriate step to comply with sanctions requirements, but rather a violation of the obligation to freeze the funds or assets of the designated persons and entities. Changing the risk profile to “high-risk” if an existing customer becomes a sanctioned entity and continuing to monitor further transactions may expose the financial institution to legal and reputational risks, as well as potential sanctions evasion or circumvention. The financial institution should terminate the business relationship with the designated person or entity and freeze their funds or assets without delay1 .

References: 1: ACAMS (2020), Study Guide for the Certification Examination, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, pp. 47-49. 2: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.1. 3: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.2. 4: ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.3. : ACAMS (2020), CAMS Examination Preparation Video, 6th Edition, ACAMS, Miami, FL, USA, www.acams.org/en/cams-certification-package-6th-edition, Module 2, Section 2.4.4.

The Basel Committee on Banking Supervision (BCBS) is a global standard-setting body for the prudential regulation of banks. It does not have any formal authority to enforce its standards, but relies on its members’ commitment and peer pressure to implement them. The BCBS’s principles on customer due diligence (CDD) are part of its guidelines on anti-money laundering and combating the financing of terrorism (AML/CFT), which aim to enhance the soundness and integrity of banking systems. The BCBS’s principles on CDD provide guidance to banks and bank supervisors on the essential elements of a CDD programme, such as customer acceptance, identification, verification, risk assessment, monitoring, and record-keeping. The BCBS’s principles on CDD are not legally binding, but are intended to be a benchmark for national practices and for banks to design their own policies and procedures. The BCBS’s principles on CDD are consistent with the recommendations of the Financial Action Task Force (FATF), the global standard-setter for AML/CFT.

References:

Customer due diligence for banks 1, BCBS, October 2001.

The Basel Committee on Banking Supervision report on customer due diligence 2, Journal of Banking Regulation, 2002.

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).

An FIU is a central, national agency responsible for receiving, analyzing, and disseminating to the competent authorities disclosures of financial information concerning suspected proceeds of crime and potential financing of terrorism or required by national legislation or regulation1. FIUs play a crucial role in the detection and prevention of money laundering and terrorist financing by collecting, processing, and analyzing financial intelligence and sharing it with domestic and foreign counterparts2. FIUs may have different organizational structures, functions, and legal frameworks, but they all adhere to the international standards and best practices set by the Egmont Group of FIUs3.

References:

What We Do | FinCEN.gov

Financial Intelligence Units: An Overview (June 2004) - IMF, page 1

[Egmont Group of Financial Intelligence Units]

When a financial institution is requested to provide data and information to a law enforcement agency for matters related to the financing of terrorism, assistance cannot be refused on the grounds of tipping-off. Tipping-off refers to disclosing to a customer or any third party that a suspicious activity report (SAR) has been filed. However, in this specific context, the obligation to provide information to law enforcement takes precedence over any concerns related to tipping-off. Financial institutions must cooperate fully with law enforcement agencies in such cases to combat money laundering and terrorist financing12.

References:

31 CFR 1010.520 (a) (2)

FinCEN: Fact Sheet on the Rapid Response Program (RRP)

FinCEN.gov

Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual

One of the main challenges of online banking is verifying the identity of customers who open accounts or conduct transactions remotely, without face-to-face interaction. This poses a higher risk of money laundering, as criminals may use false or stolen identities, or hide behind shell companies or nominees, to move illicit funds through online platforms. Therefore, online banking providers must implement robust and risk-based customer due diligence (CDD) measures, such as verifying identity documents, using biometric or digital verification methods, screening customers against sanctions and watchlists, and monitoring customer behavior and transactions for any red flags or anomalies.

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 2.2: Customer Due Diligence (CDD) and Know Your Customer (KYC), p. 32-35.

eWallets: AML Risks & How to Comply1

 Structuring is the practice of breaking down large amounts of cash into smaller transactions to avoid triggering currency transaction reports (CTRs) or suspicious activity reports (SARs) by financial institutions. CTRs are required for cash deposits or withdrawals of more than $10,000 in the United States, and SARs are filed when there is a reasonable suspicion of money laundering or other illicit activity. By making multiple deposits of less than $10,000 at different tellers, the owner of the retail store is attempting to evade the reporting requirements and conceal the source or destination of the funds. This is a common technique used by money launderers in the placement stage of the money laundering process, when they try to introduce illegal proceeds into the financial system. Structuring is illegal under the Bank Secrecy Act and can result in civil and criminal penalties.

References:

6: CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and Methods, page 43

1: Structuring Cash Deposits, Withdrawals, & Transactions Risk, Golding & Golding

2: Structuring - Wikipedia

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 ACAMS CAMS Certification Study Guide (6th edition), one of the red flags for money laundering is the transfer of large sums of money to or from high-risk jurisdictions, especially if the transactions are inconsistent with the customer’s profile or business activity. Large payments to a beneficiary in a high-risk jurisdiction may indicate that the originator is involved in illicit activities such as tax evasion, fraud, corruption, or terrorism financing. Therefore, such payments should be escalated for further investigation and reporting1

References: 1: ACAMS CAMS Certification Study Guide (6th edition), page 64.

The activity described in the question raises several red flags for money laundering, such as large and frequent cash deposits, transfers to offshore jurisdictions, and involvement of a charitable organization that could be a front for illicit funds. The Compliance Officer should file a suspicious transaction report (STR) with the competent authority, such as the Financial Intelligence Unit (FIU), as soon as possible, and provide all the relevant information and documentation to support the suspicion. Filing an STR is a legal obligation for financial institutions and does not require the consent or notification of the customer. The Compliance Officer should also follow the bank’s internal policies and procedures for handling such cases, which may include freezing the account, conducting further investigation, or escalating the matter to senior management.

References:

ACAMS CAMS Certification Study Guide1, Chapter 4: Conducting or Supporting the Investigation, Section 4.4: Reporting, pp. 137-139

ACAMS CAMS Certification Video Training Course2, Module 4: Conducting or Supporting the Investigation, Lesson 4.4: Reporting

ACAMS CAMS Certification Exam Outline3, Domain 4: Conducting or Supporting the Investigation, Task 4.4: File internal and external reports, p. 18

Internet gambling is an ideal web-based money laundering method because it allows criminals to move funds across borders quickly, anonymously, and with minimal oversight12. Internet gambling sites can facilitate the placement, layering, and integration stages of money laundering by accepting cash deposits, issuing virtual credits, allowing bets on various games, and paying out winnings through different payment methods12. Internet gambling also poses challenges for law enforcement and regulators, as it operates in a complex and dynamic environment that involves multiple jurisdictions, service providers, and technologies12.

References:

ACAMS CAMS Study Guide (the 6th edition), Chapter 2: Money Laundering Risks and Methods, page 671

ACAMS Today, The Growing Threat of Online Gambling Money Laundering2

The customer activity that poses the highest risk of money laundering is making multiple cash deposits slightly below a required reporting limit. This could indicate a practice known as structuring or smurfing, which is a method of breaking down large amounts of cash into smaller transactions to avoid detection or reporting by financial institutions12. Structuring is a common technique used by money launderers to conceal the source, ownership, or destination of illicit funds3.

The other options are not necessarily indicative of money laundering, although they may require further due diligence or monitoring depending on the customer profile and the nature of the transaction. For example:

Transferring funds to pay for flight training lessons could be a legitimate educational expense, or it could be related to terrorist financing or other criminal activities. The financial institution should verify the identity and background of the customer and the recipient, and check for any red flags or suspicious indicators4.

Paying a supplier of precious metals at regular quarterly intervals could be a normal business practice, or it could be a way of moving or storing value in an alternative asset class. The financial institution should assess the customer’s source of funds, business rationale, and market conditions, and monitor for any changes or inconsistencies.

Conducting business in a country that represents a high risk of money laundering could be a legitimate commercial opportunity, or it could be a sign of involvement in illicit activities or tax evasion. The financial institution should apply enhanced due diligence measures, such as verifying the identity and reputation of the customer and the counterparties, obtaining information on the purpose and nature of the business relationship, and screening for any sanctions or adverse media.

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 2, page 29: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-2.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 6, page 121: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-6.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 7, page 139: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-7.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 4, page 77: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-4.pdf

When dealing with correspondent banking clients, banks must evaluate the ownership and management structure of the client in order to assess the risks associated with the relationship. The status of the entity as a state, publicly, or privately held entity, as well as the transparency of the ownership structure, are important factors to consider when assessing these risks. Banks should also take into account the size of the management structure, the regularity of board meetings, and the length of time since the last Wolfsberg Group review in order to determine the risk associated with the correspondent banking relationship.

The potential red flag that alludes to money laundering is option B, where the trio engage in minimal gambling and combine the funds to request a casino cheque for the chips presented. This behavior is indicative of structuring, which involves breaking down large transactions into smaller ones to avoid detection by the casino and regulatory authorities. The fact that the trio only used a small amount of chips to play games, and then combined their funds to request a casino cheque, raises suspicions that they may be attempting to disguise the origin of their funds.

Typical events to identify and investigate potential AML activities include: A) blocked transactions involving individuals included in the Office of Foreign Assets Control Specially Designated Nationals and Blocked Persons List; B) internal tips from employees of the bank about potential suspicious activity; and C) alerts triggered by the automated AML monitoring system [1]. Blocked transactions are those which involve individuals included on the Specially Designated Nationals and Blocked Persons List – this is a list maintained by the Office of Foreign Assets Control of individuals who are subject to economic or trade sanctions [1], or who may be involved in money laundering or terrorist activities [2]. Internal tips are those which are provided by employees of the bank who may have observed suspicious activity, or have reason to believe that certain transactions or activities may be related to potential money laundering. Alerts triggered by the automated AML monitoring system are those which are generated by the banks systems and processes which are designed to detect potential money laundering.

The activities that could be considered a potential spear phishing scam are:

A courier delivers a duplicate invoice to a business that contains updated payment details of an existing supplier. This could be a way of diverting funds to a fraudulent account by impersonating a legitimate vendor and exploiting the trust relationship between the business and the supplier1.

Payroll receives an external email from an employee looking to update their bank account information. This could be a way of stealing money from the employee or the employer by pretending to be the employee and requesting a change in the payment method or destination2.

An employee receives an email that asks to download an attachment, but the attachment is a malware. This could be a way of infecting the employee’s computer or network with malicious software that could compromise sensitive data, disrupt operations, or demand ransom3.

The other options are not necessarily spear phishing scams, although they may be other types of fraud or deception. For example:

An employee receives a phone call requesting that money be sent to assist someone in trouble. This could be a vishing scam, which is a form of voice phishing that uses phone calls to solicit personal or financial information or to request money transfers4.

A business sends its employees an email warning that email passwords must be changed to prevent cyber-fraud. This could be a legitimate security measure, or it could be a phishing scam, which is a form of email phishing that targets a broad audience and tries to trick them into revealing their credentials or clicking on malicious links.

Members of a religious organization receive a donation request by email claiming to be from their leader. This could be a genuine appeal, or it could be a social engineering scam, which is a form of manipulation that exploits the human factor and relies on the victim’s emotions, trust, or sympathy.

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 3, page 53: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-3.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 3, page 54: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-3.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 3, page 55: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-3.pdf

ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 3, page 56: https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-3.pdf

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

 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

Economic sanctions are measures imposed by countries or international bodies to exert pressure on individuals, entities, or nations that engage in undesirable behavior or actions. Sanctions aim to restrict or prohibit certain economic activities with the targeted parties, such as trade, investments, or financial transactions. They serve various purposes, including achieving foreign policy and national security objectives and deterring undesired actions by countries or entities. Sanctions can be comprehensive (affecting an entire country) or targeted (specific businesses, groups, or individuals), with a recent trend toward minimizing harm to innocent civilians12.

References:

1. Council on Foreign Relations: What Are Economic Sanctions?

2. [Tookitaki: A Complete Guide to Sanctions](https://www.tookitaki.com/compliance-hub/what

According to the Certified Anti-Money Laundering Specialist (the 6th edition), the financial institution (Fl) should take the following actions:

A. Review the client's activity, determine if suspicious activity exists, and report accordingly. The Fl should assess the risk of the situation and determine if there is any suspicious activity that needs to be reported to the appropriate authorities. This would involve conducting a review of the client's account activity and transactions to determine if there are any indicators of money laundering or terrorist financing.

D. Inform local LEA and regulator of the request for awareness. The Fl should inform the local law enforcement agency and regulator of the request from the foreign jurisdiction to raise awareness of the situation and determine if any further actions need to be taken.

The General Data Protection Regulation (GDPR) is a regulation issued by the European Union (EU) that sets out requirements for the processing and protection of personal data. It applies to any company that processes personal data of individuals in the EU, and requires organizations to take appropriate measures to protect the personal data of individuals, such as implementing appropriate security measures, limiting the amount of data collected and stored, and providing clear explanations of how the data will be used. In the context of financial crime investigations, the GDPR requires organizations to ensure the security and confidentiality of personal data that they collect and process, and to take measures to ensure that the data is used only for the purpose of the investigation and not for any other purpose.

According to the CAMS Certification Package - 6th Edition1, one of the essential components of customer due diligence is verifying the identity of the customer using reliable and independent sources. This verification process should be done before or during the establishment of the business relationship, and should not be delayed unless there is a low risk of money laundering or terrorist financing, and the delay is necessary to avoid interrupting the normal course of business. Therefore, after customers have provided acceptable identification, the financial institution should next confirm the validity of the customer information, as option A suggests. Option B is not necessary, as an electronic picture of each customer is not a mandatory requirement for customer verification, and may not be feasible or effective in some cases. Option C is not the next step, as closely monitoring the account for 30 days is part of the ongoing due diligence process, which should be performed after the customer verification is completed and the account is established. Option D is not advisable, as establishing the account based on the information provided without verifying its validity may expose the financial institution to money laundering and terrorist financing risks, and may violate the KYC and AML regulations.

References:

1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pages 69-70.

1. A. Micro-structuring cash:

The customer’s behavior of putting high-denomination cash notes into a poker machine without placing bets and then collecting winnings in the form of a check resembles “structuring” or “smurfing.” Structuring involves breaking down large sums of money into smaller transactions to avoid detection. In this case, the customer may be attempting to legitimize illicit funds by converting them into casino winnings1.

2. B. Legitimizing illicit funds:

By using the poker machine to convert cash into a check, the customer is potentially legitimizing illicit funds. The casino winnings obtained through this process may appear legitimate, even though the initial source of the cash remains suspicious1.

A. Micro-structuring cash:

The customer’s actions of repeatedly inserting high-denomination cash notes into the poker machine without placing bets and then collecting winnings in the form of a check resemble structuring. Structuring involves deliberately breaking down large amounts of cash into smaller transactions to avoid detection. Money launderers engage in structuring to obscure the origin of funds and make them appear legitimate. In this case, the customer’s behavior raises red flags and warrants further investigation.

B. Legitimizing Illicit Funds:

By converting cash into casino winnings (in the form of a check), the customer may be attempting to legitimize illicit funds. The casino winnings obtained through this process could be used to create a veneer of legitimacy, even though the initial source of the cash remains suspicious. Casinos are attractive for money launderers due to the anonymity and fluidity of transactions, making it challenging to trace the origin of funds1.

References: 1: Anti-Money Laundering Specialist (6th edition), ACAMS, Chapter 3: “Money Laundering and Terrorist Financing Methods,” Section 3.1.2: “Structuring.”

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.

Using cash to buy multiple cashier's checks over a period of time is considered suspicious activity of money laundering. This method is commonly known as structuring, where individuals or entities use cash to buy multiple monetary instruments such as cashier's checks in small amounts, to avoid reporting requirements. This behavior could be an attempt to evade transaction monitoring and reporting requirements by a financial institution. Additionally, the fact that the account also receives multiple electronic transfers for the same amount could be a red flag for money laundering as it is a common technique used to layer or disguise the origin of illicit funds.

According to the ACAMS CAMS Study Guide (the 6th edition), one of the common methods of money laundering in the insurance sector is to purchase policies with illicit funds, overpay premiums, and then cancel or surrender the policies to receive refunds or payouts1. This allows criminals to move and disguise the source of their funds through the insurance company. Therefore, the regular withdrawals from the policy by the end of the month could indicate a money laundering scheme. Moreover, the FATF Guidance for a Risk-Based Approach for the Life Insurance Sector states that unidentified third parties depositing cash to the policy could also pose a high money laundering risk, as cash transactions are difficult to trace and third parties may act as intermediaries or nominees for the real beneficiaries2. Therefore, the insurance company should conduct enhanced due diligence on the policyholder and the third parties, and monitor the transactions for any suspicious activity.

References:

ACAMS CAMS Study Guide (the 6th edition), Chapter 2: Money Laundering Risks and Methods, page 671

FATF Guidance for a Risk-Based Approach for the Life Insurance Sector, pages 18-192

When a high volume of incoming wire transfers generates an alert about a client and the funds are immediately debited by cash withdrawals and outgoing wire transfers, the first information that should be reviewed to investigate this alert/case is the customer’s account activity. This is because the account activity can reveal the origin, destination, purpose, frequency, and amount of the wire transfers, as well as any unusual or inconsistent patterns that may indicate money laundering or fraud. The account activity can also help to compare the wire transfers with the customer’s profile, risk rating, expected behavior, and source of funds. Reviewing the account activity can help to determine if the alert is a false positive or a true positive, and if further investigation or reporting is required.

References:

CAMS Study Guide, 6th Edition, Chapter 4, Section 4.3.2, p. 1251

Investigating Alert/Case of High Volume Wire Transfers | CAMS Exam Prep2

Wire Transfer Red Flags: Money Laundering & Fraud Risks - Alessa3

 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

Reputational risk is the potential for negative publicity, public perception, or legal action to adversely affect a financial entity’s image, brand, or customer loyalty1. Violating AML laws can have significant reputational risks for financial entities, as they may be perceived as facilitating or enabling money laundering, terrorist financing, or other illicit activities. This can result in a loss of trust, credibility, and revenue from existing and potential customers, especially those who are high-profile, sensitive, or socially responsible23. Moreover, violating AML laws can also attract negative media attention, regulatory scrutiny, and legal action, which can further damage the reputation of the financial entity and expose it to additional sanctions, fines, or penalties4.

References:

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 1, page 16

2: ComplyAdvantage, 5 AML Reputational Risk Considerations for 2023, link

3: Exam-Answer, Reputational Risk Consequences for Violating AML Laws, link

4: Unit21, 8 AML Penalties, Fines, and Sanctions + Examples You Should Avoid, link

The two most relevant measures for a professional dealer in precious metals and stones to reduce the risk of being misused for money laundering purposes are:

B. Stop accepting payments from persons other than the beneficiary: This measure can help to ensure that the source of funds is legitimate and can be traced back to the customer.

D. Limit the acceptance of purchases without adequate customer identification information: Adequate customer identification information is necessary for the purpose of identifying and verifying the customer's identity and determining whether the customer is a politically exposed person (PEP) or has any other risk characteristics that may require enhanced due diligence measures.

According to the Certified Anti-Money Laundering Specialist (the 6th edition), Section 2.2.5 Suspicious Activity Reporting (SAR) Requirements, a Suspicious Activity Report (SAR) filing is required when a financial institution is aware of, or suspects, a possible violation of law or regulation, or any other suspicious activity related to money laundering, terrorist financing, or other unlawful activity. In this case, Answer A would require a Suspicious Activity Report filing as the deposits are made on a daily basis without providing a legitimate purpose.

According to the Financial Crimes Enforcement Network's (FinCEN) guidance, one example of a suspicious transaction is "frequent deposits of cash or monetary instruments in amounts under $10,000 to the same account, or a pattern of such deposits, unless the financial institution has a reasonable explanation for the pattern." (CAMS Manual, 6th Edition, Page 209)

When presented with a search warrant, the AML specialist should record the names and affiliations of the agents who conduct the search. This will help in identifying who conducted the search in case there are any issues that need to be addressed later. Additionally, the AML specialist should obtain a copy of the warrant or photocopy the original warrant. This is important to ensure that the warrant is valid and that the agents are authorized to conduct the search. It is not appropriate to ask the agents questions or remember what items they have seized, as this could interfere with the search and potentially lead to legal issues. Finally, leaving the premises to allow the agents to conduct the search is not necessary, as the AML specialist has the right to be present during the search.

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)?

The Egmont Group assists financial intelligence unit members to accomplish their goals by providing support to expand and systematize cooperation related to the reciprocal exchange of information, fostering better and secure communication through the application of technology, and encouraging operational autonomy of financial intelligence units. Additionally, the Egmont Group also maintains uniform global formats for funds transfers that assist in the detection of money laundering and supplies information on the common money laundering tactics used by terrorists and financial supporters of terrorism.

Under the Wolfsberg Correspondent Banking Principles, conducting enhanced due diligence (EDD) is an obligation for correspondent banking clients that present greater risks. This may include conducting additional research and analysis of the client's background, ownership structure, and transactions. EDD may also involve obtaining additional documentation, verifying the client's identity, and conducting periodic reviews to ensure ongoing compliance. The level of EDD required should be commensurate with the level of risk posed by the correspondent banking relationship. Therefore, option B and D are incorrect. Option A is not specific enough to address the question. Option C is the correct answer as it highlights the importance of senior management approval for high-risk relationships, which is a key component of EDD.

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.

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 best course of action for the FI in this scenario is to consider retaining qualified, experienced legal counsel. This is because the investigation request from the local law enforcement agency may involve complex legal issues, such as confidentiality, privacy, data protection, and cooperation obligations. The FI may need to balance the interests of the customer, the law enforcement agency, and the FI itself, and ensure that it complies with the applicable laws and regulations in responding to the request. The legal counsel can advise the FI on the scope, validity, and implications of the request, and help the FI to prepare and submit the required information in a timely and appropriate manner. The legal counsel can also protect the FI from any potential liability or litigation arising from the investigation.

References:

1: Requests by Law Enforcement for Financial Institutions to Maintain Accounts and/or Conduct Transactions1

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

3: ACAMS Study Guide for the CAMS Certification Examination3

 The correct answer is C because the European Union Money Laundering Directives require lawyers and other independent legal professionals to report suspicious transactions to the competent authority when they are involved in certain activities on behalf of their clients, such as creating or managing companies, trusts, or other legal arrangements. The directives also provide that the obligation to report overrides any professional secrecy or confidentiality rules, except when the lawyer is ascertaining the legal position of the client or representing the client in legal proceedings or in connection with such proceedings. Therefore, the lawyer in this scenario should report the activity as suspicious to the competent authority, as creating a financial holding company for the client falls within the scope of the reporting obligation and does not qualify for the exemption12

References: =

1: ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 4, page 141

2: Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, Article 33 and 34

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

According to the Basel Committee’s Customer Due Diligence for Banks paper, one of the essential elements of a sound KYC programme is customer identification. This includes obtaining sufficient information to understand the nature and purpose of the customer relationship, the source of funds, and the beneficial ownership and control structure of the customer1. For corporate business entities, this means that a bank needs to have an understanding of the structure of the company, such as its legal form, its ownership, its directors, its line of business, and its geographical locations2. This will help the bank to assess the risk profile of the customer, to verify its identity and legitimacy, and to monitor its transactions for any suspicious activities.

References:

1: Customer due diligence for banks, Basel Committee on Banking Supervision, October 2001, Section III.2 2: General Guide to Account Opening and Customer Identification, Basel Committee on Banking Supervision, February 2003, Section 2.2.1