CAMS ACAMS Certified Anti-Money Laundering Specialist (the 6th edition) Free Practice Exam Questions (2025 Updated)

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

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

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

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

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

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

The 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 aform of manipulation that exploits the human factor and relies on the victim’s emotions, trust, or sympathy.

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/]

"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.

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

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

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

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

 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.

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)

The customer’s profile and transactions are highly suspicious and indicative of possible money laundering. The customer’s income, source of wealth, and investment plans do not match with the large and frequent transfers from a diamond distributor, which is a high-risk business sector for money laundering. The customer’s transfers to Hong Kong, which is a high-risk jurisdiction for money laundering, also raise red flags. The anti-money laundering specialist should recommend contacting the competent authority and local law enforcement to report the suspicious activity and cooperate with any investigation. This is in accordance with the FATF Recommendation 20, which states that "If a financial institution suspects or has reasonable grounds to suspect that funds arethe 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)"1. The other options are not appropriate, as they do not address the urgency and severity of the situation.

 1: FATF (2012), International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, FATF, Paris, France, www.fatf-gafi.org/recommendations.html, p. 19.

Havens for money laundering and terrorist financing are jurisdictions that offer a high degree of anonymity, secrecy, and protection to criminals who seek to conceal or move their illicit funds. These havens typically have the following three attributes12:

Limited types of institutions and persons covered by money laundering laws and regulations. This means that only a narrow range of financial activities or entities are subject to anti-money laundering (AML) and combatting the financing of terrorism (CFT) obligations, such as customer due diligence, record-keeping, reporting, and supervision. For example, some havens may exclude lawyers, accountants, trust and company service providers, or non-bank financial institutions from AML/CFT requirements.

Little enforcement of the laws, weak penalties or provisions that make it difficult to confiscate or freeze assets related to money laundering. This means that the authorities in these havens lack the political will, resources, or capacity to effectively implement and enforce the AML/CFT laws and regulations. They may also impose low sanctions or fines for non-compliance, or create legal barriers or obstacles for the confiscation or freezing of assets that are the proceeds of, or used in, or intended or allocated for use in, money laundering, terrorist financing, or other crimes.

Absence of an effective FIU. This means that these havens do not have a central agency that is responsible for receiving, analyzing, and disseminating financial intelligence related to money laundering, terrorist financing, and other crimes. An effective FIU is essential for facilitating domestic and international cooperation and information exchange, as well as for supporting investigations and prosecutions of money laundering and terrorist financing cases.

1: The IMF and the Fight Against Money Laundering and Terrorism Financing, 1 2: IX Special Recommendations, 2

Global organizations must ensure their policies and procedures comply with local laws and regulations in each country where they operate, even when maintaining group-wide consistency. Relying solely on international or U.S. standards does not ensure compliance with all local requirements, which may be more stringent or specific.

“A global group-wide program should ensure adherence to local AML and sanctions laws and regulations in every jurisdiction in which it operates. Local adaptation of policies is essential to address jurisdiction-specific risks and legal requirements.”

(CAMS 6th Edition, International AML/CFT Standards; FATF Recommendations 18, 35; EU & US Sanctions Regulations)

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.

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)

Human trafficking and modern slaveryinvolveillicit financial transactions, often conductedthrough banks, money service businesses (MSBs), or virtual assets.

Option B (Correct):Frequent payments for online advertisementscan indicaterecruitment for illicit labor or traffickingoperations.

Option C (Correct):Incoming funds from third-party processors with unclear originatorssuggestconcealed financial flows linked to illicit activities.

Why Other Options Are Incorrect:

Option A (Incorrect):Transactional activity with a virtual currency exchange alone is not a strong human trafficking red flag.

Option D (Incorrect):Cash payments to workers could indicate labor law violations but do not necessarily indicate human trafficking.

Common Financial Red Flags for Human Trafficking:

Unexplained cash deposits and withdrawals from multiple accounts.

Frequent wire transfers to high-risk jurisdictions.

Use of prepaid cards to move funds anonymously.

Best Practices for Detecting & Preventing Human Trafficking-Related Transactions:

Train frontline staff to recognize financial indicators of trafficking.

Monitor unusual transaction patterns in industries with high labor exploitation risks.

File Suspicious Activity Reports (SARs) when trafficking-related transactions are suspected.

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.

= 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”.

According to a report by the OECD, government officers are among the occupations that are particularly vulnerable to the use of false identities and identity theft. This is because government officers have access to sensitive and confidential information, such as personal data, tax records, social security benefits, passports, visas, and licenses. Identity fraudsters may target government officers to obtain or alter such information, or to impersonate them to access restricted areas or systems. Identity fraud involving government officers may facilitate tax evasion, money laundering, corruption, terrorism, and other crimes1.

Some examples of identity fraud schemes involving government officers are:

Rogue agents in the immigration services sector who issue fake or fraudulent documents, such as passports, visas, orresidence permits, to facilitate the entry or stay of illegal immigrants, criminals, or terrorists12.

Corrupt tax officials who use false identities to create fictitious taxpayers or employers, or to modify tax records, to evade taxes or to claim fraudulent refunds or credits13.

Impostors who pose as government officers, such as police, customs, or revenue agents, to extort money or information from unsuspecting victims, or to access secure facilities or databases1 .

REPORT ON IDENTITY FRAUD: TAX EVASION AND MONEY LAUNDERING VULNERABILITIES

Identity Fraud and Immigration Services

Identity Theft and Tax Fraud

[Identity Theft and Government Impersonation Scams]

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.

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

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 formeranti-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.

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

What Is An AML Compliance Program? | ComplyAdvantage

The inherent level of anti-money laundering risk across the entire organization depends on various factors, such as the nature, size, complexity, and structure of the business, the customers, the products and services, and the countries or jurisdictions involved. Among the four options given, the transaction monitoring program and the customer due diligence program are not factors that determine the inherent risk, but rather measures that mitigate the risk. Therefore, they are not relevant for the compliance officer’s purpose. The countries that the bank operates in and the products and services offered by the bank are important factors that affect the inherent risk, as they may expose the bank to different levels of money laundering threats, vulnerabilities, and regulatory requirements. For example, some countries or jurisdictions have high levels of corruption, unstable governments, or are known as money laundering havens1. They could also have inadequate AML/CFT regulatory and judicial frameworks, or be subject to economic sanctions2. Similarly, some products and services may pose higher risks thanothers, such as those that involve cash transactions, cross-border transfers, anonymous or non-face-to-face customers, or complex or innovative features34.

=

1: AML risk-rating models | McKinsey

2: Money laundering and terrorist financing risks - Financial Action Task Force (FATF)

4: AML Red Flags – What are the Top 10 Indicators? - ComplyAdvantage

5: Anti Money Laundering Risk Assessment - Financial Crime Academy

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.

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 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.

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

The bank’s existing anti-money laundering training is not adequate to be delivered to the employees of the newly acquired credit card business, because anti-money laundering training needs to be tailored and focused on the risks specific to the business. Credit card businesses face different types of money laundering risks than retail banks, suchas card-not-present fraud, identity theft, card skimming, and prepaid card abuse. Therefore, the anti-money laundering training for credit card businesses should cover the specific red flags, indicators, typologies, and mitigation measures related to these risks, as well as the relevant laws and regulations that apply to credit card businesses.

CAMS Study Guide, 6th Edition, Chapter 4, Section 4.31

CAMS Study Guide, 6th Edition, Chapter 5, Section 5.21

Certification Candidate Handbook, Section 3.22

Latest CAMS Exam Questions, Question 433

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.

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

USA PATRIOT Act | FinCEN.gov

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

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

Thelife insurance industryis vulnerable tomoney laundering and terrorist financing, especially when policies allowpayments to unknown third parties.

Option A (Correct):Allowing policyholders to transfer funds tounknown third partiesincreases therisk of money laundering. FATF andEU AML Directiveshighlight life insurance policies as high-risk products.

Option B (Incorrect):Completing KYC does not eliminate risk. Customers can use legitimate insurance products for illicit purposes.

Option C (Incorrect):While governance violations should be addressed, themain concern here is money laundering risk, not the compliance team’s involvement in product development.

Option D (Incorrect):Fast-tracking approvalwithoutproper risk assessmentcreates regulatory and reputational risks.

 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.

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

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.

1: FATF Recommendation 20 - Reporting of suspicious transactions

2: FATF Interpretive Note to Recommendation 20

3: FATF Recommendation 16 - Wire transfers

A. Offering internal policies training: This is crucial. Employees need to understand the specific procedures and policies related to customer identification and verification. These internal policies ensure consistency and compliance.

B. Offering general background and history training: While historical context is valuable, it’s not the primary focus. AML training should prioritize practical knowledge and current best practices.

C. Offering periodic refresher training: Absolutely! Regular refresher training keeps employees up-to-date with evolving AML regulations and reinforces their understanding.

D. Offering tailored training for specific roles: This is essential. Different roles require different expertise. For example, investigators need to recognize red flags, while report writers must understand how to create effective suspicious activity reports.

Comprehensive Detailed Explanation:

Internal Policies Training: AML training should cover internal policies thoroughly. This includes customer identification and verification procedures, as well as other relevant policies specific to the organization. Employees need to understand how these policies translate into day-to-day practices.

General Background and History: While historical context can be interesting, it’s not the primary focus of AML training. Instead, the emphasis should be on practical knowledge, current best practices, and real-world scenarios.

Periodic Refresher Training: Regular refresher training is essential. AML regulations evolve, and employees need to stay informed. Annual or periodic refreshers reinforce knowledge and ensure compliance.

Tailored Training for Specific Roles: Different roles within an organization have distinct responsibilities related to AML. Tailored training ensures that employees understand their specific duties. For example, investigators need to recognize suspicious patterns, while report writers must know how to create effective reports.

Financial institutions must conduct thorough background checks on employees in sensitive roles (e.g., private banking) to mitigate fraud, insider trading, and money laundering risks.

Option A (Correct):Past employment records help verify work history and identify any red flags related to prior financial misconduct.

Option D (Correct):Internet and media searches reveal any negative press, regulatory issues, or connections to illicit activity.

Option E (Correct):Criminal history searches help screen for prior convictions related to financial crimes.

Why Other Options Are Incorrect:

Option B (Incorrect):Personal references are less reliable and may not uncover objective risk factors.

Option C (Incorrect):A resume is self-reported and should be verified using independent sources.

Best Practices for Employee Background Screening:

Conduct enhanced due diligence for high-risk roles (e.g., private bankers, compliance officers).

Use reliable background screening tools and legal databases.

Verify employment history and check against regulatory blacklists.

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.

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

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

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

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

FATF Recommendation 11: Record-keeping 1

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

FATF Recommendation 21: Tipping-off and confidentiality 3

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 manipulationthat 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.

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

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

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

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

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

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

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

Incorrect Options:

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

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

The 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 riskof 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.

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

Money launderersexploit corporate structuresthat offeranonymityandreduced transparency.

Option A (Correct):Nominee shareholders and directorscan be used tohide true beneficial ownership.

Option C (Correct):Bearer sharesallowownership to transfer anonymously, amajor AML risk.

Option E (Correct):Tax haven companieswithsecrecy lawsare frequently used formoney laundering.

Option B (Incorrect):A private companywithout activitydoes not inherently pose anAML risk.

Option D (Incorrect):LLCscan be transparentif properKYC and reporting measuresare in place.

Chip dumpingis a commonmoney laundering techniquein online gambling.

Option D (Correct):Chip dumpingoccurs whenplayers colludetotransfer fundsvia staged betting, making illicit funds appear as gambling winnings.

Option A (Incorrect):Concealmentis a broad term, not a specific technique.

Option B (Incorrect):Coordinated bettingrefers tomatch-fixing, not money laundering.

Option C (Incorrect):Player-to-player transfersare used in money laundering but arenot specific to online gambling.

A government Financial Intelligence Unit (FIU) is a national body or agency that collects, analyzes, and disseminates information on suspicious or unusual financial activity related to money laundering, terrorist financing, or other financial crimes12. One of the main functions of an FIU is to receive and analyze disclosures or reports filed by financial and non-bank institutions, such as banks, casinos, money service businesses, lawyers, accountants, etc., that are obliged to report transactions or activities that may indicate money laundering or terrorist financing34. Another key function of an FIU is to disseminate the information and the results of its analysis to competent authorities, such as law enforcement, prosecutors, regulators, or other FIUs, for further investigation, prosecution, or preventive action56. These two ways of interaction enable the FIU to act as a bridge between the public and private sectors in the fight against financial crimes.

 1: What are Financial Intelligence Units (FIUs)?, Dow Jones, 3; 2: Financial Intelligence Unit, Wikipedia, 2; 3: The Role of Financial Intelligence Units in Fighting Money Laundering and Terrorist Financing, IMF, 8; 4: What is an FIU?, Egmont Group of Financial Intelligence Units, [9]; 5: FIU Functions, FATF, [10]; 6: FIU.NET, Europol, [11].

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 banksthat 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.

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