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ACAMS CAMS Practice Test - Questions Answers, Page 8
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Question 71
A foreign politically exposed person (PEP) requests to add a beneficiary to a file insurance policy.
How should the request be processed to mitigate risk?
Perform due diligence on the beneficiary
Determine the source of wealth and source of funds
Decline the request if the beneficiary is a foreign PEP
Decline the request to add a beneficiary due to increased risk
According to the FATF Recommendation 12, financial institutions should take reasonable measures to determine whether the beneficiaries of a life insurance policy and/or, where required, the beneficial owner of the beneficiary are politically exposed persons.This should occur at the latest at the time of the payout1. The purpose of this requirement is to prevent the abuse of life insurance products for money laundering or terrorist financing by PEPs or their associates.Therefore, the best way to mitigate the risk of adding a beneficiary to a life insurance policy for a foreign PEP is to perform due diligence on the beneficiary, such as verifying their identity, relationship with the PEP, and source of funds2.
The other options are not correct because they either do not comply with the FATF standards, or do not adequately address the risk of adding a beneficiary to a life insurance policy for a foreign PEP.Determining the source of wealth and source of funds is a measure that should be applied to the PEP as the customer, not the beneficiary, as part of the enhanced due diligence process2. Declining the request if the beneficiary is a foreign PEP may not be feasible or proportional, as not all foreign PEPs are involved in money laundering or terrorist financing, and some may have legitimate reasons to add a beneficiary to their life insurance policy. Declining the request to add a beneficiary due to increased risk may also not be feasible or proportional, as it may violate the contractual rights of the PEP as the customer, and may not be necessary if the due diligence on the beneficiary does not reveal any red flags or suspicions.
https://www.cfatf-gafic.org/index.php/documents/fatf-40r/378-fatf-recommendation-12-politically-exposed-persons
Question 72
Which requirement is included in the Fourth European Union Directive on money laundering?
It requires obliged entities to consider politically exposed persons as high risk for life
It requires obliged entities to conduct enhanced due diligence on all prepaid card holders
It requires member countries to maintain registries of the beneficial owners of legal entities
It requires member states to enact economic sanctions against countries that do not cooperate with Financial Action Task Force recommendations
The Fourth European Union Directive on money laundering (AMLD4) requires member countries to maintain registries of the beneficial owners of legal entities, such as companies, trusts, foundations, etc.This is to ensure that the true identity and ownership of the customers and the natural persons on whose behalf transactions are conducted are known to the obliged entities, such as banks, lawyers, accountants, etc., and to the competent authorities, such as regulators, supervisors, or law enforcement12.This requirement aims to prevent the misuse of legal entities for money laundering or terrorist financing purposes, and to enhance transparency and access to beneficial ownership information34.
Question 73
A bank maintains a relationship with a customer who owns a small bakery business.
Which customer action indicates potential money laundering?
The customer continually makes regular cash deposits
The customer has multiple bank accounts at several locations
The customer purchased property insurance that is twice the value of the business
The customer recently wired a large amount to a foreign jurisdiction where family is located
The customer purchased property insurance that is twice the value of the business indicates potential money laundering. This could be a sign of insurance fraud, which is one of the predicate offenses for money laundering. Insurance fraud involves making false or exaggerated claims to obtain illegitimate financial benefits from an insurance company. The customer may have purchased an excessive amount of insurance to cover the value of the property and then intentionally damage or destroy it to claim the insurance payout. The customer may then use the insurance money to launder the proceeds of other criminal activities.
CAMS Study Guide, 6th Edition, Chapter 1, Section 1.21
CAMS Study Guide, 6th Edition, Chapter 3, Section 3.21
ACAMS Chapter 1 Exam Questions, Question 682
6th Anti-Money Laundering Directive (6AMLD): Biggest Changes, Section 23
Question 74
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 to 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?
The clients are foreign
The clients have the funds necessary to fund a 30 million purchase
The clients are not willing to have their names provided to the bank
The clients want to purchase to be made in the names of the private companies
The clients are not willing to have their names provided to the bank is a red flag that should stop the agent from discussing this potential purchase further, as this could indicate that the clients are trying to evade customer due diligence (CDD) or know your customer (KYC) requirements, or hide their beneficial ownership or source of funds. According to the U.K.Money Laundering Regulations 2017, real estate agents must conduct CDD on their customers and any beneficial owners, and verify their identity and address1. The U.K.also has a register of people with significant control (PSC) over companies, which requires companies to disclose their beneficial owners2.The use of private companies and wire transfers could also be a sign of layering, a money laundering technique that involves moving funds through multiple accounts or entities to obscure their origin3.
1: U.K. Government, Money Laundering Regulations 2017, Part 2: Customer Due Diligence,Section 5-62: U.K. Government, People with significant control (PSC) register,Overview3: ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorist Financing, Page 19
Question 75
What is a key objective of the Egmont Group?
To find ways to promote the development of Financial Intelligence Units and the sharing of expertise.
To safeguard the financial system from illicit use and combat money laundering and promote national security.
To issue binding standards that establish consistently operated Financial Intelligence Units in member jurisdictions.
To provide best practices for financial institutions on how to report suspicious activity to best share the information with law enforcement.
https://egmontgroup.org/en/content/about
'The Egmont Group is a united body of 165 Financial Intelligence Units (FIUs). The Egmont Group provides a platform for the secure exchange of expertise and financial intelligence to combat money laundering and terrorist financing (ML/TF). This is especially relevant as FIUs are uniquely positioned to cooperate and support national and international efforts to counter terrorist financing and are the trusted gateway for sharing financial information domestically and internationally in accordance with global Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) standards.
Question 76
The compliance officer for a bank is reviewing on-boarding documents for a new business account for a domestic corporation. The officer is unable to verify the identity of the beneficial owners of the company. Only information on the nominee owners was provided, and none of the listed addresses are local. The purpose of the business and future expected activity were disclosed to include cash letters, money orders and international remittance transfers.
Which red flag identifies a heightened money laundering risk?
Expected activity was advised to include cash letter and money orders
The nature and purpose of the business include international remittance transfers
The names provided at account opening are identified as the corporation's representative nominees
Account signer's government issued identification lists addresses outside of where the branch account was opened
According to the ACAMS Study Guide 6th Edition, Chapter 2, page 37, one of the red flags of money laundering or terrorist financing is the use of nominees, trusts, or third parties to hide the identity, ownership, or control of the funds or assets involved in the transaction. Nominees are individuals or entities that act on behalf of the actual or beneficial owners of a company, trust, or account, and may be used to conceal the source, destination, or purpose of the funds or assets. Nominees may also be used to evade taxes, sanctions, or regulatory requirements.
In this case, the compliance officer is unable to verify the identity of the beneficial owners of the company, and only information on the nominee owners was provided. This raises the suspicion that the company may be involved in money laundering or terrorist financing activities, and that the nominee owners may be acting as fronts or intermediaries for the actual or beneficial owners. The compliance officer should conduct further due diligence on the company, the nominee owners, and the beneficial owners, and report any suspicious or unusual activity to the relevant authorities.
ACAMS Study Guide 6th Edition, Chapter 2, page 37
Beneficial Ownership Meaning and Regulation - Investopedia
What is a nominee shareholder? | LawBite
Question 77
Law enforcement submitted a request to a bank for information regarding one of its customers.
How should the bank respond according to Financial Action Task Force Guidance?
Provide all information requested to support the investigation
Ensure that the request will not violate any local privacy regulations or legislation
Ensure the information is necessary to the investigation before responding to the request
Contact the customer informing the person of the investigation to ensure the bank provides correct information
According to the ACAMS Study Guide 6th Edition, Chapter 2, page 37, one of the red flags of money laundering or terrorist financing is the use of nominees, trusts, or third parties to hide the identity, ownership, or control of the funds or assets involved in the transaction. Nominees are individuals or entities that act on behalf of the actual or beneficial owners of a company, trust, or account, and may be used to conceal the source, destination, or purpose of the funds or assets. Nominees may also be used to evade taxes, sanctions, or regulatory requirements.
In this case, the compliance officer is unable to verify the identity of the beneficial owners of the company, and only information on the nominee owners was provided. This raises the suspicion that the company may be involved in money laundering or terrorist financing activities, and that the nominee owners may be acting as fronts or intermediaries for the actual or beneficial owners. The compliance officer should conduct further due diligence on the company, the nominee owners, and the beneficial owners, and report any suspicious or unusual activity to the relevant authorities.
ACAMS Study Guide 6th Edition, Chapter 2, page 37
Beneficial Ownership Meaning and Regulation - Investopedia
What is a nominee shareholder? | LawBite
Question 78
How should a financial institution respond to a verbal request from a law enforcement agency to keep an account open to assist in an investigation?
Agree to keep the account open
Request a subpoena to maintain the account
Request a letter on the agency's letterhead
Request a search warrant from the local court
According to the ACAMS study guide, one of the best practices for dealing with law enforcement inquiries is to verify the identity and authority of the law enforcement officer before providing any information (p. 224). This is to ensure that the inquiry is legitimate and not a phishing attempt or a breach of confidentiality. The compliance officer should also document the inquiry and the information provided, and consult with legal counsel if necessary. The other options are not appropriate, as they may either violate the law, compromise the investigation, or create unnecessary work.
ACAMS. (2020).Study Guide for the Certification Examination for Anti-Money Laundering Specialists (6th ed.). Miami, FL: ACAMS.
What Is An AML Officer1
Bank Secrecy Act/Anti-Money Laundering: Requests by Law Enforcement for Financial Institutions to Maintain Accounts2
Question 79
A bank operates in multiple countries and offers a variety of products and services. The compliance officer recently joined the bank and wants to better understand the inherent level of anti-money laundering risk across the entire organization.
Which two factors should be considered? (Choose two.)
The Transaction Monitoring program
The Customer Due Diligence program
Countries that the bank operates in
Products and services offered by the bank
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 than others, 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
Question 80
A bank is preparing for its anti-money laundering independent review, which is performed every two years under the direction of the compliance officer. The bank's corporate audit department will conduct the review.
The compliance officer will review the final report before it is released to the Board of Directors.
What is the issue with this situation?
Independent reviews must be performed annually
The review must be performed by a group outside of the bank
The final report must be presented directly to the board of directors
There is a conflict of interest with the management of the review process
The method of purchasing chips with cash and redeeming them for a check is used to launder money in casinos. This is because the check can be deposited into a bank account or cashed at another location, creating a paper trail that appears to be legitimate. The check can also be used to conceal the source and amount of the cash, as well as the identity of the person who obtained it.This method is also known as ''chip washing'' or ''chip dumping'' and is one of the common ways that money launderers exploit casinos12.
1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and Methods, p.32-332: FATF Report: Money Laundering through the Physical Transportation of Cash, October 2015, p. 28-29, http://www.fatf-gafi.org/media/fatf/documents/reports/money-laundering-through-transportation-cash.pdf
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