Free Practice Questions for ACAMS CAMS Exam

TheFATF 40 Recommendationsprovide aglobal AML/CFT framework, and theImmediate Outcomesassess effectiveness.

Option A (Correct):Therisk-based approach (RBA)is the foundation ofmodern AML complianceand is mandated byFATF Recommendation 1.

Option B (Incorrect):Interpretive notes are public documentsavailable to all jurisdictions, not private.

Option C (Incorrect):The40 Recommendations are regularly updated, incorporating new technology (e.g., virtual assets in 2019).

Option D (Incorrect):The11 Immediate Outcomesassess theeffectiveness of AML systems globally, not just for high-risk countries.

AMutual Legal Assistance Treaty (MLAT)is aformal agreementbetween nations allowinglaw enforcement cooperation in criminal investigations.

Option D (Correct):MLATs allow authorities toexchange information, request evidence, and collaborate on AML enforcement.

Option A (Incorrect):AMemorandum of Agreement (MOA)is anon-binding documentfor cooperation, not a legal treaty.

Option B (Incorrect):ADeclaration of Understandingisinformaland does not carry legal obligations.

Option C (Incorrect):MOUs are non-binding agreements, while MLATs createlegal obligations.

Economic sanctions are penalties imposed by a country or a group of countries on another country, entity, or individual for foreign policy or security purposes. There are different types of economic sanctions, depending on the scope, objective, and mechanism of the sanctions. Some of the common types are:

Targeted sanctions: These are sanctions that aim to minimize the adverse effects on the general population and the environment, and focus on specific individuals, entities, sectors, or activities that are responsible for or involved in the undesirable behavior or conduct. Targeted sanctions can include travel bans, asset freezes, arms embargoes, and trade restrictions on certain goods or services. For example, the United States and the European Union have imposed targeted sanctions on various officials, entities, and sectors in Russia, Iran, Syria, Venezuela, and other countries for human rights violations, nuclear proliferation, terrorism, corruption, and other reasons.

Sectoral sanctions: These are sanctions that target a specific sector or industry of the economy of the sanctioned country, such as energy, finance, defense, or transportation. Sectoral sanctions aim to disrupt the economic activity and revenue of the targeted sector, and to create pressure on the government or regime to change its policies or behavior. For example, the United States has imposed sectoral sanctions on Iran’s oil, gas, petrochemical, and automotive industries, as well as its central bank and other financial institutions, to curb its nuclear program and support for regional proxies.

Comprehensive sanction: These are sanctions that impose a total or near-total ban on trade, investment, and other economic relations with the sanctioned country. Comprehensive sanctions are the most severe and broadest form of economic sanctions, and they aim to isolate the country from the global market and cause severe economic hardship and social unrest. Comprehensive sanctions are often accompanied by diplomatic isolation and military intervention. For example, the United States has maintained a comprehensive embargo on Cuba since 1962, prohibiting most trade, travel, and financial transactions with the island nation, as well as supporting its political opposition and dissidents.

What Are Economic Sanctions?, Council on Foreign Relations

Types of Economic Sanctions, Profolus

Economic sanctions, Wikipedia

How Economic Sanctions Work, Investopedia

CAMS Certification Package - 6th Edition, ACAMS

CAMS Certifications: How to Get CAMS Certified, ACAMS

International cooperationis essential in AML investigations, and theEgmont GroupfacilitatesFIU-to-FIU information sharing.

Option D (Correct):Egmont Group members can request and share intelligence for AML investigationsunder established protocols.

Option A (Incorrect):Sovereignty does not prevent cooperationif proper legal frameworks exist.

Option B (Incorrect):AML regulations permit international data sharing, especially under agreements likeMutual Legal Assistance Treaties (MLATs).

Option C (Incorrect):Data sharing is restricted to authorized entities, notall organizations.

Why This Matters:

Failure toshare AML intelligence across borderscan enable:

Cross-border money laundering.

Terrorist financing networks to operate undetected.

Regulatory penalties for non-compliance.

According to the Financial Action Task Force (FATF), substantial growth in wealth during a short period of time is a red flag for money laundering or terrorist financing. Additionally, when a client is a family member of a politically exposed person (PEP) from a country known for corruption, it raises concerns about the potential for corruption, bribery, or influence peddling. In this case, the client's father became the president of Country B, which makes him a PEP.

According to the CAMS study guide, chapter 4, page 1191, transaction records include any records that reflect the movement of funds or assets, such as wire transfers, checks, deposits, withdrawals, securities trades, etc. Therefore, items 1, 2, and 4 are examples of transaction records that should be delivered in response to a legal request. Item 3, signature cards, are not transaction records, but rather account opening documents that contain the customer’s name, address, identification, and signature. These documents may be relevant for customer due diligence or identification purposes, but they do not reflect the transaction activities of the customer.

1: ACAMS CAMS Study Guide - 6th Edition, Chapter 4, page 119: https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-4.pdf

 According to the BSA/AML Manual1, once a financial institution files a SAR, it should maintain a copy of the SAR and the original or business record equivalent of any supporting documentation for a period of five years from the date of filing the SAR. The supporting documentation should be identified and maintained by the financial institution as such, and be deemed to have been filed with the SAR. The financial institution should make all supporting documentation available to FinCEN or any federal, state, or local law enforcement agency, or any federal regulatory authority that examines the financial institution for compliance with the BSA, upon request. Therefore, the best action to take regarding a particular account once suspicious activity is reported by the institution is to secure all supporting documentation, as it may be needed for further investigation or examination.

BSA/AML Manual1

Suspicious Activity Reporting - Overview2

Suspicious Activity Report (SAR) Basics3

Evaluating the risk scoring model and conducting the risk assessment itself may need to be performed annually, every eighteen to twenty-four months, before the launch of a new product, or when an acquisition of another financial institution occurs.

Mutual Legal Assistance (MLA) is a form of cooperation between different countries for the purpose of collecting and exchanging information and evidence in criminal matters. MLA is usually governed by bilateral or multilateral treaties that establish the procedures and requirements for requesting and providing assistance. The first valid step in the MLA process is to send a formal request from the central authority of the requesting country to the central authority of the requested country. The central authority is the designated entity that is responsible for making, receiving, and facilitating the execution of MLA requests. The request should contain the necessary information and documents to enable the requested country to assess and execute the request, such as the nature and purpose of the request, the legal basis, the description of the assistance sought, the identity of the persons involved, the applicable legal provisions, and the deadline for the response. The request may also be accompanied by a commission letter of request, which is a judicial document that authorizes a foreign authority to perform certain acts on behalf of the requesting authority, such as taking evidence or statements from witnesses or suspects.

Guidelines on Mutual Legal Assistance in Criminal Matters, Section 1.1, 1.2, 1.3, 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.17, 2.18, 2.19, 2.20, 2.21, 2.22, 2.23, 2.24, 2.25, 2.26, 2.27, 2.28, 2.29, 2.30, 2.31, 2.32, 2.33, 2.34, 2.35, 2.36, 2.37, 2.38, 2.39, 2.40, 2.41, 2.42, 2.43, 2.44, 2.45, 2.46, 2.47, 2.48, 2.49, 2.50, 2.51, 2.52, 2.53, 2.54, 2.55, 2.56, 2.57, 2.58, 2.59, 2.60, 2.61, 2.62, 2.63, 2.64, 2.65, 2.66, 2.67, 2.68, 2.69, 2.70, 2.71, 2.72, 2.73, 2.74, 2.75, 2.76, 2.77, 2.78, 2.79, 2.80, 2.81, 2.82, 2.83, 2.84, 2.85, 2.86, 2.87, 2.88, 2.89, 2.90, 2.91, 2.92, 2.

According to the Financial Action Task Force (FATF) methodology, financial institutions (FIs) are required to consider filing a suspicious activity report (SAR) in situations where they suspect or have reasonable grounds to suspect that funds are the proceeds of criminal activity or related to terrorist financing. One such situation is when a beneficiary of a transaction is a politically exposed person (PEP). PEPs are individuals who hold prominent public positions or have close associations with such individuals. Their involvement in transactions can raise red flags due to the potential risk of corruption, money laundering, or other illicit activities1.

A: The absence of professional oversight or accounting/auditing standards creates a high-risk environment for financial statement manipulation. Without external checks or mandated standards, criminals can more easily falsify statements to hide illicit assets.

“The lack of regulatory oversight and professional standards in accounting and auditing significantly increases the risk of manipulation and fraud in financial reporting.”(CAMS 6th Edition, Professional Service Providers; FATF Guidance on the Risk-Based Approach for Accountants)

When a prosecutor instructs a bank to freeze the assets and bank accounts held by one of its clients, the bank must take the following actions:

Ensure the client and beneficiaries are unable to access any frozen assets during the freeze order. This means the bank must prevent any withdrawals, transfers, payments, or other transactions from the frozen accounts or assets. The bank must also notify the client and beneficiaries of the freeze order and the reason for it. The bank must comply with the freezeorder until it is lifted by the court or the prosecutor12.

An affidavit must accompany the freeze order for the bank to comply with the request. An affidavit is a sworn statement that provides the legal basis and evidence for the freeze order. The affidavit must specify the name of the client, the amount and location of the assets to be frozen,the nature and source of the funds, the suspected criminal activity, and the legal authority for the freeze order3 .

The institution should obtain a copy of the court order to freeze the assets of the named individuals. A court order is a legal document that authorizes the bank to freeze the assets and accounts of the client. The court order must be signed by a judge or a magistrate and must include the same information as the affidavit. The bank should keep a copy of the court order for its records and to verify its validity .

Frozen Bank Account: Here’s What You Need to Know

Why Is My Bank Account Frozen? - Investopedia

What Is a Frozen Account? What Causes It and How toUnfreeze It

[Freezing Orders - Practical Law]

[Freezing Orders - The Law Society]

[Freezing Orders - LexisNexis]

The customer’s relocation and expansion to different jurisdictions constitutes a triggering event that requires ongoing due diligence on this client, as it may indicate changes in the customer’srisk profile, business activities, or beneficial ownership. The bank should update the customer’s information, verify the identity and legitimacy of the new entities, and assess the level of money laundering and sanctions risks associated with the new locations12. The other options are not triggering events, as they are either consistent with the customer’s normal business operations or do not affect the customer’s risk profile.

A compliance officer should cooperate with the law enforcement inquiry as much as possible, but also ensure that the request is valid, lawful, and does not violate any confidentiality or privacy obligations. Therefore, the compliance officer should collaboratewith the FI’s designated department, such as the legal counsel, the senior management, or the board of directors, to determine the appropriate course of action to comply withthe request12. The compliance officer should also ensure that all communication, written and oral, is funneled through a centralized place, and that the FI maintains a record of the request and the response12.

1: Requests by Law Enforcement for Financial Institutions to Maintain Accounts, FinCEN, 2014

2: Best Practices for Compliance and Enforcement-Related Information Requests, EPA, 2018

Money laundering through real estate transactions involves integrating illicit funds into the legitimate financial system while providing a relatively “safe” property investment. In this context, the most relevant factor to examine is the beneficial owner of the asset. Identifying the true owner behind a property helps uncover potential money laundering schemes. Criminals often use third parties, shell companies, or complex ownership structures to distance the transaction from the source of illicit funds. Investigating the beneficial owner’s identity is crucial for detecting and preventing real estate-related money laundering12.

The purchaser being a nominee is a red flag that indicates high potential for money laundering in a real estate purchase. A nominee is a person or entity that acts on behalf of another person or entity, usually to conceal the identity or beneficial ownership of the real owner. Money launderers may use nominees to purchase real estate with illicit funds, and then transfer the property to the real owner or sell it for a profit. This way, they can obscure the source and ownership of the funds, and integrate them into the legitimate economy12.

ACAMS, CAMS Examination Study Guide, 6th Edition, Chapter 3, pp. 77-78

FATF, Money Laundering and Terrorist Financing through the Real Estate Sector, June 20073, pp. 19-20

Reference data screening is a core element of AML/CFT programs and typically covers:

Customers (B):“All customers must be screened against sanctions, PEP, and adverse media lists as part of onboarding and ongoing due diligence.”(CAMS 6th Edition, Due Diligence and Screening)

Third-party service providers (C):“Screening should extend to relevant third parties, such as agents and service providers, to prevent indirect exposure to sanctioned entities.”(CAMS 6th Edition, Third-Party Screening; FATF Recommendations)

Incorrect Options:

A: Types of payment messages are not screened; the entities/individuals are.

D: Customer spouses may be screened in some KYC processes but are not a standard dataset for reference screening.