ACAMS CAMS Practice Test - Questions Answers, Page 31

According to the Basel guidelines on customer due diligence for banks, a trust is a legal arrangement whereby a person (the settlor or grantor) transfers the legal ownership of specific assets to another person or entity (the trustee) to hold for the benefit of a third person or persons (the beneficiaries)1. The Basel guidelines recommend that banks should identify and verify the identity of the following parties to determine the true nature of the trust relationship:

The trustee, who is the person or entity that has the legal authority and duty to manage the trust assets and distribute them to the beneficiaries according to the trust deed2.The trustee may also be the settlor, the beneficiary, or both, depending on the type and structure of the trust3.

The beneficiaries, who are the persons or entities that have a beneficial interest in the trust assets or income, either presently or in the future4. The beneficiaries may be named individuals, classes of persons, or charitable causes.

The settlor or grantor, who is the person or entity that creates the trust and transfers the legal ownership of the assets to the trustee. The settlor or grantor may also retain some rights or powers over the trust, such as the ability to appoint or remove trustees, beneficiaries, or protectors.

The other three options are incorrect because:

Respondents are not trust parties, but rather financial institutions that maintain correspondent banking relationships with other financial institutions. Respondents are not relevant for the identification of the trust relationship, but rather for the due diligence of the correspondent banking relationship.

Payees are not trust parties, but rather persons or entities that receive payments from the trust or other sources. Payees are not relevant for the identification of the trust relationship, but rather for the monitoring of the transactions and activities of the trust.

Trust administrators are not trust parties, but rather persons or entities that provide administrative services to the trust, such as accounting, record-keeping, or tax compliance. Trust administrators are not relevant for the identification of the trust relationship, but rather for the assessment of the risk and complexity of the trust.

1: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001,4, p.172: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001,4, p.173: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p.1114: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001,4, p. 17 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 111 : Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001,4, p. 17 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 111 : Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001,4, p. 10 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 112 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 112

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.

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.''

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

Anti-Money Laundering (AML) Risk Assessment | ACAMS1

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

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

A qualified independent party/auditor is the most effective resource to evaluate the effectiveness of an anti-money laundering program. This is because an independent auditor can provide an objective and unbiased assessment of the program, identify any weaknesses or gaps, and make recommendations for improvement. An independent auditor can also verify the compliance of the program with the relevant regulations and best practices, and test the adequacy and functionality of the internal controls, customer due diligence processes, and transaction monitoring systems. An independent auditor can also help an organization prepare for regulatory examinations and audits, and avoid potential penalties or sanctions.

The document titled ''Frequently Asked Questions Conducting Independent Reviews of Money Services Business Anti-Money Laundering Programs'' published by the Financial Crimes Enforcement Network (FinCEN) in July 2010. You can access it by clickinghere.

The document titled ''AML Audit: How to Effectively Assess Your Compliance Program'' published by Alessa in May 2023. You can access it by clickinghere.

The document titled ''Mutual Evaluations'' published by the Financial Action Task Force (FATF). You can access it by clickinghere.

According to the Egmont Group of Financial Intelligence Units, which is a network of over 160 FIUs that promotes international cooperation and information exchange, FIUs should share information with foreign FIUs spontaneously, without prior request, when they have reasonable grounds to believe that the information is relevant for the receiving FIU1.This principle is also reflected in the FATF Recommendation 40, which states that FIUs should exchange information with other FIUs, especially when this information concerns money laundering, predicate offences, or terrorist financing2.Spontaneous information sharing can enhance the effectiveness of FIUs, as it can help to identify new leads, trends, patterns, or typologies, as well as to prevent or disrupt criminal activities1.

The other options are not consistent with the best practices of FIU information sharing. For example:

In accordance with Wolfsberg guidelines, submit the information to the other FIU in written form. The Wolfsberg Group is an association of 13 global banks that issues guidance and standards on anti-money laundering and counter-terrorist financing.However, the Wolfsberg guidelines are not binding for FIUs, and they do not specify the format or channel of information exchange between FIUs3. Moreover, submitting information in written form may not be the most efficient or secure way of communication, as it may cause delays, errors, or breaches of confidentiality.

Take no action until contacted by the other FIU. This option contradicts the principle of spontaneous information sharing, as it implies that the FIU with the relevant information will wait for a formal request from the other FIU, instead of proactively sharing the information. This may result in missed opportunities, inefficiencies, or failures in detecting or preventing money laundering or terrorist financing.

Request approval from the Egmont Group prior to sharing the information with the other FIU. This option is unnecessary and impractical, as the Egmont Group does not have the authority or the capacity to approve or deny individual information requests or exchanges between FIUs.The Egmont Group provides a platform and a framework for FIU cooperation, but it does not interfere with the operational autonomy or the bilateral relations of its members4.

FATF Recommendation 40: Other Forms of International Co-operation

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

Wolfsberg Group

Egmont Group

New business products should be evaluated for AML concerns before they are launched into the market. This is because new products may introduce new risks or vulnerabilities that could be exploited by money launderers or terrorist financiers. By conducting a pre-launch assessment, a financial institution can identify and mitigate these risks, design appropriate controls and procedures, and ensure compliance with the relevant laws and regulations. A pre-launch assessment can also help a financial institution to align its AML strategy with its business objectives, and avoid potential reputational damage or regulatory sanctions.

9 Things to Consider When Evaluating an AML Solution

CAMS Study Guide 6th Edition, page 38.

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.

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

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

3: ACAMS Study Guide for the CAMS Certification Examination3

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the best practices for conducting an internal investigation is to request formal company authorization to conduct the investigation.Such authorization should be granted, if possible, by the board of directors or audit committee, as this will help to establish the independence and legitimacy of the investigation, as well as the protection of the attorney-client privilege and the work product doctrine1. The other options are incorrect because:

B .Refusing to provide any records or documents to law enforcement may be seen as obstructing justice or violating regulatory obligations, and may also result in the loss of the privilege or the imposition of sanctions or penalties23.

C .Letting the bank hire any and all contract investigators may compromise the quality and integrity of the investigation, as well as the protection of the privilege or the work product doctrine, as the investigators may not be properly supervised or instructed by legal counsel, or may not be covered by the Kovel doctrine45.

D .Not marking files or documents with privileged and confidential: attorney-client privilege and/or work-product may undermine the claim of the privilege or the work product doctrine, as it may indicate that the materials were not prepared for the purpose of seeking or providing legal advice or in anticipation of litigation, or that they were not intended to be kept confidential67.

1: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

2: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 151

3: Perkins Coie, Protecting Internal Investigation Materials From Disclosure, Updates, August 10, 2020

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

5: Eversheds Sutherland, Legal privilege of corporate internal investigations under US law - 2019 caselaw update, JDSupra, December 20, 2019

6: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

7: Norton Rose Fulbright, Internal investigations: when does privilege apply?, Global law firm, September 11, 2018