Free Practice Questions for ACAMS CAMS Exam

 the correspondent bank has engaged in a high-risk activity that could expose the primary bank to sanctions violations, reputational damage, and regulatory scrutiny. The Office of Foreign Assets Control (OFAC) administers and enforces economic and tradesanctions against targeted foreign countries, regimes, terrorists, and other threats to the national security, foreign policy, or economy of the United States1. Opening branches in a country on the OFAC list indicates that the correspondent bank is not complying with the sanctions requirements, and could be facilitating transactions for sanctioned entities or individuals. This would pose a serious risk for the primary bank, which is responsible for conducting due diligence and monitoring of its correspondent banking relationships2. Therefore, the primary bank should terminate the relationship with the correspondent bank to avoid any potential liability or penalties.

The other options are not as compelling as A, because they do not necessarily indicate that the correspondent bank is violating any laws or regulations, or that the primary bank is exposed to significant risks. Option B could be a cause for concern, but it does not imply that the correspondent bank is involved in any wrongdoing, or that the compliance officer has any influence over the correspondent banking activities. Option C could suggest that the correspondent bank is engaging in unusual or suspicious transactions, but it does not mean that the primary bank should terminate the relationship immediately, as it could also be a result of changes in the correspondent bank’s business profile, customer base, or market conditions. Option D is a normal and expected part of the correspondent banking relationship, as the primary bank has the right and obligation to request transactional details from the correspondent bank to verify the legitimacy and source of funds, and to identify any red flags or anomalies3.

1: OFAC website

2: ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 5, page 178

3: ACAMS CAMS Certification Video Training Course, Module 5, Lesson 4

4: ACAMS CAMS Certification Practice Exam, Question 93

https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-information

https://www.acams.org/en/cams-certification-package-6th-edition

https://www.exam-labs.com/video-training/acams-cams

https://vceplus.io/exam-cams/

The compliance officer should recommend an audit for cash transactions since the last compliance review, as this would help to identify the extent of the problem, the root causes, and the potential risks involved. The audit would also provide evidence for corrective actions and remedial measures to prevent future occurrences of non-compliance. The compliance officer should not recommend terminating or suspending the teller’s employment, as this would be premature and disproportionate without a thorough investigation and due process. The compliance officer should not recommend formally reprimanding the branch manager, as this would not address the underlying issues and could create a hostile work environment.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 5, page 1251

ACAMS CAMS Certification Video Training Course, Module 5, Lesson 12

ACAMS CAMS Certification Exam Outline, Domain 5, Task 33

D

 A free-look provision is a period of time, typically 10 to 30 days, in which a new life insurance policy owner can terminate the policy and have their premium refunded1. This can help criminals to launder money by purchasing a policy with illicit funds and then cancelling it within the free-look period to receive a clean check from the insurance company2. This way, they can disguise the source and origin of their funds and avoid any penalties or charges that would otherwise apply to early termination of the policy.

1: Investopedia, What Is a Free Look Period and How Does It Work?

2: FinCEN, Anti-Money Laundering Program and Suspicious Activity Reporting Requirements for Insurance Companies

The bank’s internal investigation is aimed at understanding the activities and legitimacy of the client who wants to open multiple accounts for their swimming pool company, with each account assigned to a debit card for the company’s technicians. The purpose of these accounts, as stated by the client, is to facilitate the purchase of pool chemicals. To conduct a thorough investigation, the bank can consider several available sources of information. Let’s analyze each option:

A. Client’s credit bureau report: The client’s credit bureau report primarily contains information related to the individual’s credit history, including loans, credit cards, payment patterns, and any financial obligations. While this information may be useful in assessing the client’s creditworthiness, it may not provide substantial insight into the specific activities and legitimacy of the swimming pool company or the need for multiple accounts.

B. Local law enforcement investigation report: The local law enforcement investigation report may contain information about any criminal or suspicious activities involving the client or the swimming pool company, such as fraud, money laundering, tax evasion, or other offenses. However, this source may not be readily available to the bank, as it may require a formal request or a subpoena to access. Moreover, the report may not be comprehensive or up-to-date, as it may depend on the scope and progress of the law enforcement investigation.

C. Interview swimming pool technicians and chemical suppliers: The interview with the swimming pool technicians and chemical suppliers may provide some information about the nature and frequency of the transactions involving the pool chemicals, such as the amount, the price, the payment method, and the delivery mode. However, this source may not be reliable or verifiable, as the technicians and suppliers may be biased or influenced by the client. Moreover, the interview may not be feasible or practical, as it may require the bank to contact and arrange meetings with multiple parties, which may be time-consuming and costly.

D. Internet search showing how such business are typically operated: The internet search showing how such business are typically operated may provide some information about the industry standards and best practices for running a swimming pool company, such as the average number of technicians, the typical expenses, the common suppliers, and the expected revenue. This source may be useful in comparing and contrasting the client’s business model and operations with the industry norms and identifying any red flags or anomalies. Moreover, this source may be easily accessible and inexpensive, as it may only require the bank to use a web browser and a search engine.

Therefore, the best available source for the bank’s internal investigation on this client’s activities is option D.

1: CAMS Certification Package - 6th Edition | ACAMS 2: CAMS Certifications: How to Get CAMS Certified | ACAMS 3: ACAMS CAMS Certification Video Training Course - Exam-Labs 4: Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition) 5: Bank’s Internal Investigation on Client’s Activities | CAMS Exam Prep 6: South Florida: Couple arrested for more than $2 million fraud 7: Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations

According to the ACAMS CAMS Certification Video Training Course1, one of the red flags for money laundering is “transferring funds to or from foreign countries or jurisdictions that are known to have weak anti-money laundering standards or are considered high-risk for money laundering or terrorist financing” (Module 2, Lesson 3, Part 2). This is also consistent with the suspicious activity report (SAR) criteria, which require financial institutions to report transactions that “involve funds derived from illegal activity or are intended or conducted to hide or disguise funds or assets derived from illegal activity” or “involve the use of the financial institution to facilitate criminal activity” (31 CFR § 1020.320(a)(2)). Therefore, the customer’s request to transfer funds to accounts in three different foreign jurisdictions should be the focus of the SAR, as it may indicate an attempt to launder money or finance terrorism.

ACAMS CAMS Certification Video Training Course

[31 CFR § 1020.320 - Reports by banks of suspicious transactions]

Large and frequent credit balances on a credit card resulting in request for refunds is an indicator of suspicious activity because it may suggest that the cardholder is using the credit card to launder money or to conceal the source of funds. This is also known as credit card refund fraud or credit card laundering. The cardholder may make purchases with the credit card using illicit funds, then request refunds to another account or in cash, thus transferring the funds to a legitimate or less traceable channel. This activity may also be used to evade currency reporting requirements or to avoid detection by law enforcement or financial institutions.

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Money Laundering Risks and Methods, page 381

Suspicious Activity Reporting Indicators and Examples, U.S. Department of Homeland Security, Indicator 14: Excess Purchases or Transactions2

Credit Card Laundering, Money Laundering Bulletin, Issue 245, October 2019

According to the Basel Committee on Banking Supervision’s Customer Due Diligence for Banks1, banks should have policies and procedures to identify and manage high-risk customers, such as those who provide false or incomplete information, have complex oropaque beneficial ownership structures, or are involved in large or unusual transactions. In such cases, banks should apply enhanced due diligence measures, such as obtaining additional information or documentation, verifying the source and purpose of funds, conducting more frequent and intensive monitoring of account activity, and reporting any suspicious transactions to the relevant authorities. Therefore, the best course of action for the bank in this scenario is to implement enhanced due diligence procedures to monitor the account for suspicious activity, as option B suggests. Option A is not recommended, as it would imply that the bank accepts the customer without verifying his identity and background, which would expose the bank to money laundering and terrorist financing risks. Option C is not advisable, as it would terminate the relationship without investigating the origin and destination of the funds, which could hinder the efforts of law enforcement agencies to trace and recover illicit assets. Option D is also not appropriate, as it would involve sending a check to a customer whose address and identity are not confirmed, which could facilitate money laundering and fraud.

5: Customer due diligence for banks - Bank for International Settlements, October 2001, pages 8-9, 13-14.

According to the ACAMS CAMS Study Guide, one of the methods that attorneys may use to facilitate money laundering is to make payments to third parties on behalf of their clients, using funds from their client accounts. This may obscure the source and destination of the funds, and create a false appearance of legitimate transactions. Therefore, making payment to various people is a red flag for potential money laundering in this situation.

ACAMS CAMS Study Guide, 6th Edition, page 117

FATF Report on Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals, June 2013, page 341

AML/CFT Red Flags for Lawyers, AML-CFT.net, October 20202

According to the CAMS Certification Package - 6th Edition1, a financial institution that processes a wire transfer is required to file a suspicious transaction report (STR) in thejurisdiction where it is located, if it detects any red flags or indicators of money laundering, terrorism financing, or other financial crimes. The financial institution does not need to file an STR in the jurisdictions of the originator or the beneficiary of the wire transfer, unless it has a branch or a subsidiary there. Therefore, the correct answer is A. The transaction in Country A.

CAMS Certification Package - 6th Edition1, Chapter 4: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section: Wire Transfers, pp. 161-162.

According to the FATF Guidance on Private Sector Information Sharing, FIs should establish sufficient safeguards concerning the confidentiality of information shared for AML purposes, both within the same financial group and between FIs not belonging to the same group. These safeguards include ensuring that the information is shared only with authorized personnel who have a need to know, that the information is used only for the intended AML purpose, and that the information is protected from unauthorized access, disclosure, or misuse. FIs should also comply with the applicable legal and regulatory requirements on data protection and privacy, and respect the rights and interests of the customers whose information is shared1.

1: FATF Guidance on Private Sector Information Sharing1

The USA PATRIOT Act of 20011 is a comprehensive anti-terrorism and anti-money laundering legislation that grants various powers and authorities to the US government to combat money laundering, terrorist financing, and other financial crimes. Among its provisions, Title III of the Act, also known as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 20012, specifically addresses the issue of correspondent banking and the risks of money laundering and terrorist financing through foreign banks that maintain accounts with US banks. Section 319 of Title III3 authorizes the US Attorney General or the Secretary of the Treasury to issue a subpoena or summons to any foreign bank that maintains a correspondent account in the US, and to request any records relating to such account, including records maintained outside the US. Furthermore, Section 319(b) of Title III4 allows the US authorities to seize the funds of the foreign bank held with the US bank, if the foreign bank fails to comply with such a subpoena or summons, or if the US authorities initiate a civil forfeiture action against the funds in the correspondent account. Therefore, the USA PATRIOT Act is the correct answer, as it enables the US authorities to seize the funds of the foreign bank held with the US bank, if the correspondent account is found to have facilitated a transaction involving tainted funds.

The anti-money laundering specialist should recommend a financial institution to investigate the source of funds, identify people and companies that are clearly related, and identify a person fully, including their political history, when dealing with individuals holding important public positions. These are essential steps to conduct enhanced due diligence based on public information, as they can help to assess the risk profile, the legitimacy, and the transparency of the customer relationship. The Basel Committee on Banking Supervision’s list of public officials is not a reliable source of public information, as it is not comprehensive, updated, or verified. Therefore, it is not a sufficient criterion to check the background of potential customers.

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4, page 971

ACAMS CAMS Certification Video Training Course, Module 4, Lesson 32

ACAMS CAMS Certification Exam Outline, Domain 4, Task 23

Money laundering and terrorist financing are both forms of financial crime that involve the movement of illicit funds. However, they differ in the source and purpose of the funds. Money laundering is the process of disguising the origin, ownership, or destination of funds that are derived from illegal activities, such as drug trafficking, fraud, or tax evasion. Terrorist financing is the provision or collection of funds, by legitimate or illegitimate means, for the purpose of carrying out terrorist acts. Therefore, the anti-money laundering specialist should consider the following factors in developing a compliance program:

Related practices are used to conceal the nature of the funds. Both money launderers and terrorist financiers use similar methods to hide the true identity, source, or destination of the funds, such as using shell companies, front organizations, complex transactions, cash couriers, or cryptoassets. A compliance program should include measures to identify and verify the customers, beneficial owners, and counterparties involved in the transactions, as well as to monitor and report any suspicious or unusual activities.

Similar techniques are used to move funds. Both money launderers and terrorist financiers use the same stages of placement, layering, and integration to move funds through the financial system. Placement is the introduction of illicit funds into the legitimate financial system, such as by depositing cash, purchasing assets, or transferring funds electronically. Layering is the separation of the funds from their source, such as by using multiple accounts, jurisdictions, or intermediaries. Integration is the re-entry of the funds into the legitimate economy, such as by investing in businesses, real estate, or securities. A compliance program should include measures to detect and prevent the movement of illicit funds through the financial system, such as by applying risk-based due diligence, record-keeping, and transaction limits.

CAMS Certification Package - 6th Edition | ACAMS

CAMS Certifications: How to Get CAMS Certified | ACAMS

ACAMS CAMS Certification Video Training Course - Exam-Labs

Exam CAMS: Certified Anti-Money Laundering Specialist (the6th edition)

Economic sanctions are a tool that governments and multi-national bodies can use to prevent the proliferation of weapons of mass destruction (WMDs) by imposing restrictions on trade, financial transactions, travel, or other activities with targeted countries, entities, or individuals that are involved or suspected of being involved in WMD programs. Economic sanctions aim to disrupt the supply chains, funding sources, and incentives for developing or acquiring WMDs, as well as to deter and punish any violations of international norms and obligations regarding WMDs. Economic sanctions can be imposed unilaterally by a country or multilaterally by a group of countries or an international organization, such as the United Nations, the European Union, or the Financial Action Task Force.

ACAMS CAMS Certification Video Training Course, Module 4: Preventing the Proliferation of Weapons of Mass Destruction, Lesson 4.2: Sanctions1

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 4: Preventing the Proliferation of Weapons of Mass Destruction, Section 4.2: Sanctions2

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

United Nations (UN) sanctionsarebindingon allUN member states, but their effectiveness depends onswift adoption and enforcement by national governments.

Option B (Correct):For UN sanctions to be effective, they must be enforced by all member statesthroughstrong domestic legal mechanisms.

Option A (Incorrect):UN sanctions are not necessarily implemented faster than unilateral sanctions (e.g., U.S. OFAC sanctions).

Option C (Incorrect):While UN sanctions apply internationally, enforcement depends on national governments, making implementation inconsistent.

Option D (Incorrect):Clarity of sanction measures is important, but enforcement is the primary factor determining effectiveness.

Key Features of UN Sanctions:

Mandated by the UN Security Council under Chapter VII of the UN Charter.

Binding on all 193 UN member states.

May include asset freezes, travel bans, and trade embargoes.

Best Practices for UN Sanctions Compliance:

Ensure national enforcement aligns with UN Security Council resolutions.

Monitor sanctioned individuals/entities through real-time screening tools.

Cooperate with international organizations to prevent sanctions evasion.

The scenario described in the question presents several indicators of potential money laundering through real estate, which the broker should be aware of and report accordingly. The most relevant red flags are:

Value: The student wants to buy a home that is overvalued, meaning that the asking price is higher than the market value or the appraisal value of the property. This could indicate that the student is trying to launder a large amount of illicit funds in one transaction, or that the seller is colluding with the student to inflate the price and receive a kickback. Overvaluing or undervaluing properties is a common technique used by money launderers to manipulate the price of real estate and conceal the source or destination of their funds12.

Inconsistency: The student’s behavior and profile are inconsistent with the typical characteristics of a legitimate home buyer. The student cancels the viewing of the home at the last minute due to illness, which could suggest a lack of interest or a pretext to avoid scrutiny. The student also wants to buy an expensive home despite being a student, which could indicate a discrepancy between the student’s income and the source of funds. Moreover, the student disregards the broker’s objections to the asking price, which could imply that the student is not concerned about the value or quality of the property, but rather the amount of money that can be laundered through it34.

Transaction speed: The student wants to quickly buy the home, which could indicate a sense of urgency or pressure to move the illicit funds before they are detected or seized by the authorities. Money launderers often use fast transactions to avoid raising suspicion or leaving a paper trail. Transaction speed is especially relevant when combined with other red flags, such as cash payments, anonymous buyers, or overvalued properties5 .

 A U.S. bank must block or reject an international funds transfer when there is an OFAC designated party to the transaction, regardless of the beneficiary or the correspondent bank. This is because the U.S. bank is prohibited from dealing with any person orentity that is on the Specially Designated Nationals and Blocked Persons List (SDN List) or subject to any other OFAC sanctions program1. The SDN List includes individuals, groups, and entities, such as terrorists and narcotics traffickers, that are designated under programs that are not country-specific2. The U.S. bank must also report any blocked or rejected transactions to OFAC within 10 business days3.

 1: FFIEC BSA/AML Office of Foreign Assets Control - Office of Foreign … 2: Specially Designated Nationals And Blocked Persons List (SDN) Human … 3: [Reporting Blocked Transactions | Office of Foreign Assets Control]

An effective anti-money laundering training program should include real-life money laundering examples to illustrate the concepts and strategies for detecting and preventing money-laundering activity. Real-life examples can help employees to understand the risks, methods, indicators, and impacts of money laundering, as well as the roles and responsibilities of different staff members in combating it. Real-life examples can also enhance the engagement, retention, and application of the knowledge gained from the training program.

= The main references for this question are the following sources:

The document titled “Anti-Money Laundering Awareness Training” published by ACAMS. You can access it by clicking here. This document states that “ACAMS AML General Awareness Training equips employees with knowledge of basic anti-money laundering (AML) principles” and that it is “based on real-life industry scenarios with interactive content to help learning stick”.

The document titled “Anti-Money Laundering (AML) Training” published by LIMRA. You can access it by clicking here. This document states that “LIMRA’s AML training program provides training for insurance and securities producers and home office employees” and that it “uses real-life scenarios to help learners understand how to apply AML principles to their everyday work”.