ACAMS CCAS Dumps

Cryptocurrencies are digital currencies secured by cryptography, operating independently from any central bank or government. Blockchain is the underlying distributed ledger technology supporting cryptocurrencies and other digital assets.

Cryptocurrencies and blockchain are not the same (B). Digital assets can exist off-blockchain (C), such as tokenized assets on centralized databases. While cryptocurrencies can be used as payment, blockchain itself is a technology, not a payment method (D).

Unhosted wallets are self-custody wallets controlled directly by the user without third-party oversight, posing higher anonymity and AML risks.

SARs should include detailed transactional information to support investigations, including all types and aggregate amounts of cryptocurrencies purchased, along with fiat currency equivalents. This information provides a clear picture of the subject’s activity and financial scale.

Owner names of destination wallets (B) may not be available; onboarding info (D) is supplementary, and fiat aggregate totals (C) alone are insufficient.

FATF and DFSA guidance recommend comprehensive transactional data inclusion in SARs to facilitate law enforcement.

Criminals often move cryptoassets through multiple intermediary wallets (many “hops”) rapidly to obfuscate the transaction trail and avoid clustering, which blockchain analytics use to link related addresses.

Simply receiving large amounts (A), holding assets (B), or splitting movements (D) are less effective at preventing clustering.

FATF defines VASPs as entities that conduct certain specified activities involving virtual assets. Licensing or registration as a VASP is required primarily for entities engaged in activities such as safekeeping and/or administration of virtual assets or conducting exchanges between one or more forms of virtual assets.

Cryptocurrency mining operations (A) and operating blockchain nodes (C) are generally excluded from the VASP definition because they do not involve handling customer funds or providing financial services. Virtual money service businesses (D) is a broader term that may include VASPs but not all such businesses fall under VASP regulations unless they meet the activity criteria.

This aligns with the DFSA AML Module and FATF Recommendation 15, which regulate entities providing virtual asset custody or exchange services to customers and require them to be licensed or registered.

The Travel Rule, part of FATF Recommendation 16, requires VASPs to share sender and recipient information for virtual asset transfers above USD/EUR 1,000. The aim is to enable tracing and detection of illicit funds.

The ultimate responsibility for risk oversight lies with the Board of Directors. Senior management and the board have the fiduciary and governance duty to ensure that an effective risk management framework, including AML/CFT controls and cryptoasset-specific risks, is in place and functioning properly.

The DFSA GEN Module and AML Module explicitly allocate the highest accountability for compliance and risk oversight to the Board of Directors, while first and second lines support implementation and oversight respectively. The Chief Risk Officer (CRO) supports risk management but the board maintains ultimate accountability.

Key extracts:

GEN Module, Chapter 5: “Responsibility for compliance lies with every member of senior management, with ultimate oversight by the Board.”

AML Module Section 1.2 & 4.1: “Senior management and Board must ensure appropriate systems and controls for AML/CFT risk management.”

FATF Recommendation 2 underscores that senior management and boards are accountable for effective AML governance【GEN/VER64/05-24: Chapter 5; AML/VER25/05-24: Sections 1.2, 4.1】.

Thus,Dis the correct answer.

Blockchain’s transparent ledger enables investigators to trace transaction histories indefinitely, aiding ML/TF detection.

FATF Recommendation 15 requires countries to regulate VASPs for AML/CFT purposes, applying the same preventive measures as financial institutions.

The Financial Action Task Force (FATF) guidance on Virtual Assets and Virtual Asset Service Providers (VASPs) explicitly highlights that transactions involving unhosted wallets (wallets not held or controlled by a regulated entity) pose a high inherent risk for money laundering and terrorist financing. This is because unhosted wallets are more difficult to monitor and control, lack identifiable customer information, and are often exploited for illicit activities.

The DFSA AML Module, aligned with FATF recommendations, mandates that Relevant Persons incorporate this risk into their business-wide risk assessments. The increased volume of transactions to and from unhosted wallets should therefore be assigned ahigh inherent risk ratingto trigger enhanced controls such as enhanced due diligence (EDD) and transaction monitoring.

Supporting extracts include:

FATF Guidance on Virtual Assets (October 2021) states: "Unhosted wallets or transactions with them represent a high risk of ML/TF due to limited or no access to identifying information."

DFSA AML Module (AML/VER25/05-24) Section 4.1 & 6.1 on Risk-Based Approach: mandates firms to assess and rate risks posed by customers and products, explicitly including virtual assets and unhosted wallets as high risk.

COB Module also requires heightened controls and disclosures when dealing with transactions involving unhosted wallets【AML/VER25/05-24: Sections 4.1, 6.1, COB/VER45/05-24: Sections 6.13, 15.6】.

Thus, optionD (High)is the correct risk rating.

On-chain forensic analysis uses blockchain data to detect illicit wallet patterns and cluster associations.

Ethereum uses an account-based ledger model where balances are maintained per account, similar to bank accounts, and transactions update balances directly. This differs from Bitcoin, Litecoin, and Monero, which use the UTXO (Unspent Transaction Output) model.

Understanding ledger models is important for AML transaction monitoring and blockchain analytics, as account-based systems enable different tracking and risk assessment approaches.

Indirect exposure occurs when funds pass through one or more intermediary wallets before reaching a known illicit destination. This requires enhanced monitoring to capture risks that are not directly linked but are part of the transaction chain.

Dusting involves sending tiny amounts of crypto to many addresses to later analyze transaction patterns, potentially deanonymizing users — a privacy and AML concern.

Standard due diligence typically involves reviewing negative news and verifying beneficial ownership to understand the customer’s background and potential risk factors.

Dark web forums (B) and blockchain exposure (D) are more advanced or enhanced due diligence techniques, used when higher risk is identified.

Structuring (smurfing) involves breaking transactions into smaller amounts to evade AML reporting thresholds, a classic ML tactic.

When determininghighest-risk customersunder a risk-based approach, firms must consider transaction patterns, jurisdictions, counterparties, and destinations:

B:Large deposits by a student, rapidly converting to crypto and sending to another VASP, suggest potential layering and third-party funding risk.

D:Daily inbound transfers from a foreign VASP to a private (unhosted) wallet indicate consistent high-risk exposure — especially cross-border transactions involving unregulated or weakly regulated jurisdictions.

While VPN use (A) can be a red flag, on its own it is lower risk than significant suspicious fund flows. Paying suppliers in crypto (C) can be legitimate for businesses. A large donation to a charity (E) could be flagged depending on jurisdiction and cause, but is generally less inherently suspicious than B and D unless linked to high-risk entities.

FATF, DFSA, and FSRA AML rules stress that ongoing monitoring should identify thesehigh-frequency, high-value, cross-border crypto flowsas priority for Enhanced Due Diligence (EDD) and possible Suspicious Transaction Reports (STRs).

An effective AML CDD program must include:

Staff training on gathering CDD (A)

Maintaining complete information to support risk profiling (B)

Procedures to address situations where the customer's true identity is unclear or questionable (F)

Annual client reviews (D) and IP address monitoring (E) may be part of broader AML controls but are not fundamental CDD requirements. Maintaining a list of high-risk virtual assets (C) is important but relates more to product risk management than direct CDD.

In risk-based AML/CFT programs — including those applied to Virtual Asset Service Providers (VASPs) — risk assessment determines the remaining exposure after applying mitigating measures.

Inherent Risk:The natural level of risk before applying any controls, based on factors like customer profile, transaction patterns, and jurisdiction.

Control Effectiveness:The degree to which implemented controls (e.g., CDD, EDD, sanctions screening, blockchain analytics) reduce risk.

Residual Risk:The risk that remains after controls are applied and is the level an organization must either accept, reduce further, or avoid.

The standard formula is:

Inherent Risk – Control Effectiveness = Residual Risk

This equation is emphasized in FATF’s risk-based approach guidance and reinforced in DIFC (DFSA) and ADGM (FSRA) AML rules to ensure ongoing monitoring and governance oversight of remaining risks.

The EU’s Markets in Crypto-Assets Regulation (MICA) applies specifically to:

Electronic Money Tokens (B): Tokens that fulfill the definition of electronic money under the E-Money Directive.

Cryptoassets (D): Broad category including digital representations of value that are not covered by existing financial services legislation.

Asset-Referenced Tokens (E): Tokens that purport to maintain a stable value by referencing one or several assets.

Meme coins (A) and privacy coins (C) are not separately classified under MICA but may fall under broader cryptoasset categories subject to other regulations.

The risks posed by different payment methods fall under the products and services risk category because payment methods are specific services and products offered by financial institutions or businesses. This category assesses inherent risks linked to how products are designed and used.

Geographical (A) relates to location risks; customers (B) relates to the nature of customers; new technologies (C) covers emerging tools but payment methods are classified under products/services.

The main red flag is the customer’s failure to cooperate with requests to provide information on the origin of funds, which undermines transparency and raises suspicion regarding the legitimacy of the funds.

While an unconnected IP address (D) is suspicious, non-cooperation (C) is a stronger indicator of potential money laundering.

Privacy coins like Monero use cryptographic features to obscure transaction details, increasing AML risk and regulatory scrutiny.

The Lightning Network is a second-layer payment protocol that enables off-chain transactions, allowing users to conduct fast, low-fee Bitcoin payments without recording every transaction directly on the Bitcoin blockchain. This improves scalability and reduces congestion.

It does not inherently facilitate large payments to decentralized exchanges (A), bridging assets across blockchains (B), or guarantee zero transaction fees (C), though fees are significantly lower than on-chain transactions.

The DFSA and FATF crypto guidance discuss such layer-2 solutions in the context of emerging technological risks and monitoring challenges.

Funds moving through multiple intermediary wallets before arriving at the client’s wallet indicate layering techniques used to obscure the source of funds, a classic money laundering tactic.

Transferring funds quickly (A) or declaring wealth (B) are less definitive indicators. An untraceable IP (C) raises concerns but is less conclusive than complex transactional layering.

The FATF Travel Rule requires Virtual Asset Service Providers to share originator and beneficiary information for virtual asset transfers exceeding a certain threshold. Its purpose is to mitigate ML/TF risks by increasing transparency and enabling authorities to trace the movement of funds across institutions and jurisdictions.

It does not aim to slow transactions (B) or directly enhance CDD (A), although it supports the overall AML framework including CDD.

This rule is a cornerstone of FATF’s efforts to regulate virtual asset transfers effectively and is adopted by DFSA and other regulators.

Mixing and tumbling services are used to obscure the origin of funds by blending multiple transactions, resulting in unknown or disguised sources of funds. This is a classic money laundering technique.

Rapid trades (B), IP address obfuscation (C), and transactions to high-risk jurisdictions (D) are separate or related risks but not direct indicators of mixing/tumbling.

Red flags include private sharing of NFTs without public trading (A), indicating potential lack of transparency, and new coins with untested protocols controlled by few wallets (C), signaling possible manipulation or fraud.

Tokens endorsed by celebrities with price increases (D) or active social media presence (E) are less directly indicative of fraud but require monitoring. Low social media presence with wide ownership and original whitepapers (B) is typically less suspicious.

Money laundering risk increases if the business operates in or near high-risk jurisdictions (D) or regions associated with narcotics production (C), as these are common sources of illicit funds.

An increase in volume and users (A) or supporting various cryptoassets (B) alone does not necessarily increase ML risk. Recent licensing (E) may indicate regulatory compliance, potentially lowering risk.

This process is layering, designed to hide the source of funds through multiple new wallets before integration into the financial system.