ACAMS CAMS Dumps

Policies, controls, and procedures must be proportionate to the size and nature of the firm, approved by senior management, and regularly reviewed to ensure they remain effective in preventing and mitigating financial crime risk while aligning with regulatory expectations.

Weak KYC policies and procedures represent a broader and more systemic risk specific to casinos and gambling. Without strong KYC, it becomes easier for individuals to engage in money laundering by exploiting anonymity and lack of oversight, regardless of transaction size or method.

Policies outline the guiding principles and objectives of an organization’s AML framework, setting the tone for compliance. Procedures translate these policies into detailed, actionable steps that staff must follow. Both are essential for effective AML compliance.

Public-Private Partnerships (PPPs)are collaborative initiatives involvinglaw enforcement, FIUs, and financial institutions. Their objective is to improve theefficiency and effectivenessof the fight against money laundering, terrorist financing, and other financial crimes bysharing both operational and strategic intelligence.

Option A – Exchange operational information between public authorities and obliged entities:

PPPs often facilitate real-time or near-real-time information sharing that supportsspecific investigations and the detection of suspicious activity, helping financial institutions respond quickly and accurately to ongoing threats.

Option B – Exchange strategic information between FIUs and obliged entities:

Strategic-level intelligence sharing helps financial institutionsunderstand typologies, risk trends, and evolving criminal methods, thereby strengthening their risk assessments and transaction monitoring frameworks.

Option Cis incorrect: Strategic information exchange between private institutions is limited and heavily regulated.

Option Dis incorrect: FATF does not collect or manage databases of suspicious activity reports; it sets standards and reviews national frameworks.

Verifying a customer’s identity is a fundamental CDD requirement under the FATF Recommendations, ensuring you know who your customer is.

Identifying the beneficial owner is required to uncover the natural persons ultimately controlling or benefiting from an account, closing the gap that would allow misuse of corporate vehicles.

AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) applications are heavily influenced by various laws and regulations. The most impactful areas include:

Information security, data privacy, and cybersecurity – AML/CFT compliance relies on collecting and analyzing financial data. Data protection laws (e.g., GDPR) impact how financial institutions store, share, and protect sensitive customer information while ensuring that AML measures remain effective.

Foreign exchange control, and precious gemstone and metal dealing – Criminals often launder money through foreign currency transactions, gold, diamonds, and other high-value assets. Regulations governing these sectors help prevent financial crime.

Consumer protection, financial inclusion, and ESG – AML/CFT frameworks must balance risk mitigation with ensuring access to financial services (financial inclusion). Additionally, ESG policies play a growing role in identifying illicit financial.

Terrorist financing can be facilitated on gaming platforms particularly through the trading of in-game items for fiat currency. This mechanism allows for the movement of value outside the formal financial system, potentially evading detection and reporting requirements.

“One of the key ML/TF risks in online gaming is the ability to convert virtual assets or in-game items into real-world (fiat) currency, thereby providing a channel for laundering money or funding terrorist activities.”

(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing; FATF, Virtual Assets Guidance 2019)

Incorrect Options:

A: Buying in-game items with in-game currency does not in itself facilitate terrorist financing.

B: Exchanging items between players may be a step in layering but is not direct TF unless items are traded for fiat.

D: Obtaining items by in-game activity is standard gameplay and not a TF method.

A: “Hawala and similar informal value transfer systems are difficult to monitor, making it challenging to identify the originator, recipient, and source of funds.”

D: “Hawala operates through informal networks for cross-border transfers, often outside the formal banking system, increasing AML/CFT risk.”(CAMS 6th Edition, Alternative Remittance Systems; FATF, Guidance on Money Transfer Services)

The primary compliance concern is balancing compliance with the US Bank Secrecy Act (BSA) and OFAC sanctions while also ensuring adherence to EU AML directives and GDPR requirements. GDPR’s strict data protection rules can complicate cross-border information sharing, making it challenging to align compliance across multiple jurisdictions.

A (ISO): Ensures information security controls are aligned with AFC efforts, protecting sensitive data and reducing the risk of cyber-enabled financial crime.

D (DPO): Helps ensure compliance with data privacy laws and enables secure, lawful information-sharing for AML purposes.

“Collaboration with the ISO and DPO is critical to maintaining data security and privacy within AFC compliance frameworks.”(CAMS 6th Edition, Governance and Cross-Functional Collaboration)

AMutual Legal Assistance Treaty (MLAT)is aformal agreement between two or more countriesthat facilitatescooperation in legal and law enforcement matters, includingAML investigations.

Option D (Correct):MLATs allow governments to share financial intelligence, request legal assistance, and conduct joint investigations.

Option A (Incorrect):A Memorandum of Agreement (MOA) is typically a non-binding contract used for general business or governmental cooperation.

Option B (Incorrect):A Declaration of Understanding is an informal agreement and does not provide a legal framework for law enforcement cooperation.

Option C (Incorrect):A Memorandum of Understanding (MOU) is often used for informal cooperation but lacks the legal enforceability of an MLAT.

Option E (Incorrect):A Request for Urgent Information is not a recognized international legal instrument.

Best Practices for Cross-Border AML Cooperation:

Use MLATs to request access to financial records in foreign jurisdictions.

Collaborate with Financial Intelligence Units (FIUs) via the Egmont Group.

Leverage FATF’s International Cooperation Review Group (ICRG) for guidance.

Understanding the source and origin of assets (C):According to the CAMS 6th Edition (Chapter: Customer Due Diligence and Enhanced Due Diligence) and the EU 4th & 5th AML Directives, regulated entities are required to take adequate measures to understand the source of funds and the origin of assets of their customers, especially when there are higher risk factors such as large transactions or PEPs.“Firms must identify the source and origin of assets to ensure they are not the proceeds of crime or corruption, particularly for higher-risk customers.”(CAMS 6th Edition, CDD/EDD Requirements; EU Directive 2015/849, Article 20)

Performing negative news checks of prospective customers (D):Adverse media screening is an essential part of the onboarding process for identifying potential risks related to money laundering, terrorist financing, or reputational harm.“Negative news or adverse media checks form a vital component of the due diligence process, helping organizations detect links to criminal or suspicious activities.”(CAMS 6th Edition, CDD/EDD Requirements)

Incorrect Options:

A: Onboarding interviews may be part of EDD, but are not a standard or required AML control.

B: PEPs are not to be automatically rejected; instead, enhanced due diligence should be applied.

E: Producing financial stability reports is not an AML control, but may be relevant for credit or investment assessment.

One of the core components of a strong AFC (Anti-Financial Crimes) compliance program is establishingclear roles, responsibilities, and lines of accountability, especially forescalating and addressing AFC risks and compliance issues. This governance clarity ensures effective implementation, transparency in decision-making, and timely resolution of compliance concerns.

While external audits (option A) and internal controls (option B) are important,defining governance structure and escalation responsibilities (option D)is a foundational element. Additionally, the board of directors (option C) provides oversight—not day-to-day compliance monitoring.

USA PATRIOT Act Section 314(b)allows financial institutions tovoluntarily share information with one another, after notifying the U.S. Treasury, toidentify and report possible money laundering or terrorist financing activities.

Key elements include:

Voluntary participation

Prior notice to FinCEN (part of the U.S. Treasury)

Protection from liability when acting in good faith

Enhanced collaborative detection across institutions

Section 314(a)refers toinformation sharing between law enforcement and financial institutions, not peer-to-peer sharing.

COSMICis an initiative in certain jurisdictions like Singapore, not U.S. regulation.

Regulation (EU) 2024/1624is part of the EU AML framework, not relevant to U.S. institutions.

When using network analysis tools, it’s important to avoid algorithmic bias toward social criteria to ensure fairness, analyze connections between individuals or entities to identify links and structures, and study relationships within networks to uncover hierarchies, behaviors, movements, and group organization relevant to detecting criminal activity.

Accounting can help detect irregular financial patterns, technology solutions and IT security provide systems for monitoring and data protection, and fraud risk management identifies and mitigates suspicious activities - all of which are essential to supporting AML and sanctions compliance programs.

A: Selling assets at a significant loss, especially shortly after purchase, is a classic red flag for asset laundering and value manipulation, which can be used to disguise the true nature of proceeds.

C: Transactions involving individuals from high-risk jurisdictions, as identified by the EU and FATF, warrant heightened scrutiny due to increased ML/TF risk.(CAMS 6th Edition, Red Flags for Complex Asset Transactions; EU List of High-Risk Third Countries)

B and D may contribute to complexity but are not the primary red flags in this scenario.

Early surrender of a policy can be used to quickly access and integrate illicit funds, while funding an insurance policy with cryptocurrencies or other non-fiat currencies can obscure the source of funds, both of which are recognized money laundering risk factors in insurance products.

Risks tied to the misuse of gaming accounts include transferring illicit funds between players undetected, structuring transactions to avoid reporting thresholds, and providing false personal information to evade KYC and regulatory oversight, all of which can facilitate money laundering and other financial crimes.

Red flags include using personal accounts for business transactions (which can obscure fund tracing), preferring minimal direct interaction (potentially avoiding scrutiny), and unclear ultimate beneficial ownership (which can conceal the true controllers of the entity and facilitate illicit activity).

Business entities in offshore financial centers often pose money laundering risks due to limited organizational disclosure and recordkeeping requirements, which can obscure beneficial ownership and make it easier to conceal illicit financial activities.

A national risk assessment can identify high-risk sectors requiring enhanced due diligence and guide resource allocation to mitigate financial crime risks effectively, helping organizations align their risk-based approach with national priorities and threats.

One of the biggest organizational challenges for law enforcement agencies and Financial Intelligence Units (FIUs) in cross-border money laundering (ML) investigations is dealing with jurisdictions that do not have an FIU or lack proper AML enforcement structures. When funds are transferred through countries without effective AML frameworks, it becomes difficult to trace, freeze, or recover illicit assets.

Key challenges include:

Lack of mutual legal assistance agreements (MLAs), which slows down or prevents information-sharing.

Weak AML regulations in some countries, making it easier for criminals to exploit financial systems.

Jurisdictional conflicts, as different countries have different legal definitions and enforcement mechanisms for money laundering.

Transitioning to AI and machine learning in transaction monitoring offers benefits such as long-term reduction in false positives, improved adaptability to evolving financial crime risks, and enhanced detection of complex or emerging patterns and anomalies that rules-based systems may miss.

The Financial Action Task Force (FATF) develops and promotes international standards to combat money laundering and terrorist financing, and it evaluates and monitors countries’ compliance with these standards while providing recommendations for improvement.

The first step in designing an effective controls framework using a risk-based approach is conducting a risk assessment. This identifies and evaluates inherent risks, providing the basis for determining which controls are necessary and how they should be prioritized.

The compliance team should request further clarification to assess the AML risk appropriately. This includes understanding which cryptoassets were sold and whether the exchange used applies adequate due diligence. These details help determine the legitimacy of the source of funds and ensure compliance with AML requirements.

A: The first step in any suspicious activity investigation is to review the transaction history and other relevant account information to establish context, identify patterns, and determine if the behavior is consistent with known typologies of money laundering.

“The initial phase of an AML investigation is to review relevant account information and transaction activity to assess whether a SAR filing is warranted.”

This approach ensures that any subsequent decisions, such as escalation, SAR filing, or customer outreach, are based on a comprehensive understanding of the facts.

Public-private partnerships facilitate strategic information exchange between FIUs and obliged entities and operational information sharing between public authorities and obliged entities, improving collaboration and effectiveness in detecting and preventing financial crime.

Best practices for senior management involvement include setting the tone from the top to promote a strong compliance culture and establishing clear criteria for escalations, ensuring that significant financial crime issues are promptly brought to their attention for action.

E-commerce platforms face KYC challenges due to a global and diverse customer base, making due diligence complex, while criminals may exploit identity fraud to pass KYC checks and facilitate layering in money laundering schemes. These factors increase the financial crime risks for such businesses.

A risk appetite statement defines the amount and type of risk an organization is willing to accept in pursuit of its objectives. It must be clearly communicated to all stakeholders and supported by corresponding controls and processes to ensure it is embedded in day-to-day decision-making and risk management.

The Wolfsberg Group and Transparency International are non-governmental organizations that provide information and guidance on AML/CFT matters, helping institutions and policymakers strengthen financial crime prevention practices.

Effective AML programs promote aculture of compliance, which includes an environment where staff are empowered to raise concerns, challenge decisions, and continuously improve through cross-functional learning.Providing effective challengeis a supervisory expectation and best practice in institutions that value AML governance integrity.

While AML officer authority (option B) supports oversight, it is not as impactful on daily operational effectiveness as fostering a challenging and adaptive compliance culture.

The CAMS 6th Edition highlights that a risk-based approach enables organizations to efficiently allocate compliance resources, focusing efforts on areas presenting the highest risk, thereby ensuring both regulatory compliance and operational effectiveness.

“A risk-based approach allows firms to concentrate resources and controls where the risk of ML/TF is highest, while applying simplified measures to lower-risk areas. This enhances both effectiveness and efficiency.”

(CAMS 6th Edition, AML Compliance Program: Risk-Based Approach)

Incorrect Options:

A: Cost savings may occur, but it is not the main advantage.

B: Audits may still be required, just less frequently for low-risk customers.

D: Risk-based approaches are tailored, not standardized, across regions.

A key advantage of privacy enhancing technologies (PETs) in anti-money laundering is their ability to securely process data while it remains encrypted. This enables data analysis and collaboration without exposing sensitive information, helping to maintain privacy while still supporting financial crime detection.

Customer loyalty program tracking and product usage analysis can uncover unusual patterns or behaviors that deviate from expected norms. These insights may help detect suspicious activity or hidden risks, making them valuable tools for supporting AML compliance even if not directly linked to traditional monitoring systems.

Trade-based money laundering red flags include third-party involvement in transactions, amended letters of credit without clear justification, and non-standard settlement arrangements, all of which can indicate attempts to disguise illicit fund movements or the true nature of the trade.

A: FIs should ensure they have a general understanding of virtual assets and VASP operations to assess risks accurately.

C: Enhanced KYC measures are recommended for VASPs due to their higher ML/TF risk profile.

“FIs must understand the business model and risk of VASPs and apply enhanced due diligence as required by FATF and regulatory guidance.”(CAMS 6th Edition, Virtual Assets and VASPs; FATF Guidance)

Incorrect:

B: While monitoring transactions is important, it’s not a primary initial consideration for onboarding.

D: The FI’s own holdings are not relevant to due diligence on VASPs.

Establishing a surveillance program with periodic risk assessments, access controls, and regular compliance reviews for employees, vendors, and third parties is the most effective way to mitigate insider threats and ensure ongoing adherence to AML regulations. This proactive approach continuously monitors risk rather than relying solely on initial checks or self-certifications.

A low number of sanctions screening alerts relative to the size and scope of operations may indicate overly restrictive or inappropriate monitoring parameters. Revisiting and adjusting the post-transaction monitoring system parameters and thresholds ensures that the system is calibrated to detect potential sanctions breaches effectively.

A (Enhanced due diligence): EDD is a key control at onboarding for high-risk customers, involving deeper scrutiny, additional documentation, and approval layers to address increased ML/TF risk.

“High-risk customers must be subject to enhanced due diligence during onboarding to ensure a thorough understanding of potential ML/TF risks.”(CAMS 6th Edition, CDD/EDD for High-Risk Customers)

Financial institutions must conduct thorough background checks on employees in sensitive roles (e.g., private banking) to mitigate fraud, insider trading, and money laundering risks.

Option A (Correct):Past employment records help verify work history and identify any red flags related to prior financial misconduct.

Option D (Correct):Internet and media searches reveal any negative press, regulatory issues, or connections to illicit activity.

Option E (Correct):Criminal history searches help screen for prior convictions related to financial crimes.

Why Other Options Are Incorrect:

Option B (Incorrect):Personal references are less reliable and may not uncover objective risk factors.

Option C (Incorrect):A resume is self-reported and should be verified using independent sources.

Best Practices for Employee Background Screening:

Conduct enhanced due diligence for high-risk roles (e.g., private bankers, compliance officers).

Use reliable background screening tools and legal databases.

Verify employment history and check against regulatory blacklists.

Key challenges in adopting new AML/CFT technologies are:

A: Data privacy—new tech often requires processing more personal data, raising privacy/regulatory concerns.

C: The Travel Rule—meeting global standards for information sharing in payments is a technology challenge.

D: Data quality—effective systems rely on accurate, comprehensive, timely data.

E: Complexity—integrating and managing new technology can increase operational complexity.(CAMS 6th Edition, Technology in AML/CFT; FATF Guidance on Digital ID and Fintech)

Independent testing is critical for the third line of defense to provide unbiased and effective oversight, ensuring that reviews and audits are objective and free from influence by the first or second lines of defense.

B: When a subpoena is received, the institution should first consult with legal counsel to ensure the validity and scope of the subpoena. Compliance with law enforcement requests is mandatory and subject to strict legal obligations. All documentation and responses should be properly recorded.

“A subpoena requires a legal response; consult legal counsel to validate the request and respond as required by law.”

FinCEN 314(b) information-sharing requests are voluntary and can proceed only after fulfilling required legal steps, such as verifying membership in the program and ensuring information-sharing agreements are in place.

CAMS 6th Edition clarifies that “under no circumstances should a customer be notified of a law enforcement inquiry or subpoena.”

Global organizations must ensure their policies and procedures comply with local laws and regulations in each country where they operate, even when maintaining group-wide consistency. Relying solely on international or U.S. standards does not ensure compliance with all local requirements, which may be more stringent or specific.

“A global group-wide program should ensure adherence to local AML and sanctions laws and regulations in every jurisdiction in which it operates. Local adaptation of policies is essential to address jurisdiction-specific risks and legal requirements.”

(CAMS 6th Edition, International AML/CFT Standards; FATF Recommendations 18, 35; EU & US Sanctions Regulations)

Preventing financial crime is essential because it protects society by maintaining market integrity and public confidence, reducing the harm caused by illicit activities such as money laundering, fraud, and corruption.

Cryptoassets, such as cryptocurrencies, pose specific ML/TF risks due to their technological characteristics and usage patterns:

Potential for anonymity (C): Cryptoassets allow users to make transactions without revealing their true identities, which hinders law enforcement from tracking illicit activity. The CAMS 6th Edition states:“Cryptoassets can be transferred or exchanged between users without the need for identification, presenting a significant risk due to the potential for anonymity.”(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing, Virtual Assets section)

Global reach (D): Cryptoassets operate on a global scale, enabling rapid cross-border transfers without the limitations of traditional financial systems. This increases the complexity of monitoring and controlling illicit transactions.“The global nature of virtual assets makes it easy for criminals to move value across borders quickly, evading jurisdictional controls.”(CAMS 6th Edition; FATF Guidance on Virtual Assets 2019)

Use to layer illicit funds (F): The ability to move cryptoassets between numerous wallets and exchanges allows criminals to obscure the source of funds through layering, a key stage of money laundering.“Layering can be achieved by rapidly moving cryptoassets between wallets, exchanges, and across different jurisdictions, making tracing more difficult.”(CAMS 6th Edition, Chapter: Risks and Methods of Money Laundering and Terrorist Financing)

Fingerprint is an inherent factor because it is a biometric trait - something the user is. Inherent factors rely on physical or behavioral characteristics such as fingerprints, facial recognition, or voice, which are unique to the individual.

A proposed EU import ban on refined oil products would be of greatest concern to the bank’s trade finance services, as it directly targets a core revenue-generating sector (oil production) of the company’s country. This could lead to significant disruptions in trade flows, regulatory risk exposure, and potential sanctions violations.

Financial institutions should have a standardized process for terminating customer relationships, including conducting risk assessments and documenting the reasons for termination. A final review of the customer’s transaction history helps address any outstanding concerns or unresolved issues. Keeping thorough records of the termination process ensures compliance and provides documentation in case of any future inquiries or disputes.

In anEnterprise-Wide Risk Assessment (EWRA),residual riskis the level of risk that remains after applying mitigating controls to theinherent risk(the risk present before controls are applied).

In this scenario, theinherent risk is highdue to the nature of private banking—high net worth clients,cross-border transactions,complex ownership structures, andhigh-value financial products. However, the institution has implementedrobust CDD and EDD, as well asadvanced transaction monitoring systems.

According to the CAMS Study Guide – 6th Edition, wheneffective and properly implemented controlsare in place, they cansignificantly reducethe residual risk—even in high-risk business areas like private banking. However, no control framework caneliminate all riskentirely.

Option Ais correct: Controls can significantly reduce the residual risk when strong, effective systems and procedures are in place.

Option Bis partially true but suggests inadequacy, which is not indicated here.

Option Cincorrectly assumes residual risk cannot be lowered even with controls.

Option Dis incorrect because residual riskcannot be eliminated entirely.

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.

OFAC sanctions are a key element of the U.S. AML/CFT framework. According to the CAMS 6th Edition and OFAC regulations:

Blocked funds must be placed into an interest-bearing account on a financial institution's books (B):“Blocked property must be held in a separate interest-bearing account on the books of the U.S. financial institution.”(CAMS 6th Edition, Sanctions Compliance; OFAC FAQs)

Sanctions can be either comprehensive or selective using the blocking of assets and trade restrictions (C):“OFAC administers both comprehensive and targeted (selective) sanctions programs to fulfill U.S. foreign policy and national security goals.”(CAMS 6th Edition, Sanctions Compliance)

Incorrect Options:

A: OFAC can sanction entities, vessels, and organizations—not just individuals or those in foreign countries.

D: There is no automatic expiration of OFAC sanctions after five years.

The First Line of Defense (1LoD) consists of customer-facing business units (e.g., relationship managers, front-office staff, and operational teams). Their primary responsibility in financial crime risk management is to implement AML/CFT controls as part of daily operations. This includes Collecting complete customer information.

The First Line of Defense is responsible for conducting Know Your Customer (KYC) and Customer Due Diligence (CDD) during onboarding and throughout the customer relationship. Ensuring that all relevant customer details (e.g., identity, business purpose, ownership structure) are accurately collected and documented is crucial for mitigating financial crime risks.

Application Programming Interfaces (APIs)are tools that enableinterconnectivity and data exchangebetween different software applications. In AML contexts, APIs are commonly used tointegrate third-party systems, such as screening tools, customer databases, and transaction monitoring platforms, ensuring real-time and accurate flow of information.

This technological capability supports enhancedautomation, agility, and efficiencyin AML processes.

Under FinCEN Section 314(b), financial institutions are permitted to share information with other financial institutions about suspected money laundering or terrorist financing activities. This collaboration helps identify and report suspicious transactions while complying with legal safeguards and privacy requirements.

FATF and CAMS 6th Edition highlight certain third-party activities as red flags for money laundering in the life insurance sector:

Payments are regularly received from third parties that have no apparent relationship with the policy holder (C):“Red flags include payments made by third parties, especially where there is no apparent connection between the third party and the policy holder.”(FATF, Risk-Based Approach for Life Insurance Sector, Section IV: Red Flags; CAMS 6th Edition, Customer Due Diligence for Life Insurance)

A customer names an apparently unrelated third party as a beneficiary (D):“Another warning sign is when beneficiaries have no apparent relation to the policyholder.”(FATF, Ibid; CAMS 6th Edition, Life Insurance ML/TF Red Flags)

Incorrect Options:

A: Consulting an attorney is not, by itself, a red flag.

B: Policy transfer may warrant review but is not specifically a red flag for third-party involvement.

Countries that are members of the Egmont Group can securely exchange information between their Financial Intelligence Units (FIUs) to support money laundering and terrorist financing investigations, even when the activity involves multiple jurisdictions.