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NEW QUESTION # 68
What is operational risk?
- A. The potential for loss of public confidence in an organization's integrity
- B. The potential for loss resulting from too much credit or loan exposure to one borrower
- C. The potential for lawsuits, fines, and penaltiesincreasingan organization's expenses
- D. The potential for loss due to inadequate processes, people, systems, or external events
Answer: D
NEW QUESTION # 69
The law enforcement agency (LEA) of a foreign jurisdiction contacts a financial institution (Fl) regarding one of the Fl's clients. The LEA advises that the client is currently wanted for prosecution as a result of a series of human trafficking charges. What should the Fl do? (Select Two.)
- A. Inform local LEA and regulator of the request for awareness.
- B. Advise the LEA that the government needs to be contacted for extradition.
- C. Review the client's activity, determine if suspicious activity exists, and report accordingly.
- D. Close the clients accounts immediately to avoid any undue risk.
- E. Comply immediately with the foreign jurisdiction and turn over all client information.
Answer: A,C
Explanation:
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.
NEW QUESTION # 70
What are two legal risks of having inadequate privacy policies and procedures? (Choose two.)
- A. Higher marketing and public relations costs
- B. Diminished reputation
- C. Industry of regulatory sanctions
- D. Charges of deceptive business practices
Answer: C,D
Explanation:
Having inadequate privacy policies and procedures can expose an organization to legal risks such as industry or regulatory sanctions and charges of deceptive business practices. Industry or regulatory sanctions can result from violating the laws and regulations that govern data privacy and protection, such as the GDPR, the CCPA, or the GLBA. These sanctions can include fines, penalties, injunctions, or revocation of licenses. Charges of deceptive business practices can arise from misleading or false statements about how the organization collects, uses, or discloses personal data, or from failing to comply with its own privacy policies and procedures. These charges can lead to lawsuits, settlements, or enforcement actions by authorities such as the FTC or the state attorneys general.
References: =
The 4 Biggest Risks of Non-Compliance With Data Privacy Regulations
Security and privacy laws, regulations, and compliance: The complete guide An Ethical Approach to Data Privacy Protection
NEW QUESTION # 71
Which requirement is included in the Fourth European Union Directive on money laundering?
- A. It requires member countries to maintain registries of the beneficial owners of legal entities
- B. It requires obliged entities to consider politically exposed persons as high risk for life
- C. It requires obliged entities to conduct enhanced due diligence on all prepaid card holders
- D. It requires member states to enact economic sanctions against countries that do not cooperate with Financial Action Task Force recommendations
Answer: A
Explanation:
Reference: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32018L0843&from=EN
NEW QUESTION # 72
What is a major economic consequence of money laundering through the use of front companies?
- A. Aligning management principles between criminal enterprises and legitimate businesses
- B. Placing more emphasis on manufacturing
- C. Creating a more competitive pricing environment
- D. Weakening of the legitimate private sector
Answer: D
Explanation:
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 Reference: http://people.exeter.ac.uk/watupman/undergrad/rtb/effects2.htm
NEW QUESTION # 73
According to the Second European Union Money Laundering Directive, what may knowledge of criminal conduct be inferred from?
- A. Objective, factual circumstances
- B. Subjective, non-factual circumstances
- C. Objective, non-factual circumstances
- D. Subjective, factual circumstances
Answer: A
Explanation:
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.
NEW QUESTION # 74
What is the goal of the Egmont Group in providing a forum for Financial Intelligence Units (FIUs) around the world?
- A. To improve cooperation with state and federal governments in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field.
- B. To improve international laws to combat money laundering and the financing of terrorism and foster the implementation of domestic programs.
- C. To improve communication with law enforcement in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field.
- D. To provide a forum for FIUs to improve cooperation in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field.
Answer: D
Explanation:
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\
Reference: https://en.wikipedia.org/wiki/Egmont_Group_of_Financial_Intelligence_Units
NEW QUESTION # 75
An institution receives a request for credit from a local company that has been a client for many years. The information provided by the company indicates that its assets have increased substantially with the addition of several new subsidiaries. Further research performed by the institution indicates the new subsidiaries are recently created shell companies.
Could this indicate potential money laundering?
- A. Yes, the shell companies could have been created to hide beneficial ownership.
- B. No, it is normal for a business to diversify by creating shell companies.
- C. No, the company has been a client for many years.
- D. Yes, shell companies are typically created to manage tax liabilities.
Answer: A
Explanation:
Shell companies are business entities that exist only on paper, with no physical presence, no employees, and no operations. They are often used for legitimate purposes, such as facilitating mergers and acquisitions, protecting assets, or managing investments. However, they are also frequently exploited for illegal activities, such as tax evasion and money laundering, due to their ability to obscure ownership and financial transactions12. Money launderers can use shell companies to disguise the origin of illicit funds, evade sanctions, and avoid the anti-money laundering (AML) measures that financial institutions use to detect suspicious activity23. The process typically involves setting up a shell company in a jurisdiction known for strict privacy laws, such as a tax haven, and then using it to move and hide illicit funds while hiding the identity of the ultimate beneficiaries13.
In this scenario, the fact that the company has been a client for many years does not rule out the possibility of money laundering. The company could have changed its ownership, activities, or risk profile over time, or it could have been involved in money laundering all along without being detected. The fact that the company has added several new subsidiaries that are recently created shell companies is a red flag that indicates potential money laundering. The company could be using the shell companies to hide the source and destination of its funds, or to conceal the identity of its beneficial owners. The institution should perform enhanced due diligence on the company and its subsidiaries, and report any suspicious transactions or activities to the relevant authorities.
References:
How Shell Companies Are Used in Money Laundering: A Detailed Guide
Shell Companies and Money Laundering
The Role of Shell Companies in Money Laundering
NEW QUESTION # 76
Three individuals enter a casino and use cash to purchase chips worth 20,000 USD. The trio uses 200 USD in chips to play games and then combine their funds to request a casino cheque. What is the potential red flag that alludes to money laundering?
- A. The trio purchased the chips with cash and proceeded to gamble.
- B. The trio engage in minimal gambling and combine the funds to request a casino cheque for the chips presented.
- C. The trio purchased chips worth 20,000 USD and requested a casino cheque for the remaining chips.
- D. The trio uses chips worth 200 USD to gamble before requesting the refund.
Answer: B
Explanation:
Explanation
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.
NEW QUESTION # 77
Which is a goal of Financial Action Task Force Regional-Style Bodies?
- A. Analyzing new or developing methods in which criminals or terrorists abuse the financial system in their region
- B. Enforcing local AML laws and regulations
- C. Setting standards to assess whether members have an adequate AML regime
- D. Executing sound AML processes in response to recommendations
Answer: C
Explanation:
Explanation
Setting standards to assess whether members have an adequate AML regime. Financial Action Task Force (FATF) Regional-Style Bodies (RSBs) are regional organizations that operate under the aegis of the FATF.
The purpose of the RSBs is to promote and facilitate the implementation of effective AML/CFT measures in the region and to facilitate international cooperation on AML/CFT [1][2]. One of the main goals of the RSBs is to set standards to assess whether member countries have an adequate AML/CFT regime and are meeting the FATF Recommendations. The RSBs also provide guidance to member countries in setting up effective AML/CFT regimes, and support them in their efforts to combat money laundering and terrorist financing.
NEW QUESTION # 78
A compliance officer is looking to update an institutions private bank procedures. What should be included as recommended by the Wolfsberg AML Principles on Private Banking?
- A. The institution's senior management has primary responsibility for the relationship
- B. Review of client files annually if there are unusual transactions
- C. Dedicated automated AML monitoring of client activity
- D. Approval of Politically Exposed Persons (PEPs) by at least one person other than the relationship manager
Answer: D
Explanation:
https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/wolfsbergstandards/10.%20Wolfsberg-Private-
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.
NEW QUESTION # 79
A compliance officer learns from an Information Technology (IT) source of a potential new financial service being discussed by the new product approval committee.
What is the correct next course of action?
- A. Go to the board of directors and try to shut the new service down immediately because the committee did not communicate with the compliance officer.
- B. Get as much information as possible from the source so that potential risks can be researched and a report prepared and presented to the head of marketing.
- C. Request that the new product approval committee include the compliance officer.
- D. Start initial research into potential risks but wait until notified that the service has been approved by the committee before initiating extensive research.
Answer: D
NEW QUESTION # 80
A new AML Officer for a US-based money service business (MSB) is drafting procedures around types of activity that require further review. Which should be included? (Choose two.)
- A. A customer sending funds to a family member living in a high-risk jurisdiction that is subject to civil unrest.
- B. A customer visiting multiple branches of the MSB on the same day in order to transfer funds internationally.
- C. A customer buying several money orders totaling over $10,000 USD using debit card on the same day using government-issued identification.
- D. A customer attempting to buy money orders under $3,000 USD in cash multiple times a day.
- E. A customer buying multiple money orders for $250 totaling $2,000 USD.
Answer: B,D
Explanation:
A customer visiting multiple branches of the MSB on the same day in order to transfer funds internationally is a potential indicator of structuring, which is a technique used by money launderers to avoid reporting thresholds or detection by authorities. A customer attempting to buy money orders under $3,000 USD in cash multiple times a day is also a possible sign of structuring, as well as an attempt to evade the identification and recordkeeping requirements for MSBs. Both scenarios should be included in the procedures for further review by the AML Officer.
References:
BSA/AML Risk Assessment for Money Services Businesses (MSBs), section "Risk Factors", sub-section "Structuring": "Structuring is the practice of conducting financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by the BSA and/or 31 CFR Chapter X. Structuring is illegal and is often indicative of money laundering or other illicit activity." Money Services Business (MSB) - AML Compliance Guide, section "AML Compliance Requirements for MSBs", sub-section "Identification and Recordkeeping": "MSBs must verify the identity of any person who conducts a transaction of $3,000 or more. They must also keep records of the transaction, including the name, address, date of birth, and identification number of the customer, as well as the amount, date, and method of payment."
NEW QUESTION # 81
How do payable through accounts (PTAs) differ from normal foreign correspondent accounts?
- A. The customers do not have to worry about sanctions list screening such as OFAC
- B. The customers can contact the correspondent bank directly to send wire transfers
- C. The customers can hide their identity through the use of cover payments in U.S. dollars
- D. The customers have the ability to directly control funds at the correspondent bank
Answer: D
NEW QUESTION # 82
What does designing a country as being of "prime money laundering concern" allow the U.S. government to do?
- A. Ensure the inclusion of that country onto FATF's Non-Cooperative Country and Territory list
- B. Obtain transactional information from U.S.-owned subsidiary banks located outside the U.S.
- C. Close some or all correspondent or payable-through accounts
- D. Ensure the inclusion of that country into the office of Foreign Asset Control country sanctionsprograms
Answer: A
NEW QUESTION # 83
An oil exploration company based in France does business with oil refineries in Iran, which is subject to comprehensive Office of Foreign Assets Control (OFAC) sanctions. What type of OFAC sanctions should be imposed against the French company?
- A. Secondary
- B. List-based
- C. Country-based
- D. Sectoral
Answer: A
Explanation:
Explanation
An oil exploration company based in France does business with oil refineries in Iran, which is subject to comprehensive Office of Foreign Assets Control (OFAC) sanctions. What type of OFAC sanctions should be imposed against the French company?
1. Sectoral
2.Country-based
3.Secondary
4. List-based
NEW QUESTION # 84
Potential indicators of money laundering associated with Trust and Company Service Providers include:
(Select Two.)
- A. generation of rental income to legitimize illicit funds.
- B. multi-jurisdictional wire transfers with no legal purpose.
- C. frequent deposits to or withdrawals from bank accounts.
- D. structuring cash deposits into third party accounts.
- E. use of legal persons in jurisdictions with strict secrecy laws.
Answer: B,E
Explanation:
Explanation
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."
NEW QUESTION # 85
Which action should an FIU consider taking when it has information that might be useful to another FIU?
- A. Request approval from the Egmont Group prior to sharing the information with the other FIU
- B. Take no action until contacted by the other FIU
- C. In accordance with Wolfsburg guidelines, submit the information to the other FIU in written form
- D. Supply the information to the other FIU spontaneously as soon as the relevance of sharing the information is identified
Answer: D
NEW QUESTION # 86
A U.K. real estate agent has three foreign clients interested in purchasing an apartment building, valued at £30 million, in the outskirts of London as an investment property. The clients are not willing to have their names provided to the bank. The clients want the purchase to be made in the names of three private companies for privacy reasons. The plan is to wire the funds into an account held in the name of another private company at a bank in London.
Which red flag should stop the agent from discussing this potential purchase further?
- A. The clients want the purchase to be made in the names of the private companies
- B. The clients have the funds necessary to fund a £30 million purchase
- C. The clients are not willing to have their names provided to the bank
- D. The clients are foreign
Answer: C
NEW QUESTION # 87
A company contracts a life insurance policy with a savings feature of 100,000 USD for an individual in a high-risk country. The policy receives monthly cash deposits from unknown third parties. A minimal part of the deposit is invested and the rest is withdrawn by the end of the month. Which are the circumstances to consider as a risk for money laundering? (Select Two.)
- A. Unidentified third parties depositing cash to the policy
- B. A life insurance policy with a savings feature for a national from a high-risk country
- C. A company established in a high-risk country contracting a policy for a domestic individual
- D. The regular withdrawals from the policy by the end of the month
- E. A policy for an amount of 100,000 USD is to be considered high and suspicious
Answer: A,D
Explanation:
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
NEW QUESTION # 88
Which of the following customers require the most enhanced due diligence?
- A. A resident of a non-cooperative jurisdiction.
- B. An international business corporation.
- C. A politically exposed person.
- D. An established customer.
Answer: C
NEW QUESTION # 89
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The CAMS certification exam is designed to assess an individual's knowledge and understanding of AML laws, regulations, and best practices, as well as their ability to apply this knowledge in real-world scenarios. CAMS exam covers a wide range of topics such as money laundering typologies, risk assessment, customer due diligence, transaction monitoring, and sanctions compliance. Passing the CAMS exam demonstrates a professional's commitment to the AML field, and it is often a requirement for many AML-related job positions in financial institutions, law enforcement agencies, and regulatory bodies.
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