ACAMS Advanced-CAMS-Audit Practice Test - Questions Answers, Page 3

Steps to Assess the External Review Report: Validate the scope, methodology, and findings of the external review to determine its adequacy and reliability. Identify any gaps or areas that require additional scrutiny by internal audit. Rationale for Review Instead of Reliance: Relying solely on external reviews without validation risks overlooking key compliance deficiencies. Internal audit must establish an independent assessment to corroborate findings. CAMS-Audit Recommendations: CAMS-Audit stresses the importance of critical evaluation of third-party reports and ensuring internal audit findings align with organizational compliance priorities

Incorporating Comprehensive Risk Factors By including an assessment of channel, credit, and transaction risks, the client's overall risk profile is accurately determined. This aligns with risk-based approaches emphasized by FATF and CAMS-Audit standards. These risk factors provide a granular view of the client's risk level, ensuring proper classification into Standard or Enhanced Due Diligence categories. Regulatory Alignment FATF Recommendations mandate that client risk assessments consider the products, services, and delivery channels used, as well as geographic and transactional risks. Conclusion Implementing composite AML and sanctions risk scores ensures the institution is compliant with regulatory standards and adequately mitigates risks associated with different client profiles.

Adverse Media Screening Requirements: Negative media screening is a critical part of customer due diligence (CDD) as highlighted in FATF Recommendation 10. Proper training ensures staff apply consistent procedures. Regular screening of all clients ensures ongoing monitoring of risks, aligning with the risk-based approach mandated by AML standards. Key Compliance Justification: Staff training and procedural updates mitigate the risk of inconsistent adverse media identification, a key finding in compliance audits.

Executive Summary Requirements: The statement focuses on clear, evidence-based findings, critical for reflecting material deficiencies in enhanced due diligence (EDD) for high-risk clients. Guidelines for Reporting: FATF emphasizes the consistent application of risk rating systems to ensure ML/TF risks are adequately mitigated.

Enhanced due diligence is necessary to identify potential risks associated with high-value transactions such as art sales, a known method for money laundering. CAMS-Audit guidelines recommend updating client records with findings to maintain transparency and prepare for regulatory scrutiny. This approach ensures compliance with due diligence requirements and mitigates reputational and financial crime risks.

First Steps for Sampling: Reviewing onboarding policies ensures the sampling aligns with established risk criteria, improving the relevance and accuracy of the audit findings. Regulatory Emphasis: FATF guidance stresses aligning audit sampling with organizational risk assessments and onboarding standards.

Nature of Discussion: Root cause analysis is required to identify underlying reasons for the failure to perform the control, particularly resource constraints. Key Compliance Justification: Addressing the root cause aligns with Basel Committee guidelines on improving control environments and addressing systemic issues in AML compliance.

Comparison Against Past Suspicious Activity Reported: This evaluates whether the new thresholds are identifying similar or improved patterns of suspicious activity compared to prior thresholds. Helps validate that the updated thresholds align with the institution's AML risk profile and regulatory expectations. Above-the-Line and Below-the-Line Testing: Above-the-line tests verify that alerts generated by the thresholds include expected suspicious transactions. Below-the-line tests assess transactions below the threshold to ensure no significant suspicious activities are missed. CAMS-Audit

Reference: Advanced CAMS-Audit frameworks emphasize the importance of both historical comparison and robust testing methodologies to validate transaction monitoring system updates.

Role of Internal Audit: Internal audit is tasked with evaluating and improving the effectiveness of governance, risk management, and control processes within the organization. Periodic evaluations ensure that AML/CFT processes remain robust and effective against emerging risks. Alignment with CAMS-Audit Guidance: Advanced CAMS-Audit training highlights the need for internal audit to focus on process effectiveness rather than operational responsibilities, such as quality assurance or corrective actions.