ACAMS CAMS - Certified Anti-Money Laundering Specialist (the 6th edition)

TheUSA PATRIOT Act Section 313 & 319(b)placesstrict requirements on foreign correspondent banking relationshipsto prevent money laundering.

Option A (Correct):Theforeign bank must disclose its ownership structureto identifyultimate beneficial owners (UBOs).

Option C (Correct):Theforeign bank must certify that it maintains a physical presencein a regulated jurisdiction.

Option E (Correct):Theforeign bank must not allow shell banks to use its U.S. correspondent accounts.

Why Other Options Are Incorrect:

Option B (Incorrect):Thecertification does not specifically exclude PEPs, butPEPs require enhanced due diligence (EDD).

Option D (Incorrect):The foreign bankmay operate in multiple jurisdictions, but it must be regulated where it has a presence.

Key Compliance Measures for Correspondent Banking:

Conduct EDD on foreign bank relationships.

Ensure correspondent banks do not facilitate shell banks.

Monitor transactions for money laundering and terrorist financing risks.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, when a financial institution receives a law enforcement request to keep an account open that may be associated with suspicious or criminal activity, it should take the following two steps:

Maintain account records for at least five years after the request expires. This is to ensure that the financial institution can provide evidence of its compliance with the law enforcement request and the applicable anti-money laundering regulations. The five-year retention period isbased on the international standard set by the Financial Action Task Force (FATF) and adopted by many jurisdictions12.

Ask for a written request from the law enforcement agency that defines the duration. This is to protect the financial institution from potential liability and to clarify the scope and purpose of the law enforcement request. The written request should specify the time period for which the account should remain open, the reason for the request, the contact information of the law enforcement officer, and the legal authority for the request34.

Anti-Money Laundering Specialist (the 6th edition) study guide, page 57

FATF Recommendation 11, paragraph 2

Anti-Money Laundering Specialist (the 6th edition) study guide, page 58

Money Laundering website, article on “Law Enforcement Requests to Keep Accounts Open”

https://www.fincen.gov/resources/statutes-regulations/guidance/requests-law-enforcement-financial-institutions-maintain

 it describes the organization that a national Financial Intelligence Unit (FIU) should consider becoming a member of, which is the Egmont Group. The Egmont Group is an international network of FIUs that was established in 1995 to facilitate the exchange of financial intelligence and information among its members, and to promote cooperation and coordination in the fight against money laundering and terrorist financing. The Egmont Group currently has 166 member FIUs from different jurisdictions, and provides them with various benefits, such as access to secure communication channels, bestpractices, training, and technical assistance. The Egmont Group also works closely with other international organizations, such as the Financial Action Task Force (FATF), the United Nations, and the World Bank, to enhance the global anti-money laundering and counter-terrorist financing (AML/CTF) framework.

The other options are not necessarily organizations that a national FIU should consider becoming a member of, although they may have some relevance or influence on the AML/CTF field. Option B describes the Wolfsberg Group, which is an association of 13 global banks that was formed in 2000 to develop standards and guidance for the financial industry on AML/CTF and other financial crime issues. The Wolfsberg Group is not an organization for FIUs, but rather for financial institutions. Option C describes the Financial Action Task Force (FATF), which is an inter-governmental body that was established in 1989 to set the international standards and recommendations for AML/CTF and to monitor the compliance and effectiveness of its members and other jurisdictions. The FATF is not an organization for FIUs, but rather for governments and policy-makers. Option D describes the Basel Committee, which is a forum of central bank governors and heads of banking supervision authorities from 28 jurisdictions that was established in 1974 to enhance the quality and consistency of banking supervision and regulation. The Basel Committee is not an organization for FIUs, but rather for banking regulators and supervisors.

ACAMS CAMS Certification Video Training Course - 6th Edition1

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)2

ACAMS CAMS Study Guide - 6th Edition, Chapter 5, pages 108-109

https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-5.pdf

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the situation that is the highest risk for money laundering and terrorist financing activity is A. A customer purchases casino chips, using small denomination bank notes, but does not engage in game play before redeeming the chips for a casino check. This is because this situation may indicate some red flags of money laundering, such as:

Using small denomination bank notes, which may be an attempt to avoid detection or reporting by the casino or the authorities, as large amounts of cash are usually associated with criminal activity1.

Not engaging in game play, which may indicate a lack of interest in gambling and a sole purpose of exchanging cash for a casino check, which is a more legitimate and less traceable form of payment2.

Redeeming the chips for a casino check, which may be a way of laundering the cash through the casino, as the check can be deposited into a bank account or cashed at another location, without revealing the source of the funds3.

The other three options are less risky because:

B. A customer purchases casino chips and engages in significant game play before requesting a casino check for the remainder is less risky, as it may indicate a genuine interest in gambling and a legitimate source of funds. However, this situation may still require further investigation and verification, as some money launderers may use gambling as a cover for their illicit activities, or may use the casino check as a way of transferring funds to another jurisdiction or person4.

C. A customer purchases casino chips using a credit card and engages in minimal game play before redeeming the chips for a casino check is less risky, as it may indicate a low level of funds involved and a traceable source of funds. However, this situation may still require further investigation and verification, as some money launderers may use credit cards to obtain cash advances from the casino, or may use the casino check as a way of repaying their credit card debt or transferring funds to another jurisdiction or person.

D. A customer purchases casino chips using credit from an account at an affiliated casino and engages in significant game play before redeeming the chips for a casino check is less risky, as it may indicate a regular and loyal customer of the casino and a legitimate source of funds. However, this situation may still require further investigation and verification, as some money launderers may use credit from an affiliated casino to avoid carrying cash or using credit cards, or may use the casino check as a way of transferring funds to another jurisdiction or person.

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 106 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 110

One of the key components of an effective anti-money laundering (AML) program is customer due diligence (CDD), which involves verifying the identity of the customer, understanding the nature and purpose of the customer’s relationship with the financial institution (FI), and assessing the risk of money laundering or terrorist financing that the customer poses. CDD is essential for preventing and detecting the misuse of the FI’s services by criminals, and for complying with the relevant laws and regulations.

However, CDD can be challenging for FIs that offer online services to customers, as there is a greater difficulty in matching the customer with the provided identification documentation. Unlike face-to-face interactions, online services rely on electronic or remote methods of identification and verification, such as scanned copies of documents, biometric data, digital signatures, or third-party verification services. These methods may not be as reliable or secure as physical verification, and may expose the FI to the risk of identity fraud, document forgery, or impersonation. Moreover, online services may attract customers from different jurisdictions, which may have different standards and requirements for identification and verification, and may pose different levels of risk.

Therefore, FIs that offer online services to customers should implement enhanced due diligence (EDD) measures to mitigate the risk of money laundering, such as obtaining additional information or documentation from the customer, applying more stringent verification procedures, conducting more frequent and intensive monitoring of the customer’s transactions and behavior, and restricting or limiting the types or amounts of transactions that the customer can perform online.

CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 82

Anti-Money Laundering in a Nutshell, Chapter 4, Section 4.2, page 63

Guidance on Digital Identity, Section 2, page 8

Anti-Money Laundering, The Basics: Installment 1, Section 3.2, page 5

Chip dumpingis a commonmoney laundering techniquein online gambling.

Option D (Correct):Chip dumpingoccurs whenplayers colludetotransfer fundsvia staged betting, making illicit funds appear as gambling winnings.

Option A (Incorrect):Concealmentis a broad term, not a specific technique.

Option B (Incorrect):Coordinated bettingrefers tomatch-fixing, not money laundering.

Option C (Incorrect):Player-to-player transfersare used in money laundering but arenot specific to online gambling.

 A financial institution should consult with its legal counsel before responding to a grand jury subpoena regarding a customer, as such subpoenas may involve complex legal issues and potential conflicts of interest. A grand jury subpoena is a legal order issued by a federal or state grand jury that compels a person or entity to produce documents, testify, or both, in connection with a criminal investigation. A financial institution that receives a grand jury subpoena should not disclose its existence or contents to the customer or any third party, unless authorized by law or the court, as doing so may constitute obstruction of justice or violate the secrecy rules of the grand jury. A financial institution should also assess and review all relevant information it has about the customer that is the subject of the subpoena, in accordance with its risk-based AML program, and consider filing a SAR if it identifies any suspicious activity.

 According to the ACAMS CAMS Certification Study Guide (6th edition), a financial institution (FI) should update its ML/TF risk assessment when there are changes in its business activities, customer base, or operating environment that may affect its exposure to ML/TF risks1 Some examples of such changes are:

When new products, services or customer types are introduced: New products, services or customer types may introduce new or increased ML/TF risks that the FI may not have previously considered or addressed. For example, offering online banking, prepaid cards, or cross-border remittances may create new opportunities for money launderers or terrorist financiers to exploit the FI’s systems and processes. Therefore, the FI should assess the ML/TF risks associated with the new products, services or customer types and implement appropriate controls to mitigate them12

When the institution faces a merger or acquisition: A merger or acquisition may result in the FI inheriting the ML/TF risks of the other entity, as well as the potential liabilities and reputational damage that may arise from any ML/TF issues or violations. Therefore, the FI should conduct a due diligence on the other entity’s ML/TF risk assessment, policies, procedures, and controls, and identify any gaps or weaknesses that need to be addressed. The FI should also integrate and harmonize the ML/TF risk assessment and compliance programs of the merged or acquired entity with its own13

 1: ACAMS CAMS Certification Study Guide (6th edition), page 32. 2: Money laundering/terrorism financing risk assessment | AUSTRAC4 3: MONEY LAUNDERING & TERRORIST FINANCING (ML/TF) RISK ASSESSMENT METHODOLOGY5, page 4.

The activities that could be considered a potential spear phishing scam are:

A courier delivers a duplicate invoice to a business that contains updated payment details of an existing supplier. This could be a way of diverting funds to a fraudulent account by impersonating a legitimate vendor and exploiting the trust relationship between the business and the supplier1.

Payroll receives an external email from an employee looking to update their bank account information. This could be a way of stealing money from the employee or the employer by pretending to be the employee and requesting a change in the payment method or destination2.

An employee receives an email that asks to download an attachment, but the attachment is a malware. This could be a way of infecting the employee’s computer or network with malicious software that could compromise sensitive data, disrupt operations, or demand ransom3.

The other options are not necessarily spear phishing scams, although they may be other types of fraud or deception. For example:

An employee receives a phone call requesting that money be sent to assist someone in trouble. This could be a vishing scam, which is a form of voice phishing that uses phone calls to solicit personal or financial information or to request money transfers4.

A business sends its employees an email warning that email passwords must be changed to prevent cyber-fraud. This could be a legitimate security measure, or it could be a phishing scam, which is a form of email phishing that targets a broad audience and tries to trick them into revealing their credentials or clicking on malicious links.

Members of a religious organization receive a donation request by email claiming to be from their leader. This could be a genuine appeal, or it could be a social engineering scam, which is aform of manipulation that exploits the human factor and relies on the victim’s emotions, trust, or sympathy.

FATF Recommendation 29 states that an FIU should serve as a national center for the receipt and analysis of suspicious transaction reports and other information relevant to money laundering and terrorist financing.

“The FIU should serve as a national center for the receipt and analysis of suspicious transaction reports (STRs) and other information relevant to ML/TF, and for the dissemination of the results of that analysis.”

(CAMS 6th Edition, Role of the FIU; FATF Recommendation 29)

TheAML analyst must gather additional informationbefore determining if an alert is suspicious.

Option C (Correct):Requesting information from the relationship managerhelps determineif the transaction is in line with the customer’s profile.

Option A (Incorrect):Below-the-line testingis useful forcalibrating AML models, but it doesnot help in real-time case evaluation.

Option B (Incorrect):Directly contacting a counterparty bankmaynot be appropriatewithout internal analysis first.

Option D (Incorrect):Restricting accessis aserious actionthat should only be takenafter a full investigation.

C: “The system must be adequate and proportionate to the bank’s size, activities, complexity, and risk profile. A one-size-fits-all solution is not appropriate.”

D: “Effective monitoring systems should support the detection of unusual trends and business relationships, facilitating meaningful analysis and alerts.”(CAMS 6th Edition, Transaction Monitoring System Requirements)

Incorrect:

A: Vendor internal controls are important, but not a top selection criterion for AML system effectiveness.

B: Permissions should be appropriate for the bank’s structure, not just compared to other banks.

 According to the AML Directive of the EU, obliged entities, such as banks and other financial institutions, are required to apply enhanced vigilance in business relationships and transactions involving high-risk third countries, which are those identified by the Commission as having strategic deficiencies in their anti-money laundering and countering the financing of terrorism regimes1. The types of enhanced vigilance requirements are basically extra checks and control measures which are defined in article 18a of the Directive1. However, these requirements are not exhaustive, and obliged entities should also implement additional mitigating measures that are complementary to the enhanced customer due diligence procedures, in accordance with a risk based approach1. This means that obliged entities should assess the level of risk posed by each customer, product, service, transaction, or delivery channel, and apply appropriate measures to mitigate those risks2. The additional mitigating measures may include, for example, obtaining additional information on the customer and the beneficial owner, applying additional elements of enhanced monitoring, increasing the frequency and intensity of transaction testing, or requiring the first payment to be carried out through an account in the customer’s name with a bank subject to similar customer due diligence standards1.

1: Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (Text with EEA relevance)

2: Guidance on Risk Factors, EBA, 2021

"The decision of whether or not to file a suspicious transaction report (also known as a suspicious activity report or SAR in the United States) often involves weighing the aggravating and mitigating factors arising from the research conducted during the investigative process. Financial institutions should draft procedures that document the factors to consider when determining whether a suspicious transaction report (STR) is appropriate."

The specialist should recommend directing the teller (cashier) to file a suspicious transaction report (STR). This is because the teller (cashier) has failed to comply with thebank’s internal policies and procedures for reporting unusual or suspicious activity, which is a key component of an effective anti-money laundering (AML) program1. The teller (cashier) should have filed an internal report of unusual activity assoon as he or she noticed the suspicious transactions, regardless of the personal circumstances or the length of service of the customer involved2. Failing to do so could expose the bank to regulatory sanctions, reputational damage, or legal liability3.

The other options are not appropriate recommendations for the specialist to make in this situation. Continuing to monitor the accounts is not sufficient, as it does not address the past non-compliance or the potential money laundering risk posed by the suspicious transactions. Refreshing anti-money laundering training for the teller (cashier) is not enough, as it does not ensure that the teller (cashier) will report the suspicioustransactions or prevent future violations. Suspending the teller’s (cashier’s) employment is too harsh, as it does not take into account the teller’s (cashier’s) long and exemplary work record, the personal hardship faced by the teller’s (cashier’s) family, or the possibility of remedial actions or corrective measures4.

1: Internal Controls | FinCEN.gov1 2: Reporting Suspicious Transactions - ACAMS2 3: The Consequences of Non-Compliance with AML Regulations - Blog | Unit213 4: Employee Discipline in the Workplace: A Guide for Managers4

The characteristic of the Financial Action Task Force (FATF) 40 recommendations is that they comprise global standards for countering money laundering, recognized by government bodies across the world. The FATF 40 recommendations provide a comprehensive framework of measures that countries should implement to combat money laundering and terrorist financing. The recommendations are not mandatory, but are widely recognized and followed by countries across the globe. The recommendations cover a range of areas, including customer due diligence, record-keeping, suspicious activity reporting, and international cooperation.

 A financial institution located in a Financial Action Task Force (FATF) member country should address the following issues in its anti-money laundering program when dealing with customers located in countries/jurisdictions that are not members of FATF:

The requirement to identify the beneficial owners of accounts: Beneficial owners are the natural persons who ultimately own or control a customer or a legal entity. Identifying the beneficial owners of accounts is a key component of customer due diligence (CDD) and helps the financial institution to assess the risk profile of the customer, prevent the misuse of legal entities for money laundering or terrorist financing, and comply with the FATF Recommendations12.

The requirement for customer identification for the opening of new accounts: Customer identification is the process of verifying the identity of a customer using reliable and independent sources of information or documents. Customer identification is another essential element of CDD and helps the financial institution to establish a business relationship with the customer, prevent identity fraud, and comply with the FATF Recommendations13.

The financial institution’s obligation to report suspicious transactions: Suspicious transactions are transactions that have no apparent economic or lawful purpose, or are inconsistent with the customer’s known profile or business activities, or indicate involvement in money laundering or terrorist financing. Reporting suspicious transactions to the competent authorities is a core obligation of the financial institution under the FATF Recommendations14 and helps to detect and deter illicit activities and support law enforcement investigations.

The obligation to freeze funds involved in suspicious transactions is not an issue that should be addressed in the anti-money laundering program, as it is not a requirement under the FATF Recommendations. The FATF Recommendations require the financial institution to freeze funds or other assets of designated persons and entities that are subject to targeted financial sanctions related to terrorism, proliferation of weapons of mass destruction, or other threats to the international financial system1 . However, the financial institution is not obliged to freeze funds involved in suspicious transactions, unless it receives a specific order from the competent authorities or the courts.

The FATF Recommendations, as amended November 2023

Interpretive Note to Recommendation 10 (Customer Due Diligence), paragraphs 5(b) and 6

Recommendation 10 (Customer Due Diligence), paragraph 1

Recommendation 20 (Reporting of Suspicious Transactions)

Recommendation 6 (Targeted Financial Sanctions Related to Terrorism and Terrorist Financing), Recommendation 7 (Targeted Financial Sanctions Related to Proliferation), and Recommendation 8 (Non-Profit Organisations)

Concentration accounts are internal accounts used by financial institutions to aggregate funds from or for various clients or other accounts. They are also known as omnibus accounts or suspense accounts. The use of concentration accounts may obscure the audit trail and the identity of the clients involved in the transactions. Therefore, the Wolfsberg Principles on Private Banking, which are a set of voluntary guidelines for preventing money laundering and terrorist financing in the private banking sector, prohibit the use of concentration accounts in a way that would prevent appropriate monitoring or identification of the clients or their funds12.

1: Wolfsberg Anti-Money Laundering Principles for Private Banking (2012), Section 4.3 2: The Wolfsberg Principles - an analysis, Journal of Money Laundering Control, Vol. 7 No. 3, 2004, pp. 237-240