ACAMS CAMS Practice Test - Questions Answers

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.

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

Option B is closest to the definition of money laundering provided by the United Nations Convention against Transnational Organized Crime and Other Protocols, which states that money laundering is ''the conversion or transfer of property, knowing that such property is the proceeds of crime, for the purpose of concealing or disguising the illicit origin of the property or of helping any person who is involved in the commission of the predicate offence to evade the legal consequences of his or her action''. In this scenario, the person is knowingly financing a resort development with the proceeds of arms trafficking, which is a crime, and thus concealing or disguising the illicit origin of the property.

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

United Nations Convention against Transnational Organized Crime and the Protocols Thereto

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

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

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

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

ACAMS CAMS Certification Video Training Course

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

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

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

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

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

Money laundering through real estate is a common method of disguising the source and ownership of illicit funds. Real estate transactions often involve large amounts of money, complex legal structures, and cross-border transfers, which can obscure the true nature and origin of the funds. The new business customer in this scenario raises several red flags that warrant enhanced due diligence, such as:

The business was established five years ago but has a vague website and no physical presence in the state where it is registered.

One of the principals has an international phone number and lives abroad, which could indicate a foreign shell company or a politically exposed person.

The other principal works out of a recreational vehicle, which could suggest a lack of legitimate business activity or income.

The business claims to be a real estate business, but does not provide any details about its projects, clients, or partners.

These factors suggest that the business may be involved in money laundering through real estate, either by purchasing properties with illicit funds, using properties to generate illegal income, or selling properties to launder money. Therefore, the financial institution should conduct enhanced due diligence to verify the identity, background, and source of funds of the business and its principals, as well as the purpose and nature of the account relationship.

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 2: Money Laundering Risks and Methods, pp. 46-47

Enhanced Due Diligence in Construction and Real Estate, by James Swenson, Ethixbase 360

Due Diligence & Legal Considerations in Commercial Real Estate, by Justia

The audit function should report to the audit committee of the board of directors (or similar oversight body) and independently evaluate the risk management and controls of the bank through periodic assessments, including the adequacy of the bank's controls to mitigate the identified risks, the effectiveness of the bank's staff's execution of the controls, the effectiveness of the compliance oversight and quality controls and the effectiveness of the training.

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.

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

A corporate account opened on behalf of several beneficial owners is a red flag because it may indicate an attempt to conceal the identity or source of funds of the ultimate beneficiaries1. The customer's stated investment goal of long-term investment is not reflective of the account activity, which involves frequent and large transfers, currency exchanges, and account depletion within a short period of time.This discrepancy may suggest that the customer is using the account for money laundering or other illicit purposes2.