Free and Premium ACAMS CAMS Dumps Questions Answers

Terrorist financing (TF) differs from traditional money laundering, as funds can originate fromlegitimate sources(e.g., donations, charities) and often involvelow-value transactions.

Option A (Correct):Non-profits with no online presencecan beshell organizations used to finance terrorism.

Option C (Correct):Small-dollar payments to high-risk jurisdictions(e.g., FATF-listed countries)may indicate terrorist funding activity.

Why Other Options Are Incorrect:

Option B (Incorrect):Crowdfunding payments with transparency and project detailsare generallylow-risk.

Option D (Incorrect):Charities helping refugeesmay behigh-risk but not automatically suspicious.

Option E (Incorrect):Structuring below reporting thresholds is more indicative of money laundering than terrorist financing.

Red Flags for Terrorist Financing:

Frequent low-value transactions to conflict zones.

Use of charities and non-profits as fronts for terror groups.

Funds moving through unregulated crowdfunding platforms.

Best Practices for Detecting Terrorist Financing:

Identify transactions involving known terrorist financing typologies.

Enhance monitoring of non-profit organizations operating in high-risk regions.

Use negative news screening to detect links to sanctioned entities.

Correspondent banking relationshipspresent high money laundering risks, requiringenhanced due diligence (EDD)when monitoringcross-border transactions.

Option B (Correct):Verifying that neither the sender nor the receiver is on a sanctions list is a mandatory AML check.

Option C (Correct):Requesting invoices and contracts helps establish the legitimacy of the transactionandensures funds are being used for their stated purpose.

Option D (Correct):Conducting adverse media checkscan revealpast financial crime links or regulatory issuesrelated to the sender or beneficiary.

Why Other Options Are Incorrect:

Option A (Incorrect):Calling the individual is not a standard AML procedureandmay violate privacy laws.

Option E (Incorrect):314(b) information sharing applies only to U.S. financial institutions—the bankshould first conduct its internal review before escalating internationally.

Best Practices for Investigating Suspicious Correspondent Banking Transactions:

Check for links to known money laundering typologies.

Verify business relationships using supporting documentation.

Ensure transaction transparency through KYC/CDD measures.

 According to the Wolfsberg Group, the FI should take the following steps regarding the opening of the account for the senior government official:

Reasonably establish if the source of wealth and funds of the official is legitimate. This is to ensure that the FI is not facilitating the laundering of proceeds of corruption, bribery, or other illicit activities by the official, who is considered a politically exposed person (PEP) and poses a higherrisk of financial crime. The FI should obtain information and documentation on the origin and ownership of the funds, the official’s income and assets, and the purpose and expected activity of the account12.

Perform due diligence procedures on the managing intermediary. This is to verify the identity, reputation, and regulatory status of the intermediary, who acts as a third party on behalf of the official. The FI should also assess the intermediary’s own AML/CFT policies and controls, and the nature and extent of the relationship between the intermediary and the official13.

Determine whether the intermediary representative is acting on the officer’s behalf. This is to establish the beneficial ownership and control of the account, and to avoid any potential conflicts of interest or undue influence by the intermediary. The FI should obtain a written confirmation from the intermediary that they are authorized to act on behalf of the official, and that they will disclose any changes in the beneficial ownership or control of the account13.

 Predicate offenses are the criminal activities that generate the proceeds that are later laundered through money laundering schemes. A country that does not have strong predicate offenses and is lax in prosecuting AML cases could suffer from increased organized crime and corruption, as criminals would have more opportunities and incentives to engage in illicit activities and evade detection and punishment. Organized crime and corruption can have serious social and economic consequences for a country, such as undermining the rule of law, eroding public trust, threatening national security, harming human rights, reducing economic growth, and distorting market competition123.

 A beneficial owner is the natural person who ultimately owns or controls a legal entity or arrangement, such as a company, a trust, or a foundation. Identifying the beneficial owner is essential for preventing and detecting money laundering, terrorist financing, tax evasion, and other illicit activities that may involve the misuse of corporate vehicles. However, some individuals or entities may attempt to conceal the true beneficial ownership of a company by using various techniques, such as complex ownership structures, shell companies, bearer shares, or nominees. A nominee is a person or an entity that acts on behalf of another person or entity, usually for a fee or a commission, without disclosing the identity of the real owner or controller. Nominees can be used to protect or conceal the identity of the beneficial owner and controller of a company or asset. A nominee can help overcome jurisdictional controls on company ownership and circumvent directorship bans imposed by courts and government authorities. While the appointment of nominees is lawful in most countries, the use of nominees for money laundering purposes is illegal and a red flag for suspicious activity. Therefore, the person filling out an application on the company’s behalf indicating that a beneficial owner is a nominee for another person not named in the company’s documentation is an indicator that there is an attempt to conceal the company’s true beneficial ownership12.

The other options are not necessarily indicators of concealment of beneficial ownership, as they may have legitimate explanations or reasons. The company having a subsidiary in another jurisdiction with a local investor as a beneficial owner may be a normal business practice or a strategic decision, as long as the ownership information is transparent and accurate. Recent changes to the company’s ownership structure may reflect the company’s growth, development, or adaptation to market conditions, as long as they are documented and reported to the relevant authorities. Beneficial ownership information from the time that the company was formed several years ago not matching the current information may be due to natural changes in the company’s shareholders, directors, or managers, as long as they are updated and verified periodically.

Financial Intelligence Units (FIUs)serve as national centers for collecting, analyzing, and disseminating AML/CFT information.

Option B (Correct):FIUs analyze SARs and STRs to detect money laundering and terrorist financing risks.

Option D (Correct):FIUs disseminate financial intelligence to local and international law enforcement agencies and other FIUs.

Option E (Correct):FIUs receive SARs/STRs from financial institutions, which form the basis for their analysis.

Why Other Options Are Incorrect:

Option A (Incorrect):FIUs do not prosecute cases; they refer findings to law enforcement agencies.

Option C (Incorrect):FIUs share intelligence, but prosecution is handled by judicial authorities, not FIUs.

Best Practices for FIUs:

Enhance data-sharing agreements with domestic and international agencies.

Use AI and analytics tools to detect suspicious financial patterns.

Ensure secure handling of sensitive AML/CFT data.

The first step in a financial investigation is to review and analyze allinternalsources of information related to the suspicious transaction.

Option C (Correct):Gathering and assessing internal data helps investigators establish a baseline for normal vs. suspicious customer behavior. This includes reviewing KYC (Know Your Customer) documentation, transaction history, and any previous alerts on the customer.

Option B (Incorrect):This is part of the investigation, but an investigator first needs togatherdata before determining consistency with expected behavior.

Option A (Incorrect):An FIU is typically contactedafterinternal analysis has been completed and a Suspicious Activity Report (SAR) is warranted.

Option D (Incorrect):External information is useful, but internal data should be reviewed first to confirm whether a case needs escalation.

The financial institution should freeze the funds or assets of designated persons and entities once this decision is approved by the Board. This is to comply with the obligation to implement targeted financial sanctions imposed by the United Nations Security Council (UNSC) or other relevant authorities. Freezing means preventing any access, use, transfer, or disposal of the funds or assets by the designated persons and entities or by any other person on their behalf. The financial institution should also report the freezing action to the competent authority and the relevant sanctions committee12.

Option A is not a sufficient step to comply with sanctions requirements, but rather a tool to facilitate compliance. Adopting automatic screening systems to detect designated persons and entities can help the financial institution to identify potential matches and flag them for further investigation. However, screening systems are not infallible and may generate false positives or false negatives. Therefore, the financial institution should also conduct manual checks and verification of the screening results13.

Option B is not a relevant step to comply with sanctions requirements, but rather a measure to mitigate money laundering and terrorist financing risks. Conducting enhanced due diligence for prohibited entities on the sanctions list may be useful to obtain more information about the nature and purpose of the business relationship, the source and destination of the funds, and the beneficial ownership and control structure of the entity. However, enhanced due diligence does not replace the obligation to freeze the funds or assets of the designated persons and entities14.

Option C is not an appropriate step to comply with sanctions requirements, but rather a violation of the obligation to freeze the funds or assets of the designated persons and entities. Changing the risk profile to “high-risk” if an existing customer becomes a sanctioned entity and continuing to monitor further transactions may expose the financial institution to legal and reputational risks, as well as potential sanctions evasion or circumvention. The financial institution should terminate the business relationship with the designated person or entity and freeze their funds or assets without delay1 .

Financial institutions must screen customers against adverse information and determine whether they pose a significant financial crime risk.

Option B (Correct):A direct link to an organized crime group is a severe red flag. Organized crime networks engage in money laundering, corruption, and other illicit activities. UnderFATF Recommendations 10 and 12, financial institutions must implement enhanced due diligence (EDD) for high-risk customers and consider account closure if they pose undue risk.

Option A (Incorrect):Bankruptcy does not necessarily indicate financial crime risk, though it may raise financial stability concerns.

Option C (Incorrect):While PEPs pose a higher risk for corruption, financial institutions typically apply EDD rather than immediately terminating the relationship.

Option D (Incorrect):Violating a construction permit is a regulatory issue, not directly linked to financial crime.

Civil and Criminal Prosecution, Fines, and Imprisonment: The Chief AML Officer may face legal action, including both civil and criminal proceedings. This could result in fines and even imprisonment if found guilty of negligence or misconduct related to anti-money laundering compliance.

Ban from Employment: Regulators have the authority to ban individuals from working in the financial services industry if they are deemed unfit due to AML-related failures. Such a ban can significantly impact the individual’s career prospects.

Recommend Termination of Employment: While the regulator cannot directly terminate employment, they can recommend that the financial institution (FI) take appropriate action, including termination, based on the Chief AML Officer’s performance.

Money laundering negatively affects economic stability by discouraging investment, distorting markets, and eroding public trust.

Option A (Correct):A financial system tainted by money laundering loses credibility, leading to reduced investor and consumer confidence.

Option D (Correct):Foreign investors avoid jurisdictions with weak AML controls due to the risk of sanctions and reputational damage.

Option B (Incorrect):While tax evasion is linked to money laundering, it does not directly affect the decision to implement tax incentives.

Option C (Incorrect):Unemployment may result from economic instability, but money laundering does not directly cause job losses.

Option E (Incorrect):Money laundering often increases volatility in financial markets, not reduces it.

Banks within theEUmust comply withAML laws and data privacy regulationsbefore sharing customer data.

Option D (Correct):Information sharing should belimited to what is necessary and proportionate, followingGDPR and AMLDregulations.

Option A (Incorrect):AML laws allowinformation-sharing in certaincross-border investigations.

Option B (Incorrect):Whilelegal review is necessary, aproduction order is not always requiredforAML-related information sharing.

Option C (Incorrect):Data protection laws (e.g., GDPR) must still be respected, even in financial crime investigations.

Non-compliance with anti-money laundering (AML) laws and regulations can lead to severe consequences for both financial institutions and individuals. One of the indirect consequences is the imposition of punitive fines. These fines can vary based on the type of violation and the institution’s willingness to address the issue. Additionally, non-compliance may damage a company’s reputation, impacting its standing in the market and potentially leading to financial losses beyond the fines themselves123.

A subpoena is a legal order that requires a person or an entity to produce documents, information, or testimony related to a legal matter. A financial intelligence unit (FIU) is a specialized unit within a financial institution that is responsible for detecting, analyzing, and reporting suspicious activities and transactions. When a bank receives a subpoena regarding one of its clients, the FIU should review the subpoena and perform a transaction review to determine if there is any evidence of money laundering, terrorist financing, fraud, or other criminal activity involving the client. The FIU should also respond fully to the subpoena by providing the requested information and documents, unless there is a valid reason to object or seek a protective order. The FIU should not adjust the client’s risk score, file a SAR, or close the client’s account based solely on the receipt of the subpoena, as these actions may be premature, inappropriate, or illegal. Adjusting theclient’s risk score may require further investigation and due diligence. Filing a SAR may be unnecessary or misleading if the subpoena does not indicate any suspicious activity. Closing the client’s account may violate the bank’s contractual obligations, customer service standards, or anti-discrimination laws. Moreover, these actions may alert the client or the subject of the investigation to the existence of the subpoena, which may interfere with the legal process or jeopardize the safety of the bank or its employees.

According to the ACAMS Study Guide for the CAMS Certification Exam (6th edition), page 215, one of the best practices for banks to prevent and detect mortgage fraud is to conduct internal investigations when there are red flags or suspicions of fraud involving bank employees. The investigation should include reviewing the employee’s loan files, interviewing the employee and other relevant parties, verifying the information and documents provided by the employee, and documenting the findings and actions taken. Filing a suspicious activity report (SAR) may be appropriate after the investigation is completed and the bank has reasonable grounds to suspect fraud. Filing a police report or initiating civil litigation may also be options depending on the outcome of the investigation and the bank’s policies, but they are not the first steps to take when the bank suspects an employee of mortgage fraud.

TheFATF Immediate Outcomes (IOs)measure the effectiveness of AML/CFT frameworks in jurisdictions.

Option A (Correct):International cooperationis key to combating financial crime, as outlined inImmediate Outcome 2.

Option B (Correct):Effective regulation of financial institutionsis part ofImmediate Outcome 3, which ensures compliance with AML laws.

Option E (Correct):Investigation and prosecution of money laundering offensesalign withImmediate Outcome 7.

Option C (Incorrect):FATF itself does not conduct investigations; FIUs share intelligence with domestic and international agencies.

Option D (Incorrect):While financial criminals face legal consequences, there is no global mandate to restrict their access to banking.

AFinancial Intelligence Unit (FIU)acts as thecentral hub for AML/CFT intelligencein a country.

Option A (Correct):FIUs collect, analyze, and disseminate financial intelligencerelated tosuspicious transactionsto law enforcement and regulators.

Option B (Incorrect):FIUsdo not prosecute cases; theyrefer cases to law enforcementfor prosecution.

Option C (Incorrect):FIUsanalyze databut donot develop surveillance technology.

Option D (Incorrect):FIUs share intelligencewith authorized entities, butnot real-time criminal datawith the private sector.

Types of FIUs:

FIU Model

Description

Example

Administrative FIU

Operates under agovernment agency or central bank.

FinCEN (USA), AUSTRAC (Australia)

Law Enforcement FIU

Operates within alaw enforcement body.

UK NCA (UK), IMPA (Israel)

Judicial FIU

Operates within ajudicial authority.

Belgium CTIF-CFI

Why FIUs Are Important:

They bridge the gap between banks, regulators, and law enforcement.

They ensure confidential handling of SARs.

They support domestic and international cooperation in AML/CFT efforts.

Cross-borderAML investigationsrequire cooperation throughofficial channels, such as theEgmont Group.

Option D (Correct):TheEgmont Groupis an international network ofFIUs that facilitates secure information exchangein financial crime investigations.

Option A (Incorrect):While sovereignty applies,formal international cooperation mechanisms exist.

Option B (Incorrect):AML cooperation is allowed under legal frameworks(e.g.,MLATs, Egmont Secure Web).

Option C (Incorrect):Information-sharing is restrictedtoauthorized government agencies, not all organizations.

PEPs posehigher risks for corruption and money laundering, requiringenhanced due diligence (EDD).

Option D (Correct):Understanding aPEP’s source of wealth and fundsensureslegitimacy of transactions.

Option A (Incorrect):Commercial databases help identify PEPsbutdo not mitigate risk alone.

Option B (Incorrect):Lowering monitoring thresholds, not raising them, helps detect suspicious activity.

Option C (Incorrect):Regulatory approval isnot required, but internal risk assessments are.

Money laundering has a significant negative impact on the financial sector by undermining the integrity of financial markets. It distorts asset and commodity prices and leads to the misallocation of resources, which can dampen economic growth. The process also erodes public trust in the financial system and can deter foreign investment.

 According to the Anti-Money Laundering Specialist (the 6th edition) resources, one of the challenges of online financial technologies is the difficulty of verifying the identity and legitimacy of the customers and counterparties. This creates opportunities formoney launderers and other criminals to exploit the anonymity and speed of online transactions to move and conceal illicit funds. The other options are not directly related to the money laundering risk posed by online financial technologies.

The customer’s business activity as a domestic carpet cleaning company is not inherently suspicious, as it aligns with their registered business. However, the significant weekly transactions from an international reputable antique auction house raise red flags.

The sudden increase in the customer’s initial international receipt from $15,000 USD to an average of $30,000 USD per transaction per week is also noteworthy. Such a substantial change warrants further scrutiny.

The fact that 90% of the incoming deposits are matched by cash outgoings to non-related individuals could indicate layering or structuring activities associated with money laundering.

Overall, the combination of large international transactions, increased receipts, and cash outflows to unrelated parties from an antique auction house is the most concerning aspect.

Casinos and gambling institutionsare highly vulnerable to money launderingbecause they allow theconversion of cash into chips, checks, or electronic credits, which can later be redeemed as “clean” funds.

Option A (Correct):A privately held company funding multiple patrons' betting accounts is highly suspiciousand may indicate:

Structuring/smurfing, where multiple individuals are used to move illicit funds.

Third-party money laundering, where the real source of funds is obscured.

Trade-based money laundering, if linked to non-gaming businesses.

Why Other Options Are Incorrect:

Option B (Incorrect):Placing multiple bets on the same eventis not inherently suspiciousunless linked tofraudulent betting patterns.

Option C (Incorrect):Large chip purchases in cashmay requirereporting, but they do not necessarily indicatemoney laundering.

Option D (Incorrect):Transferring winnings to another operator may beunusual, butnot automatically suspiciousunless the amount is large and unjustified.

Common Money Laundering Techniques in Casinos:

Chip Walking– Buying chips with illicit funds and cashing them out later as "clean" funds.

Casino Account Transfers– Using multiple accounts or third-party accounts to move funds.

High-Value Gambling with No Loss Intent– Betting on both sides of an event to ensure clean withdrawal of funds.

Best Practices for Casino AML Compliance:

Monitor suspicious large transactions and third-party funding activities.

Perform enhanced due diligence (EDD) on high-risk patrons.

File Suspicious Transaction Reports (STRs) for unusual gambling activity.

Financial institutions (FIs) are required to cooperate with law enforcement agencies (LEAs) in their investigations of money laundering, terrorist financing, and other financial crimes. However, sometimes LEAs may submit requests for information or documents that are overly broad, unduly intrusive, or unreasonable in scope or volume. Such requests may pose challenges or risks for FIs, such as violating customer privacy, compromising data security, disrupting business operations, or incurring excessive costs.

The most appropriate response for an FI in such a situation is to narrow the request through a prompt response to the LEA. This means that the FI should communicate with the LEA as soon as possible to clarify the purpose, scope, and relevance of the request, and to negotiate a more reasonable and proportionate request that meets the LEA’s needs and the FI’s capabilities. The FI should also explain the potential difficulties or consequences of complying with the original request, and propose alternative or additional sources of information that may be more useful or accessible. The FI should document the communication and the agreed terms of the request, and comply with the request in a timely and accurate manner.

By narrowing the request through a prompt response, the FI can demonstrate its good faith and willingness to cooperate with the LEA, while also protecting its own interests and obligations. This can help avoid or resolve any conflicts or misunderstandings between the FI and the LEA, and facilitate a more efficient and effective investigation.

Paying a large amount in cash for an art purchase is a typical red flag of potential money laundering, as it may indicate an attempt to avoid traceability and reporting requirements. Cash transactions are often used by criminals to launder illicit funds, as they are difficult to track and verify. According to the FATF guidance on money laundering and terrorist financing risks in the art trade, cash payments above a certain threshold should be subject to enhanced due diligence and reporting obligations by art market participants (AMPs). AMPs should also be wary of customers who provide insufficient or inconsistent information about the source of funds, the purpose of the transaction, or the identity of the beneficial owner.

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 a form of manipulation that exploits the human factor and relies on the victim’s emotions, trust, or sympathy.

AML compliancemust balancedata privacy lawswithfinancial crime prevention.

Option A (Correct):FIUsmust document the purpose of SAR-related data sharingunderFATF Recommendation 29andGDPR compliance standards.

Option B (Incorrect):Customers do not have the rightto request redaction of personal data in SARs, as this wouldcompromise AML enforcement.

Option C (Incorrect):Many jurisdictions permit information sharingfor AML purposes underformal agreements (e.g., 314(b) USA PATRIOT Act, GDPR exemptions).

Option D (Incorrect):AML reporting requirementsoverride opt-in privacy preferencesdue to thelegal obligation to report suspicious activity.

AML audit findings must beanalyzed and addressed through remedial actions based on root cause analysis.

Option D (Correct):Root cause analysis helps develop effective corrective measures to prevent recurring AML deficiencies.

Option A (Incorrect):Retesting controls may be useful, but addressing deficiencies is more critical.

Option B (Incorrect):While the board oversees compliance, the responsibility for implementing fixes lies with AML teams.

Option C (Incorrect):Audit teams provide findings but do not execute corrective actions.

Best Practices for Addressing AML Audit Findings:

Identify the root cause of AML control failures.

Develop risk-based remediation plans.

Implement and monitor corrective actions.

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.

Financial institutionsmust close accounts that violate sanctions laws or pose a severe AML risk.

Option C (Correct):Doing business with Specially Designated Nationals (SDNs) violates U.S. OFAC and EU sanctions, requiring account closure.

Option A (Incorrect):Multiple SARs do not always require account closure; the institution may continue monitoring the customer.

Option B (Incorrect):Tuition payments are normal transactions and do not justify account closure.

Option D (Incorrect):A civil subpoena does not imply financial crime and does not require closure.

Key Account Closure Triggers:

Violation of OFAC, EU, or UN sanctions laws.

Confirmed criminal activity (e.g., fraud, money laundering, terrorist financing).

Regulatory directive or legal requirement to terminate the account.

Best Practices for Account Closure:

Document the justification for closure (e.g., sanctions compliance, AML concerns).

Notify the customer in a manner that does not constitute "tipping off."

File SARs where required before closing high-risk accounts.

Non-compliance with AML regulatory obligations can have severe consequences for financial institutions. Among these, the most severe consequence is the loss of license. When a financial institution fails to meet AML requirements, regulators may revoke its license to operate. Losing the license effectively shuts down the institution’s ability to conduct business, impacting its existence and operations significantly12.

1. D. The account received a large cash deposit followed by systematic automated teller machine (ATM) withdrawals until the balance was nominal.

This pattern of behavior, known as “structuring” or “smurfing,” is often associated with money laundering. The large cash deposit followed by smaller withdrawals in a systematic manner raises red flags and requires further investigation.

2. E. The customer conducts multiple cash transactions on a regular basis which do not match the customer’s occupation.

Conducting frequent cash transactions that do not align with the customer’s stated occupation or income source is suspicious. It suggests potential attempts to hide the true origin of funds or evade reporting requirements1.

D. Large Cash Deposit Followed by ATM Withdrawals:

The large cash deposit followed by systematic ATM withdrawals is indicative of structuring, a common money laundering technique. Structuring involves breaking down large sums of money into smaller transactions to avoid detection. In this case, the customer’s behavior warrants further scrutiny to determine the purpose behind these transactions.

E. Inconsistent Cash Transactions:

When a customer conducts multiple cash transactions that do not align with their stated occupation or income source, it raises suspicions. Such behavior may indicate an attempt to obscure the true origin of funds or evade reporting requirements. Investigating the reasons behind these inconsistent cash transactions is essential to assess potential money laundering risks1.

International cooperation is essentialinAML investigations, and theEgmont GroupfacilitatesFIU-to-FIU information sharing.

Option D (Correct):Egmont Group memberscan request and share information forAML/CFT investigations.

Option A (Incorrect):Sovereigntydoes not preventcooperationunder proper agreements.

Option B (Incorrect):AML laws allowdata sharing under legal frameworkslikeMutual Legal Assistance Treaties (MLATs).

Option C (Incorrect):Information sharing isrestricted to FIUs and authorized agencies, notall organizations.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, one of the essential elements of an effective AML program is the establishment of a written AML policy that setsout the bank’s commitment to comply with the applicable AML laws and regulations, as well as the roles and responsibilities of the board of directors, senior management, and staff in implementing the AML program. The AML policy should also include the bank’s risk assessment, customer due diligence, transaction monitoring, record keeping, reporting, training, and audit procedures. The AML policy should be approved by the board of directors and communicated to all staff from the top down. The other options are not incorrect, but they are not the primary responsibility of the board of directors in demonstrating commitment to AML compliance.

The Belgian bank should freeze the assets of the customer and report to OFAC, as this is the required action for any US person or entity, or any person or entity within the US, that holds or controls property or interests in property of a person or entity on the OFAC Specially Designated Nationals and Blocked Persons List (SDN List). The SDN List is a list of individuals and entities that are subject to US sanctions and whose assets are blocked by OFAC. The Belgian bank, by maintaining a branch in New York, is subject to the jurisdiction and authority of OFAC, and must comply with its regulations and directives. Allowing transactions, closing the account, or continuing business as usual would violate the sanctions and expose the bank to civil and criminal penalties.

Customer due diligence (CDD) is a key component of anti-money laundering (AML) and counter-terrorism financing (CTF) compliance. CDD helps financial institutions identify and verify their customers, assess their risk levels, and monitor their transactions for suspicious activity.

One of the main objectives of CDD is to understand the nature and purpose of customer relationships, which involves collecting and analyzing relevant information about the customer’s business activities, expected transaction patterns, source and destination of funds, and beneficial ownership. This information helps financial institutions develop a customer risk profile, which is a tool to measure and manage the risk exposure of each customer.

A customer risk profile reflects the financial institution’s risk appetite, which is the level and type of risk that the institution is willing and able to accept. By comparing the customer’s risk profile with the institution’s risk appetite, the institution can determine if the customer operates in line with the firm’s expectations and requirements for a specific industry segment. For example, if the institution has a low risk appetite for customers involved in high-risk sectors such as gambling, cryptocurrency, or arms trade, it can use the customer risk profile to identify and mitigate any potential risks associated with such customers.

Therefore, to understand if the customer operates in line with the firm’s risk appetite for a specific industry segment, a financial institution must obtain sufficient customer information to understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile.

According to the FATF Recommendations (2012), page 111, the FATF calls on its members and urges all jurisdictions to apply enhanced due diligence and, in the most serious cases, countermeasures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from countries with significant strategic AML/CFT deficiencies. Countermeasures are proportionate and effective actions that can be applied by countries individually or collectively to protect their financial systems from these risks. Examples of countermeasures include restricting or prohibiting financial transactions with the high-risk country, requiring financial institutions to review and terminate correspondent relationships with the high-risk country, or applying enhanced reporting mechanisms or systematic reporting of financial transactions with the high-risk country.

The art and antiquities market is highly vulnerable to money laundering and terrorist financingdue toanonymity in transactions, lack of regulatory oversight, and difficulty in tracing ownership.

Option A (Correct):Art storage in tax-free zones can be used to obscure ownership and avoid AML scrutiny.

Option C (Correct):Using third-party art advisors can facilitate anonymous transactions and shield beneficial ownership.

Option D (Correct):High-value art sold on social media without proper provenance raises ML/TF risksdue tolack of financial oversight.

Why Other Options Are Incorrect:

Option B (Incorrect):Paying fair market value does not indicate illicit activity—underpricing or rapid resale are bigger red flags.

Option E (Incorrect):Authenticity verification is common in legitimate art transactions and is not a direct ML/TF red flag.

Red Flags for Art & Antiquities Money Laundering:

Frequent high-value art transactions with no clear business purpose.

Use of intermediaries to conceal beneficial ownership.

Rapid resale of newly purchased art at below-market prices.

Best Practices for AML in the Art Market:

Conduct enhanced due diligence (EDD) on high-value art transactions.

Monitor transactions involving politically exposed persons (PEPs).

Report suspicious transactions linked to high-risk art traders.

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.

AML compliancemust be balanced with data privacy laws, includingGDPR (EU), CCPA (U.S.), and banking secrecy regulations.

Option A (Correct):FIUsmust documentwhy and how personal data in SARs is shared with law enforcement or regulators.

Option B (Incorrect):SAR subjects cannot request redaction—SARs are confidential to avoid "tipping off" the suspect.

Option C (Incorrect):Many jurisdictions allow AML-related information sharing, particularlyunder FATF guidance.

Option D (Incorrect):SARsdo not require customer consent—they are filed based on legal obligations.

Key Data Privacy Considerations in AML Investigations:

GDPR Article 6permits data processing for AML compliance.

Banking secrecy laws have exemptions for AML disclosures.

FIUs must document SAR handling procedures for legal compliance.

Best Practices for Managing Data Privacy in AML:

Limit data collection to what is necessary for AML compliance.

Ensure SAR information is only shared with authorized agencies.

Comply with local and international data privacy laws.

Nonprofit organizations (NPOs) and charities are at risk of being exploited for terrorist financing due to their access to large sums of money and their operational reach into high-risk areas. FATF’sRecommendation 8specifically recognizes that terrorist organizations may misuse NPOs to raise and move funds, provide logistical support, or conceal the diversion of funds for illicit purposes.

Option A (Correct):Many charities operate internationally, especially in areas with humanitarian crises. These regions often overlap with locations where terrorist organizations are active, making them vulnerable to abuse.

Option D (Correct):Charities handle large volumes of cash and enjoy public trust, which makes it easier for illicit actors to integrate illicit funds without raising immediate suspicion.

Option B (Incorrect):While charities are generally legitimate, the concern is that they can be exploited, not that they necessarily intend to misuse funds.

Option C (Incorrect):Although collecting donations is a legitimate practice, it does not directly contribute to their vulnerability to terrorist financing.

 The board of directors or designated specialized committee should be provided with statistical data regarding SARs filed during the reported period, such as the number, type, and amount of SARs, as well as any trends or patterns identified. This would enable them to oversee the effectiveness of the anti-money laundering program and ensure compliance with regulatory requirements. Providing too much detail, such as names of customers or copies of SARs, could compromise the confidentiality of the SARs and expose the institution to legal risks.

According to the ACAMS CAMS Study Guide, 6th Edition, Chapter 3, Section 3.2, the financial institution should implement the following measures in order to identify and investigate money laundering activity from their clients:

Adverse news screening: This is a process of checking the clients’ names and related parties against various sources of negative or adverse information, such as media reports, sanctions lists, watch lists, law enforcement databases, etc. Adverse news screening can help the financial institution to detect any potential red flags or indicators of money laundering or other criminal activities involving their clients, and to take appropriate actions, such as conducting enhanced due diligence, filing suspicious activity reports, or terminating the relationship.

Transaction monitoring: This is a process of reviewing and analyzing the clients’ transactions and activities, such as deposits, withdrawals, transfers, payments, etc., to identify any unusual or suspicious patterns or behaviors that deviate from their normal or expected profile. Transaction monitoring can help the financial institution to detect any possible signs of money laundering or other financial crimes, such as structuring, layering, integration, fraud, tax evasion, etc., and to investigate and report them accordingly.

The other options are not measures that the financial institution should implement in order to identify and investigate money laundering activity from their clients, although they may be part of the overall AML program or compliance culture:

Integrity policy: This is a document that outlines the ethical principles and values that guide the conduct and behavior of the financial institution and its employees. An integrity policy can help the financial institution to promote a culture of honesty, transparency, and accountability, and to prevent or deter any misconduct or corruption. However, an integrity policy alone is not sufficient or specific enough to identify and investigate money laundering activity from their clients.

Whistleblower hotline: This is a mechanism that allows the employees or other stakeholders of the financial institution to report any suspected or observed violations of the AML policies, procedures, or regulations, or any other wrongdoing or malpractice, without fear of retaliation or reprisal. A whistleblower hotline can help the financial institution to encourage and facilitate the reporting of any potential or actual money laundering activity from their clients or within the organization, and to protect the rights and interests of the whistleblowers. However, a whistleblower hotline is not a measure that the financial institution implements to identify and investigate money laundering activity from their clients, but rather a tool that supports the AML program and compliance function.

Code of conduct: This is a document that defines the standards and expectations of the financial institution and its employees regarding their professional and ethical behavior, responsibilities, and obligations. A code of conduct can help the financial institution to establish and maintain a culture of compliance and integrity, and to prevent or address any conflicts of interest, misconduct, or abuse of power. However, a code of conduct is not a measure that the financial institution implements to identify and investigate money laundering activity from their clients, but rather a framework that governs the AML program and compliance function.

Money laundering through capital marketsoften involvespump-and-dump schemes, wash trading, and layering funds through rapid trading activity.

Option A (Correct):A sudden spike in demand for a low-priced security is a red flag for pump-and-dump schemes, where criminals manipulate the marketto inflate stock prices artificially before selling off shares for a profit.

Option B (Incorrect):A gradual decline in trading volume and price does not indicate suspicious activity related to money laundering.

Option C (Incorrect):An increase in demand for ETFs is common and not necessarily linked to money laundering.

Option D (Incorrect):Holding securities in one specific emerging market may indicate a geographic investment strategy, not necessarily money laundering.

Common Money Laundering Typologies in Capital Markets:

Pump-and-Dump Schemes– Fraudulently inflating stock prices to cash out illicit funds.

Wash Trading– Conductingself-tradesto create an illusion of high market activity.

Layering Funds Through Rapid Trading– Engaging infrequent buy-and-sell ordersto obfuscate the origin of funds.

Best Practices for AML in Capital Markets:

Monitor unusual trading volume and price fluctuations.

Use AI-driven surveillance systems to detect manipulative behavior.

Investigate transactions involving offshore brokers or shell entities.

When investigating unusual transactions, financial institutions must focus on data-driven risk assessment and internal review first.

Option A (Correct):Assessing business ownership and control structureshelps determine ifmultiple businesses are connected through hidden links(e.g., shell companies or common ownership).

Option C (Correct):The account managermay provide valuable insight on whether the customer’s activity aligns with their expected profile.

Option B (Incorrect):Law enforcement should only be contacted after internal review confirms suspicious activity.

Option D (Incorrect):Declining transactions without thorough investigationcould lead tomissed SAR filingsor improper risk assessment.

Option E (Incorrect):Social media is not a reliable investigative toolfor AML casework.

Key Red Flags in Business AML Investigations:

Frequent transactions between businesses with no clear commercial relationship.

Ownership structures that obscure beneficial owners.

Rapid movement of funds through multiple accounts without economic justification.

Best Practices for Investigating Complex Cases:

Verify ownership and control through official company registries.

Conduct negative news screening and PEP/sanctions screening.

Request supporting documentation from the customer.

ASuspicious Activity Report (SAR)is required when afinancial institution detects activity that raises suspicion of money laundering, terrorist financing, or fraud.

Option A (Correct):Inability to verify customer identification documentsis ared flag for potential financial crimeand may requirereporting to the Financial Intelligence Unit (FIU).

Option B (Incorrect):PEPs require enhanced due diligence (EDD), but their involvement alone does not automatically trigger a SAR.

Option C (Incorrect):Dealers in precious metals/stones are high-risk, but being in this industry alonedoes not warrant an automatic SAR.

Option D (Incorrect):Crypto-to-fiat transactions are not inherently suspicious, but they requiremonitoring for unusual activity.

Key SAR Filing Triggers:

Transactions that do not match the customer’s expected activity.

Incomplete, fraudulent, or unverifiable customer identification.

Use of shell companies or unusual intermediaries.

Large or structured transactions with no apparent legitimate purpose.

Best Practices for SAR Compliance:

Implement robust customer due diligence (CDD) processes.

Monitor transaction behavior against expected patterns.

Follow jurisdictional SAR filing deadlines to avoid penalties.

Banks mustcomply with legal subpoenaswhile ensuring AML compliance.

Option B (Correct):The bank shouldreview client transactionsandrespond fullyto law enforcement.

Option A (Incorrect):Filing a SAR simply because of a subpoenaisnot requiredunless suspicious activity is identified.

Option C (Incorrect):Tipping offthe client about the subpoena isillegalunder AML laws.

Option D (Incorrect):Risk scores should be reviewedbut not automatically adjustedsolely based on a subpoena.

Thereal estate sectoris a known avenue formoney laundering, and this scenario presents multiplered flags.

Option A (Correct):High-risk jurisdictionsare associated withcorruption and financial crime, making transactions involving their citizenshigher risk.

Option D (Correct):Selling assetsbelow market valueis a common tactic todisguise illicit funds or transfer value illicitly.

Option B (Incorrect):While cross-border legal representation may raise questions,it is not inherently suspicious.

Option C (Incorrect):Offshore companies are common intax planning, though they requirefurther scrutiny.

According to the CAMS Study Guide (the 6th edition), page 184, when an FI receives a formal law enforcement request to produce documents, such as a subpoena, a search warrant, or a court order, it should designate a person responsible for the internal investigation in preparation of documents for the request. This person should be familiar with the FI’s policies and procedures, the applicable laws and regulations, and the nature and scope of the request. The designated person should also coordinate with the FI’s legal counsel, compliance officer, and senior management, and ensure that the FI preserves the confidentiality and integrity of the documents and the investigation.

TheBoard of Directorsholdsultimate responsibilityforAML/CFT compliance and governance.

Option B (Correct):TheBoardmustoversee, approve, and ensure AML programs are effective.

Option A (Incorrect):TheCOO manages operations, butdoes not hold ultimate accountability.

Option C (Incorrect):While theAML officer executes compliance programs, theBoard provides oversight.

Option D (Incorrect):TheCEO is responsible for strategy, butAML failures fall under Board accountability.

Economic sanctions are measures imposed by countries or international bodies to exert pressure on individuals, entities, or nations that engage in undesirable behavior or actions. Sanctions aim to restrict or prohibit certain economic activities with the targeted parties, such as trade, investments, or financial transactions. They serve various purposes, including achieving foreign policy and national security objectives and deterring undesired actions by countries or entities. Sanctions can be comprehensive (affecting an entire country) or targeted (specific businesses, groups, or individuals), with a recent trend toward minimizing harm to innocent civilians12.

Aproper investigation of unusual transactions requires a mix of data analysis, contextual review, and expert judgmentto assess potential risks.

Option B (Correct):Cross-referencing transactions with external factors(e.g.,political events, commodity price fluctuations, news reports) helps identifypotential links to illicit activities.

Option C (Correct):Therelationship managermay provide insights intowhether a transaction aligns with the customer’s known profile and business activity.

Option D (Correct):Arisk-based approachensures thathigher-risk transactions receive enhanced scrutiny, while lower-risk ones undergo standard monitoring.

Why Other Options Are Incorrect:

Option A (Incorrect):Focusing only on transaction amountsignorescontextual factors, such asunusual behavior in low-value transactions.

Option E (Incorrect):Automated alerts are valuable but cannot replace human analysis and judgment.Manual reviews remain necessary for complex cases.

Red Flags in Unusual Transactions:

Large or frequent transactions inconsistent with a customer’s normal profile.

Payments from/to high-risk jurisdictions without a clear purpose.

Use of intermediaries or shell companies to move funds.

Best Practices for AML Investigations:

Use both qualitative and quantitative factorsto assess transaction risks.

Collaborate with business units(e.g., relationship managers) to understand client behavior.

Apply a risk-based approach to allocate investigation resources efficiently.

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.

Transaction monitoring alerts requirefurther analysisto determine whether they indicategenuine suspicious activity or a false positive.

Option C (Correct):Requesting information from the relationship manager helps gather customer background details, past transaction patterns, and business rationale.

Option A (Incorrect):Below-the-line testing assesses system effectiveness but does not resolve an immediate AML alert.

Option B (Incorrect):Directly contacting a counterparty bank may violate privacy regulations and should only be done if escalation is required.

Option D (Incorrect):Restricting access without due diligence may lead to regulatory and reputational risks.

Best Practices for Investigating AML Alerts:

Review transaction history and customer risk profile.

Engage the relationship manager for business context.

Escalate to AML compliance teams if red flags persist.

Aneffective AML programbalancesalert accuracy and operational efficiency.

Option D (Correct):The true positive vs. false positive ratio reflects the efficiency and accuracy of an AML transaction monitoring system.

Option A (Incorrect):The number of alerts does not indicate system effectiveness—many could be false positives.

Option B (Incorrect):Clients exiting for commercial reasons are unrelated to AML efficiency.

Option C (Incorrect):Tracking high-risk customer onboarding is important but does not measure AML effectiveness.

Best Practices for Measuring AML Effectiveness:

Monitor system efficiency through alert validation metrics.

Reduce false positives while maintaining regulatory compliance.

Enhance machine learning and AI models for transaction monitoring.

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.

Lawyers and legal professionalsare frequently used inmoney laundering schemes, particularly throughtrust accountsthat offeranonymity and client privilege protections.

Option A (Correct):Repeated wire transfers from unknown sources followed by immediate outward transferssuggest that the lawyer’s trust accountis being used as a pass-through account for laundering funds.

Option B (Incorrect):If legal services were actually rendered,this is a normal transactionunless other risk factors exist.

Option C (Incorrect):Receiving funds from aregulated insurance companyisnot inherently suspicious, unless the transaction isinconsistent with the lawyer’s usual business activity.

Option D (Incorrect):Large transactions are normal inreal estate purchases, as long as proper documentation exists.

Red Flags in Legal Sector Money Laundering:

Use of lawyer trust accounts to move funds with no legitimate business purpose.

Frequent transactions from high-risk jurisdictions.

Transactions that are inconsistent with the lawyer’s area of practice.

Clients who refuse to disclose the source of funds.

Best Practices:

Apply AML measures to law firmshandling financial transactions, as required by FATF’sDesignated Non-Financial Businesses and Professions (DNFBPs)guidelines.

Require enhanced due diligence (EDD) for high-risk clientsandunusual transactions.

Money Services Businesses (MSBs)are commonly recognized by regulatory and supervisory authorities as havinghigher inherent AML/CFT risk, particularly due to certain business characteristics.

Option B – The prevalence of international wire transfers:

MSBs often facilitatecross-border transactions, which present a higher money laundering and terrorist financing risk due to challenges in verifying customer identity, the origin of funds, and the end destination—especially when dealing with higher-risk jurisdictions.

Option D – The cash-intensive nature of the services offered:

Many MSBs deal primarily incash, which increases the risk ofanonymous transactionsandfunds layering, making it harder to trace illicit activity. Cash is the most vulnerable medium for placement of illicit funds into the financial system.

Option AandOption E, while involving modern technologies,can actually reduce riskwhen implemented with proper controls (e.g., secure digital onboarding and traceable payments enhance auditability).

Option Cdoes not in itself signal high AML risk unless combined with other red flags.

Option A indicates potential money laundering activity by a lawyer, as it involves the use of a trust account to receive and transfer funds from unknown sources in high risk jurisdictions, without any apparent legitimate purpose or explanation. This could be a sign of layering, where the money launderer attempts to conceal the origin and ownership of the illicit funds by moving them through multiple accounts and jurisdictions. Option B does not necessarily indicate money laundering, as the source of the funds is a reputable entity and the transfer could be explained by a legitimate transaction or service. Option C does not necessarily indicate money laundering, as the bank draft could be a payment for a legal service or a settlement between parties. Option D does not necessarily indicate money laundering, as the cash deposit could be a fee for a legal service or a donation, and the amount could be below the reporting threshold to avoid unnecessary paperwork or scrutiny.

According to the Wolfsberg Principles on Private Banking, the bank should apply additional diligence to customers who present a higher risk of money laundering or other financial crimes. Some of the indicators for defining such customers are:

Persons residing in or having funds from countries with inadequate AML standards, sanctions, embargoes, or other measures that indicate a higher risk of money laundering or terrorist financing12.

Persons engaged in business activities known to be susceptible to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, art and antiquities, etc13.

Persons determined to be Politically Exposed Persons (PEPs), who are individuals who hold or have held positions of public trust or influence, or their family members or close associates, and who may pose a higher risk of corruption, bribery, or abuse of power14.

Persons who receive funds from a correspondent banking relationship are not necessarily required additional diligence, unless they fall under any of the above categories or other risk factors. Correspondent banking is a service provided by one bank to another bank to facilitate cross-border transactions, and it is subject to its own set of AML standards and due diligence measures5.

An internal investigation log is primarily intended to track the status of investigations into unusual activity. This is to ensure that the investigations are conducted in a timely, thorough, and consistent manner, and that the results and recommendations are documented and communicated to the relevant parties12. An internal investigation log can also help the organization to identify any trends, patterns, or gaps in its anti-money laundering (AML) compliance program, and to measure its effectiveness and efficiency3.

An internal investigation log is not intended to provide training on investigations to the anti-money laundering officer and Financial Intelligence Unit (FIU), report status of investigations to the Board of Directors, or detect and monitor possible suspicious activity. These are separate functions that may involve the use of the internal investigation log, but are not its primary purpose.

According to the ACAMS study guide, one of the red flags for money laundering in crowdfunding platforms is “projects that are fully funded within a very short period of time, especially if the funding comes from a small number of donors or from a single donor” (p. 222). This could indicate that the project is a front for laundering illicit funds or financing terrorism. The other options are not necessarily indicative of money laundering risk, as they could be explained by legitimate factors such as the popularity, urgency, or ambition of the project.

 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.

A money laundering investigation that involves multiple countries can be challenging due to different legal systems, languages, cultures, and levels of cooperation. Two factors that can assist such an investigation are:

Law enforcement and other authorities should have access to financial information that is pertinent to the investigation. This can help them trace the flow of illicit funds, identify the perpetrators and beneficiaries, and gather evidence for prosecution. Financial information can be obtained from various sources, such as financial institutions, financial intelligence units, regulators, and international organizations.

Law enforcement and other authorities should be allowed to establish and utilize joint investigative teams with law enforcement in other countries. This can enhance coordination, communication, and information sharing among the authorities involved, and allow them to pool resources, expertise, and evidence. Joint investigative teams can also facilitate mutual legal assistance and extradition requests.

Money laundering can have negative effects on a country’s currencies and interest rates, as it distorts the allocation of resources and the demand and supply ofmoney. According to the IMF1, money laundering can also adversely affect currencies and interest rates as launderers reinvest funds where their schemes are less likely to be detected, rather than where rates of return are higher. This can create artificial fluctuations and imbalances in the exchange and interest rates, and undermine the effectiveness of monetary policy. For example, if launderers invest in low-yield assets such as government bonds or real estate, they may drive up the prices and lower the yields of these assets, while reducing the availability of funds for more productive investments. This can also affect the inflation and growth prospects of the country.

According to the Basel Committee on Banking Supervision’s Customer Due Diligence for Banks, the compliance function should provide an evaluation of a bank’s policies and procedures independent from its management. The compliance function is responsible for ensuring that the bank adheres to the relevant laws, regulations, and standards on customer due diligence, anti-money laundering, and combating the financing of terrorism. The compliance function should also monitor the implementation and effectiveness of the bank’s customer due diligence policies and procedures, identify and report any breaches or deficiencies, and recommend corrective actions or improvements. The compliance function should have sufficient authority, independence, resources, and access to information to perform its duties effectively.

A customer who is nervous, uneasy, or in a hurry to cash a large cashier’s check may be trying to launder money or evade reporting requirements. The teller should complete the transaction as normal, but also flag the customer’s account for further monitoring and review. The teller should look for any unusual or suspicious patterns of activity, such as frequent large cash transactions, transfers to or from high-risk jurisdictions, or transactions that do not match the customer’s profile or expected behavior. The teller should also document the transaction and the customer’s demeanor, and report any findings or concerns to the appropriate authority within the bank.

The teller should not confer with the bank’s account going forward, as this may alert the customer to the bank’s suspicion or compromise the investigation. The teller should not file a SAR on the customer, unless there are other grounds to suspect money laundering or terrorist financing, as this may be premature or unnecessary. The teller should not file a CTR on the customer by the end of the day, unless the transaction exceeds the threshold of $10,000, as this is a legal requirement for cash transactions in the US.

a vehicle that is historically most often used to hide beneficial ownership, which is an offshore company. An offshore company is a legal entity that is incorporated or registered in a foreign jurisdiction, usually with low or no taxes, high confidentiality, and lax regulation. Offshore companies can be used by money launderers and other criminals to conceal the true identity and ownership of the funds or assets that they control, andto evade taxes, reporting, or legal obligations in their home jurisdictions. Offshore companies can also be layered with other vehicles, such as trusts, foundations, or nominees, to create complex and opaque structures that make it difficult for authorities to trace the source and destination of illicit funds.

The other options are not necessarily vehicles that are most often used to hide beneficial ownership, although they may pose some risks or challenges depending on the circumstances and the risk profile of the customers and countries involved. Option A describes a professional association, which is a group of individuals or entities that share a common profession or interest, such as lawyers, accountants, or doctors. Professional associations may be involved in money laundering or terrorist financing as facilitators, intermediaries, or advisors, but they are not typically used to hide beneficial ownership. Option C describes a limited liability partnership, which is a legal entity that combines the features of a partnership and a corporation, and limits the liability of its partners. Limited liability partnerships may be used by money launderers or terrorist financiers to obscure the ownership or control of funds or assets, but they are not as common or as secretive as offshore companies. Option D describes a charitable organization, which is a non-profit entity that is established for a charitable, religious, educational, or other public benefit purpose. Charitable organizations may be abused by money launderers or terrorist financiers to divert funds or assets for illicit purposes, but they are not usually used to hide beneficial ownership.

Online banking is vulnerable to all three stages of money laundering, namely placement, layering, and integration, because it allows the movement of funds across different accounts, jurisdictions, and institutions with speed, anonymity, and convenience. Online banking can facilitate the following money laundering methods:

Placement: The initial stage of money laundering, where illicit funds are introduced into the financial system. Online banking can enable placement by allowing the deposit of cash or checks through ATMs, mobile devices, or remote deposit capture, or the transfer of funds from prepaid cards, digital wallets, or cryptocurrencies to bank accounts.

Layering: The second stage of money laundering, where illicit funds are moved, disguised, or concealed to obscure their origin and ownership. Online banking can enable layering by allowing the transfer of funds between multiple accounts, often in different jurisdictions or currencies, or the purchase of financial products or services, such as money orders, wire transfers, or online gambling, that create complex transaction trails.

Integration: The final stage of money laundering, where illicit funds are reintroduced into the legitimate economy as apparently legal income or assets. Online banking can enable integration by allowing the transfer of funds to legitimate businesses, investments, or charities, or the purchase of goods or services, such as real estate, luxury items, or travel, that provide a cover for the source of funds.

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.

 Section 311 of the USA PATRIOT Act grants the Secretary of the Treasury the authority to designate foreign jurisdictions, financial institutions, classes of transactions, or types of accounts as being of primary money laundering concern, and to impose one or more of five special measures on them. These special measures range from requiring enhanced recordkeeping and reporting to prohibiting U.S. financial institutions from opening or maintaining correspondent accounts for the designated entities. The purpose of these special measures is to protect the U.S. financial system from money laundering and terrorist financing risks posed by the designated entities.

A government Financial Intelligence Unit (FIU) is a national body or agency that collects, analyzes, and disseminates information on suspicious or unusual financial activity related to money laundering, terrorist financing, or other financial crimes12. One of the main functions of an FIU is to receive and analyze disclosures or reports filed by financial and non-bank institutions, such as banks, casinos, money service businesses, lawyers, accountants, etc., that are obliged to report transactions or activities that may indicate money laundering or terrorist financing34. Another key function of an FIU is to disseminate the information and the results of its analysis to competent authorities, such as law enforcement, prosecutors, regulators, or other FIUs, for further investigation, prosecution, or preventive action56. These two ways of interaction enable the FIU to act as a bridge between the public and private sectors in the fight against financial crimes.

On-line banking offers a significant money laundering risk to a financial institution because:

The nature of on-line banking can make it difficult to establish who is controlling the account. On-line banking allows customers to access their accounts remotely, without face-to-face contact with the financial institution. This can pose challenges for verifying the identity and legitimacy of the account holder, especially if the account is opened on-line or through a third-party intermediary. On-line banking can also facilitate the use of anonymous or fictitious identities, or the use of proxies or nominees to hide the true beneficial owner of the account.

The ease of access through the internet enables cross border movement of funds. On-line banking allows customers to transfer funds quickly and easily across different jurisdictions, without physical movement of cash or other instruments. This can increase the risk of money laundering, as funds can be moved to or from high-risk countries or regions, or through multiple accounts or financial institutions, to obscure the origin, destination, or purpose of the funds. On-line banking can also enable customers to access or use alternative payment systems or virtual currencies, which may have lower regulatory oversight or transparency standards than traditional banking systems.

The speed of electronic transaction enables execution of multiple complex transactions within short time frame. On-line banking allows customers to conduct transactions in real time, with minimal or no human intervention or verification. This can increase the risk of money laundering, as customers can execute multiple transactions in a short period of time, or use complex transaction structures or patterns, to avoid detection or reporting thresholds, or to conceal the source, nature, or ownership of the funds. On-line banking can also enable customers to use automated or algorithmic trading systems, which may generate large volumes of transactions that are difficult to monitor or analyze.

This is the correct answer because the institution must ensure that the beneficiaries of the transfers are not on a terrorist watch list, such as the United Nations Security Council Consolidated List, the U.S. Treasury Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons List, or the European Union Terrorism List. These lists contain the names of individuals, entities, and groups that are subject to sanctions or other measures due to their involvement or association with terrorism or terrorist financing. The institution must screen the beneficiaries of the transfers against these lists and report any matches or hits to the relevant authorities. Failing to do so may expose the institution to legal, regulatory, or reputational risks, as well as facilitate the financing of terrorism.

 the account officer should avoid disclosing any details of the investigation to the customer, as this could compromise the integrity of the law enforcement inquiry, or even constitute tipping off, which is a criminal offense in many jurisdictions12. The account officer should only inform the customer that a legal request has been made, and that the bank is obliged to comply with it, without revealing the nature or scope of the request3. The account officer should also document the communication with the customer, and report it to the appropriate internal authority, such as the compliance officer or the legal department4.

According to the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, the risk of a correspondent bank customer depends on various factors, such as the nature of the customer’s business, the customer’s location, the products and services offered, the customer’s ownership and management structure, and the customer’s customer base1. Among these factors, two that should increase the risk and require additional due diligence are:

The customer is located in a Financial Action Task Force (FATF) member country and the bank’s head of information security is a politically exposed person (PEP). A PEP is an individual who is or has been entrusted with a prominent public function, such as a senior government official, a judicial or military officer, a senior executive of a state-owned corporation, or a political party leader2. PEPs pose a higher risk of money laundering, corruption, or bribery due to their influence and access to public funds3. Therefore, a correspondent bank customer that has a PEP in a key position should be subject to enhanced due diligence, such as verifying the source of funds, the purpose of the relationship, and the PEP’s reputation and integrity4.

The customer is located in a non-FATF member country and services mostly commercial customers who engage in international trade. A non-FATF member country is a country that is not part of the FATF, an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system5. Non-FATF member countries may have weaker or less consistent anti-money laundering and counter-terrorist financing regimes, and may pose a higher risk of financial crime or sanctions evasion6. Moreover, a correspondent bank customer that services mostly commercial customers who engage in international trade may be exposed to trade-based money laundering, which is the process of disguising the proceeds of crime and moving value through the use of trade transactions7. Therefore, a correspondent bank customer that operates in a non-FATF member country and deals with international trade should be subject to enhanced due diligence, such as obtaining information on the nature and volume of the trade transactions, the origin and destination of the goods, and the identity and reputation of the trade counterparties8.

The other options are not correct because they do not necessarily increase the risk of a correspondent bank customer or require additional due diligence. A customer that is located in a FATF member country and provides services primarily to a local individual customer may pose a lower risk of money laundering or terrorist financing, as the customer’s activities are subject to the FATF standards and recommendations, and the customer’s customer base is less likely to involve complex or cross-border transactions. A customer that is located in a FATF member country and provides services to other correspondent banks in neighboring countries may also pose a lower risk of money laundering or terrorist financing, as the customer’s activities are subject to the FATF standards and recommendations, and the customer’s customer base is composed of regulated financial institutions that are subject to their own anti-money laundering and counter-terrorist financing obligations.

nswer:BD

According to the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, the risk of a correspondent bank customer depends on various factors, such as the nature of the customer’s business, the customer’s location, the products and services offered, the customer’s ownership and management structure, and the customer’s customer base1. Among these factors, two that should increase the risk and require additional due diligence are:

The customer is located in a Financial Action Task Force (FATF) member country and the bank’s head of information security is a politically exposed person (PEP). A PEP is an individual who is or has been entrusted with a prominent public function, such as a senior government official, a judicial or military officer, a senior executive of a state-owned corporation, or a political party leader2. PEPs pose a higher risk of money laundering, corruption, or bribery due to their influence and access to public funds3. Therefore, a correspondent bank customer that has a PEP in a key position should be subject to enhanced due diligence, such as verifying the source of funds, the purpose of the relationship, and the PEP’s reputation and integrity4.

The customer is located in a non-FATF member country and services mostly commercial customers who engage in international trade. A non-FATF member country is a country that is not part of the FATF, an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system5. Non-FATF member countries may have weaker or less consistent anti-money laundering and counter-terrorist financing regimes, and may pose a higher risk of financial crime or sanctions evasion6. Moreover, a correspondent bank customer that services mostly commercial customers who engage in international trade may be exposed to trade-based money laundering, which is the process of disguising the proceeds of crime and moving value through the use of trade transactions7. Therefore, a correspondent bank customer that operates in a non-FATF member country and deals with international trade should be subject to enhanced due diligence, such as obtaining information on the nature and volume of the trade transactions, the origin and destination of the goods, and the identity and reputation of the trade counterparties8.

 A politically exposed person (PEP) is a customer who requires the most enhanced due diligence (EDD). This is because PEPs are individuals who hold or have held prominent public positions, such as heads of state, senior politicians, judges, military officers, ordirectors of state-owned enterprises, and who may pose a higher risk of money laundering, corruption, or bribery due to their influence and access to public funds1. EDD measures for PEPs may include obtaining senior management approval, establishing the source of wealth and funds, and conducting enhanced ongoing monitoring of the business relationship2.

The other customers listed do not necessarily require the most EDD, although they may still present a higher risk of money laundering depending on the circumstances. A resident of a non-cooperative jurisdiction is a customer who lives in a country or territorythat has been identified by the Financial Action Task Force (FATF) or other international bodies as having weak or deficient anti-money laundering (AML) standards or posing a threat to the international financial system3. EDD measures for such customers may include obtaining additional information or documentation, applying extra scrutiny to transactions, or refusing to establish or continue the business relationship4. An international business corporation is a customer who operates in multiple jurisdictions and may have complex or opaque ownership structures that can conceal the identity or activity of the beneficial owners or controllers. EDD measures for such customers may include verifying the legal existence and structure of the entity, identifying the beneficial owners and controllers, and understanding the nature and purpose of the business relationship. An established customer is a customer who has a long-standing and regular business relationship with the financial institution and who may have a lower risk of money laundering due to the familiarity and trust that has been built over time. EDD measures for such customers may not be required unless there are changes in the customer’s profile, behavior, or risk level.

The Wolfsberg Anti-Money Laundering Principles for Private Banking require new clients to be approved by at least one person other than the private banker. This is because the private banker may have a conflict of interest or be influenced by the client’s wealth or reputation. The approval process should involve a senior manager or a compliance officer who can independently assess the client’s risk profile and suitability for the institution’s services12.

According to the CAMS study guide, chapter 4, page 851, bearer shares are shares that do not have the name of the owner registered on them, and the ownership is transferred by the physical delivery of the share certificate. This means that the true beneficial owner of the company can be hidden or changed without any record or notification. Bearer shares are considered a high-risk factor for money laundering and terrorist financing, as they can facilitate the movement and concealment of illicit funds through anonymous corporate vehicles. Therefore, the company having bearer shares should cause the most suspicion of money laundering among the options given.

The other options are not necessarily indicative of money laundering, although they may have some risk implications depending on the context and the customer profile. Option A, the jurisdiction being a known tax haven, may suggest that the company is seeking to avoid or minimize taxes, but this does not imply that the company is involved in money laundering, as there may be legitimate tax planning or optimization purposes. Option C, the corporation director being a European citizen, may indicate that the company has some cross-border or international activities, but this does not imply that the company is involved in money laundering, as there may be valid business or personal reasons for the director’s nationality. Option D, no financial statements being filed for 3 years, maysuggest that the company is not complying with the accounting or reporting standards of the jurisdiction, but this does not imply that the company is involved in money laundering, as there may be other explanations or mitigating factors for the lack of financial statements.

According to the CAMS Certification Package - 6th Edition1, the ultimate responsibility for an institution’s anti-money laundering program rests with the institution’s board of directors. The board of directors is responsible for creating a culture of compliance, approving the AML policies and procedures, appointing the AML compliance officer, overseeing the implementation and effectiveness of the AML program, and ensuring adequate resources and training are provided to the staff. The board of directors is also accountable for any deficiencies or violations of the AML program and must take corrective actions when necessary.

The USA PATRIOT Act imposes several requirements on U.S. financial institutions when dealing with foreign financial institutions, especially those that pose a high risk of money laundering or terrorist financing. Two of these requirements are:

Performing enhanced due diligence on shell banks: A shell bank is a bank that has no physical presence in any country and is not affiliated with a regulated financial group. The USA PATRIOT Act prohibits U.S. financial institutions from opening or maintaining correspondent accounts for shell banks, and requires them to take reasonable steps to ensure that their correspondent accounts are not being used by shell banks indirectly12.

Performing due diligence on correspondent accounts: A correspondent account is an account established by a financial institution to receive deposits from, make payments on behalf of, or handle other financial transactions for a foreign financial institution. The USA PATRIOT Act requires U.S. financial institutions to collect and verify certain information about the foreign financial institution, such as its ownership, licensing, and anti-money laundering policies, and to assess the risk of money laundering or terrorist financing associated with the correspondent account13.

According to the guidance issued by the Financial Crimes Enforcement Network (FinCEN) and the federal banking agencies, a financial institution is legally permitted to discuss any aspects of the reported activity with the law enforcement officer who contacts them about the suspicious transaction report (SAR), as long as the officer provides appropriate credentials and a written request for the information. The financialinstitution is also legally permitted to send the deposit documents referenced in the SAR, as they are part of the supporting documentation that may be requested by law enforcement1

However, the financial institution is not legally permitted to provide copies of the customer’s loan documents or explain the customer’s loan payment history, as they are not directly related to the reported activity and may contain confidential information that is protected by privacy laws or contractual agreements. The financial institution should only disclose the minimum amount of information necessary to respond to the law enforcement request and should not volunteer any information that is not relevant or requested12

 The Financial Action Task Force (FATF) Recommendation that should cause an anti-money laundering specialist the most concern is B: Financial institutions should not keep anonymous accounts. This is because anonymous accounts are accounts that are opened or maintained without verifying the identity of the customer or the beneficial owner, or with fictitious or incomplete information. Anonymous accounts pose a high risk of money laundering and terrorist financing, as they can be used to conceal the origin, destination, and purpose of illicit funds, and to evade the detection and reporting of suspicious transactions. Therefore, the FATF Recommendation 10 requires financialinstitutions to identify and verify the identity of their customers and the beneficial owners, and to prohibit the opening or maintaining of anonymous accounts or accounts in obviously fictitious names1.

The other options are also FATF Recommendations, but they are less relevant or applicable to the scenario. Option A: Financial institutions should not warn their customers when information relating to them is being reported to the competent authorities, is the FATF Recommendation 21, which aims to prevent tipping-off, i.e., alerting the customer that they are being investigated or reported for money laundering or terrorist financing. However, this does not directly address the issue of identity verification or anonymous accounts2. Option C: Financial institutions should maintain all necessary suspicious transaction report records on transactions, both domestic and international, for at least 5 years, is the FATF Recommendation 11, which aims to ensure that financial institutions have adequate and consistent records of their customers and transactions, and that these records are available to the competent authorities when needed. However, this does not prevent the opening or maintaining of anonymous accounts in the first place3. Option D: If financial institutions suspect that funds stem from criminal activity,they should be required to close the account, is not a FATF Recommendation, but rather a possible action that financial institutions may take in accordance with their risk assessment and policies. However, the FATF does not mandate or recommend the closure of accounts as a general rule, and advises that financial institutions should consult with the competent authorities before taking such action, as it may alert the customer or compromise the investigation4.

The Financial Action Task Force (FATF) 40 Recommendations address the transparency and beneficial ownership of legal persons (such as companies, foundations, associations, etc.) and legal arrangements (such as trusts, fiducies, anstalts, etc.) in Recommendations 24 and 25. These recommendations aim to prevent the misuse of legal persons and arrangements for money laundering, terrorist financing and other illicit purposes, by requiring countries to ensure that accurate and up-to-date information on the natural persons who ultimately own or control them (the beneficial owners) is available to the competent authorities in a timely manner.

Assessing AML/CFT is an ongoing and evolving component of maintaining a compliant AML/CFT program. Evaluating the risk-scoring model and conducting the risk assessment itself may need to be performed annually, every 18 to 24 months, before the launch of a new product or when an acquisition of another financial institution occurs.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the employee should report the conversation to the compliance officer because the colleague is engaging in tipping off, which is a serious violation of anti-money laundering laws and regulations. Tipping off is the act of informing a person or entity that they are the subject of a suspicious transaction report or an investigation, or providing any information that may compromise or impede the investigation. Tipping off can result in criminal penalties, civil liabilities, and disciplinary actions for the individual and the institution. Therefore, the employee has a duty to report the colleague’s misconduct to the compliance officer, who is responsible for ensuring compliance with the anti-money laundering policies and procedures, and taking appropriate corrective actions.

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 38, one of the steps that a financial institution should take when it suspects money laundering activity is to file a suspicious transaction report (STR) or a suspicious activity report (SAR) to the relevant authorities. This will alert the regulators and law enforcement of the potentialmoney laundering scheme and provide them with valuable information to trace the funds and identify the perpetrators.

Another step that a financial institution should take is to identify any unusual or suspicious wire transfers initiated by casas de cambio to jurisdictions outside of Mexico that bear no apparent business relationship with that casa de cambio. This could indicate that the casas de cambio are involved in layering and integration stages of money laundering, where they are moving the illicit funds across borders and disguising their origin and ownership. The financial institution should monitor and document these wire transfers and report them to the authorities if necessary.

Option B is not a relevant step to trace funds through the bank, as it does not provide any information about the source, destination, or purpose of the funds. A decrease in the sale of large denomination U.S. bank notes to casas de cambio by the bank could be due to various factors, such as market demand, exchange rates, or regulatory changes, and does not necessarily indicate money laundering activity.

Option C is also not a relevant step to trace funds through the bank, as it does not indicate any connection to the suspected money laundering scheme. Deposits by casas de cambio that include third-party items, such as sequentially numbered monetary instruments, could be legitimate transactions that are part of the normal business operations of the casas de cambio. Unless there is evidence that these deposits are related to the sale of large denomination U.S. bank notes or the Mexican syndicate, they are not useful for tracing the funds.

According to the web search results, one of the methods that FATF-style regional bodies (FSRBs) use to understand the inherent money laundering and terrorist financing risks in their regions is to conduct regional-level research and analysis of the money laundering and terrorist financing methods and trends using standards and templates used for FATF typologies reports12. Typologies are the various techniques used to launder money or financeterrorism, and typologies reports are the documents that describe these techniques, identify the vulnerabilities and risks, and provide case studies and best practices to prevent and detect them3. The FATF and its FSRBs produce typologies reports on a regular basis, covering different topics and sectors relevant to their regions and the global community3. By conducting regional-level research and analysis, FSRBs can enhance their understanding of the specific money laundering and terrorist financing threats and challenges faced by their member countries, and provide them with useful guidance and recommendations to mitigate these risks12.

The other options are not correct because they are either not the methods used by FSRBs to understand the inherent money laundering and terrorist financing risks in their regions, or they are not consistent with the FATF standards and expectations. Requiring member countries to develop statistical metrics over money laundering and terrorist financing crimes may be a useful way to measure the effectiveness of their anti-money laundering and counter-terrorist financing (AML/CFT) systems, but it is not a method used by FSRBs to understand the risks in their regions. Rather, it is a requirement imposed by the FATF on all countries to collect and maintain comprehensive statistics on matters relevant to the effectiveness and efficiency of their AML/CFT systems4. Requiring participating financial institutions of their members to file suspicious transaction reports (STRs) to the regional body may be a violation of the FATF standards, which state that financial institutions should report any suspicious transactions to the financial intelligence unit (FIU) of their country, not to any regional or international body5. Moreover, STRs are confidential and protected by legal provisions, and should not be disclosed to any third party without the consent of the FIU5. Conducting global research on money laundering and terrorist financing trends and reporting their findings in their own typologies report may be a duplication of the FATF’s work, as the FATF is the global standard-setter and policy-maker for AML/CFT, and produces typologies reports that cover the global trends and issues3. FSRBs should focus on the regional-level research and analysis, and coordinate and cooperate with the FATF and other FSRBs to share information and experiences12.

Institutions that violate anti-money laundering laws may face various risks and consequences, such as legal, regulatory, reputational, and operational risks. As demonstrated by the 2012 HSBC settlement with United States authorities, two of the most significant risks are:

Forfeiture of assets. This means that the institution may have to surrender some or all of its assets that are related to the money laundering activities or violations. For example, HSBC agreed to forfeit $1.256 billion as part of its deferred prosecution agreement with the US Department of Justice1.

Civil money penalties. This means that the institution may have to pay fines or penalties to the government or other regulatory agencies for violating the anti-money laundering laws or regulations. For example, HSBC agreed to pay $665 million in civil money penalties to various US regulators, including the Office of Foreign Assets Control, the Federal Reserve Board, and the Office of the Comptroller of the Currency1.

The other two options, C and D, are not as common or relevant to the 2012 HSBC settlement. Loss of bank charter/license may occur in extreme cases where the institution is deemed unfit to operate or poses a serious threat to the financial system. Imprisonment of bank employees may occur if the employees are found guilty of criminal charges, such as fraud, conspiracy, or wilful violation of anti-money laundering laws. However, these outcomes are usually reserved for individuals, not institutions, and depend on the specific facts and circumstances of each case.

 The integration stage of money laundering is where the illicit funds are reintroduced into the legitimate financial system, making them appear as lawful income or assets. This may include using multiple accounts, transferring funds between different banks or jurisdictions, and engaging in various financial activities to legitimize the illicit funds. The integration stage aims to make the illicit funds appear legitimate and indistinguishable from lawful funds within the financial system1.

Option C is an example of the integration stage of money laundering involving a bank or another deposit-taking institution, as it involves moving the illicit funds from one bank account to another, creating a complex trail of transactions that obscures the origin and ownership of the funds. This technique is also known as wire transfer laundering or electronic funds transfer laundering2.

Option A is an example of the placement stage of money laundering, as it involves depositing the illicit funds into the financial system for the first time, using a front company as a cover for the illegal source of the funds. A front company is a legitimate business that is used to conceal or facilitate illicit activity.

Option B is an example of the layering stage of money laundering, as it involves converting the illicit cash into other forms of value that are less conspicuous and easier to move, such as negotiable instruments. Negotiable instruments are documents that promise payment to a specified person or the bearer, such as checks, money orders, or traveler’s checks.

Option D is not an example of the integration stage of money laundering involving a bank or another deposit-taking institution, as it does not involve any financial transactions or accounts. It is rather an example of the integration stage of money laundering involving the purchase of goods or services, such as a luxury vehicle, with the illicit funds that had previously been deposited and layered through the financial system.

The U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. OFAC publishes lists of individuals and entities that are subject to various sanctions programs, such as the Specially Designated Nationals and Blocked Persons List (SDN List), the Sectoral Sanctions Identifications List (SSI List), and the Foreign Sanctions Evaders List (FSE List). These lists are updated frequently and can be accessed through OFAC’s website or other sources12.

The Financial Action Task Force (FATF) is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. FATF publishes lists of jurisdictions that have strategic deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes, and calls on its members and other countries to apply enhanced due diligence or counter-measures to protect themselves from the risks emanating from these jurisdictions. These lists are updated periodically and can be accessed through FATF’s website or other sources34.

 This involves breaking down large amounts of cash into smaller transactions that are below the reporting threshold of $10,000 in the United States, in order to avoid detection and reporting by the financial institution. Structuring is a red flag for money laundering and should be reported to the authorities as a suspicious activity. The other options are not necessarily indicative of money laundering, as they could have legitimate explanations. For example, the customers may have a family or business connection to the same recipient in Country B, or they may have a regular need to send money three times a week.

According to the Basel Committee on Banking Supervision principles, the most important question the banker should ask when opening a numbered or alternate name account is who will control the account. This is because such accounts pose a higher risk of money laundering and terrorist financing, as they can be used to conceal the identity and beneficial ownership of the funds. Therefore, the banker should perform enhanceddue diligence and verify the identity and source of funds of the person who has the authority to operate the account, as well as the purpose and nature of the business relationship12

The other questions are less relevant or secondary to the issue of control. The inheritance of the proceeds in the event of the businessman’s death is a matter of succession law and does not affect the identification of the beneficial owner. The amount of money deposited into the account may indicate the level of risk, but does not reveal the origin or destination of the funds. The account-opening date is a procedural detail thatdoes not affect the compliance with the anti-money laundering and counter-terrorist financing standards12

The Office of Foreign Assets Control (OFAC) is a US agency that administers and enforces economic and trade sanctions based on US foreign policy and national security goals1. OFAC has a list of sanctions programs and country information for various regions and topics, such as Russia, Iran, North Korea, Cuba, and more2. If a charity is headquartered in a country on the OFAC list, it means that the US government has imposed restrictions or prohibitions on transactions or dealings with that country, its government, entities, or individuals. This poses a high risk of violating the sanctions regulations and exposing the bank to legal, regulatory, or reputational consequences. Therefore, the bank may decide to terminate the banking relationship with the charity to avoid such risks.

The other options are not sufficient reasons to terminate the banking relationship, as they may not indicate illegal or suspicious activities by the charity. A high turnover rate of official positions may be due to various factors, such as organizational changes, staff turnover, or personal reasons. It does not necessarily imply that the charity is involved in money laundering or terrorist financing. However, the bank should verify the identity and authority of the new officials and update the customer due diligence information accordingly. The charity may have several incoming international funds transfers because it receives donations or grants from different sources or countries. This is not unusual for an international charity, as long as the funds are consistent with its stated purpose and activities. The bank should monitor the transactions and report any anomalies or red flags to the relevant authorities. The flow of funds both in and out may be complex and hard to trace because the charity operates in multiple jurisdictions or sectors, or has a decentralized or layered structure. This may increase the risk of money laundering or terrorist financing, but it does not necessarily mean that the charity is engaged in such activities. The bank should conduct enhanced due diligence and ongoing monitoring of the charity’s transactions and beneficiaries, and apply a risk-based approach to mitigate the potential risks.

 The Fourth European Union Directive on money laundering (AMLD4) requires member countries to maintain registries of the beneficial owners of legal entities, such as companies, trusts, foundations, etc. This is to ensure that the true identity and ownership of the customers and the natural persons on whose behalf transactions are conducted are known to the obliged entities, such as banks, lawyers, accountants, etc., and to the competent authorities, such as regulators, supervisors, or law enforcement12. This requirement aims to prevent the misuse of legal entities for money laundering or terrorist financing purposes, and to enhance transparency andaccess to beneficial ownership information34.

Under the USA PATRIOT Act, a U.S. bank that maintains a correspondent account for a foreign bank operating under an offshore license must obtain from the foreign bank the name and address of a person residing in the United States who is authorized to accept service of legal process for records related to the correspondent account1. This requirement is intended to facilitate the U.S. authorities’ access to information and records regarding the correspondent account and its underlying transactions, especially in cases where the foreign bank is located in a jurisdiction that does not cooperate with U.S. law enforcement or regulatory requests2.

 Under USA PATRIOT Act Section 311, the U.S. government can impose special measures against a foreign jurisdiction, institution, or transaction that is of primary money laundering concern1. These measures can range from requiring additional recordkeeping and reporting to prohibiting or restricting the opening or maintaining of correspondent or payable-through accounts for the designated entity2. A payable-through account is a type of correspondent account that allows customers of a foreign bank to access the U.S. financial system by writing checks or making wire transfers from the foreign bank’s account at a U.S. bank3.

In this case, the U.S. government has enacted special measures against a designated entity that has a payable-through account with an EU bank, which in turn has a correspondent banking relationship with a U.S. bank. One of the possible actions that the U.S. bank might be required to take regarding the EU bank’s services for the designated entity is to obtain additional information about customers permitted to use this account. This is to ensure that the U.S. bank can identify and monitor the transactions and activities of the designated entity and its customers, and to prevent any money laundering or terrorist financing risks4.

The other actions listed are not likely to be required by the U.S. government under Section 311. Ensuring the designated entity’s confidential information is not shared with other entities is not a special measure, but a general obligation of any financial institution under privacy laws. Verifying that the EU bank serves the designated entity is not a relevant action, since the U.S. government has already designated the entity as a primary money laundering concern. Performing enhanced due diligence on the EU bank is not a specific action related to the payable-through account, but a broader requirement for any correspondent account under Section 312 of the USA PATRIOT Act5.

Trade-based money laundering (TBML) is a method of disguising and moving illicit funds through the international trade system. Criminals often manipulate various aspects of trade transactions, such as pricing, quantity, documentation, and commodity type, to transfer value and obscure the source of funds. Some of the common red flags that may indicate TBML are:

The transaction involves the use of front (or shell) companies: Front or shell companies are entities that have no physical presence, no employees, and no business activity, but are used to facilitate money laundering. They often have vague or generic names, are registered in secrecy jurisdictions, and have no available ownership information. In this case, ABC Holdings Ltd. and Sunrise Holdings Ltd. could be front or shell companies that are used to launder money through trade transactions.

The type of commodity being shipped appears inconsistent with the exporter or importer’s regular business activities: Criminals may use commodities that are unrelated to their core business or that have low correlation with the market price to launder money. They may also use commodities that are difficult to value, verify, or trace, such as precious metals, gems, art, or antiquities. In this case, the automotive parts company and the silk flower supplier seem to have no logical connection, and the value of the silk flowers may be inflated or deflated to transfer funds.

According to Section 313 of the USA PATRIOT Act, U.S. financial institutions are prohibited from maintaining correspondent accounts for foreign shell banks, which are banksthat have no physical presence in any country and are not affiliated with a regulated financial group. Therefore, a non-U.S. bank must provide the name and address of all shell banks that it maintains accounts for, if any, to its U.S. correspondent. This is to ensure that the U.S. financial institution does not indirectly provide services to shell banks, which pose a high risk of money laundering and terrorist financing.

According to Section 319 (b) of the USA PATRIOT Act, U.S. financial institutions that provide a correspondent account to a foreign bank must maintain records of the owners of the foreign bank and the name and address of a U.S. person who is authorized to receive service of legal process for records regarding the correspondent account. This is to facilitate the access of U.S. law enforcement authorities to information related to the correspondent account in case of an investigation or a subpoena.

The other two options, B and C, are not required by the USA PATRIOT Act, although they may be part of the due diligence or enhanced due diligence procedures that U.S. financial institutions apply to their foreign correspondent accounts, as per Section 312 of the USA PATRIOT Act.

A customer’s account appears to function as a funnel account whereby cash deposits occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made

"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."

Paying the quarterly life insurance premium using money orders from two different banks is considered a red flag for potential money laundering. This is because moneyorders are often used by money launderers to avoid the scrutiny of banks and regulators, and to disguise the source and origin of funds12. Using money orders from two different banks also suggests that the client is trying to evade the reporting thresholds or the record-keeping requirements that apply to cash transactions3. The other transactions are not necessarily indicative of money laundering, although they may warrant further due diligence depending on the risk profile of the client and the nature of the insurance product.

The Egmont Group’s 100 Cases1, the Financial Action Task Force Typologies2, and FinCEN’s SAR Activity Review3 are all sources of information related to money laundering trends, methods, and risks. They provide examples, analysis, and guidance on how to detect, prevent, and report money laundering and other financial crimes. The Wolfsberg Principles4, on the other hand, are a set of global standards for the prevention of moneylaundering in the correspondent banking and private banking sectors. They are not intended to provide information on money laundering trends, but rather to establish best practices and minimum requirements for financial institutions to comply with anti-money laundering regulations and expectations.

 Option B is closest to the definition of money laundering provided by the United Nations Convention against Transnational Organized Crime and Other Protocols, which states that money laundering is “the conversion or transfer of property, knowing that such property is the proceeds of crime, for the purpose of concealing or disguising the illicit origin of the property or of helping any person who is involved in the commission of the predicate offence to evade the legal consequences of his or her action”. In this scenario, the person is knowingly financing a resort development with the proceeds of arms trafficking, which is a crime, and thus concealing or disguising the illicit origin of the property.

According to the Bank Secrecy Act (BSA), a financial institution or business must establish an anti-money laundering (AML) program that includes at least four elements: (a) a system of internal policies, procedures and controls to prevent, detect and report money laundering and other illicit activities; (b) a designated compliance officer who is responsible for overseeing the implementation and effectiveness of the AML program; © an ongoing employee training program that covers the legal and regulatory obligations, the risks and red flags of money laundering, and the roles and responsibilities of the staff in the AML program; and (d) an independent audit function that tests and evaluates the adequacy and compliance of the AML program12.

While the Office of Foreign Assets Control (OFAC) is a key agency that enforces economic and trade sanctions against targeted foreign countries, entities and individuals, it is not part of the BSA or the AML program requirements. However, financial institutions and businesses are expected to comply with OFAC regulations and screen their customers and transactions against the OFAC lists of sanctioned parties. Failure to do so may result in civil or criminal penalties34. Therefore, it is advisable for financial institutions and businesses to have an OFAC program that is integrated with their AML program, but it is not a mandatory element that they have to specifically address in their AML program.

According to the USA PATRIOT Act, the four minimum elements required for an anti-money laundering program for a foreign bank with branches in the United States are:

An ongoing employee training program. This is to ensure that the employees are aware of the anti-money laundering policies and procedures, the legal and regulatory requirements, the red flags and indicators of suspicious activity, and their roles and responsibilities in detecting and reporting money laundering and terrorist financing.

The designation of a compliance officer. This is to ensure that there is a person responsible for overseeing the implementation and effectiveness of the anti-money laundering program, ensuring compliance with the applicable laws and regulations, and liaising with the regulators and law enforcement agencies.

An independent audit function to test the program. This is to ensure that the anti-money laundering program is periodically reviewed and evaluated by an independent and qualified auditor, who can assess the adequacy and effectiveness of the program, identify any weaknesses or deficiencies, and recommend corrective actions or improvements.

The development of internal policies, procedures, and controls. This is to ensure that the foreign bank has a written and documented anti-money laundering program that establishes the standards, guidelines, and processes for preventing, detecting, and reporting money laundering and terrorist financing, and that the program is consistent with the risk profile and business activities of the foreign bank.

The development of a Know Your Customer program is not a minimum element required under the USA PATRIOT Act, although it is a recommended best practice and may be required by other laws or regulations.

Section 313 of the USA PATRIOT Act prohibits U.S. financial institutions from establishing, maintaining, administrating or managing correspondent accounts for foreign shell banks. A foreign shell bank is a foreign bank that does not have a physical presence in any country. To ensure compliance with this prohibition, U.S. financial institutions must obtain from each foreign bank that maintains a correspondent account the identity of each owner of the foreign bank and the nature and extent of each owner’s ownership interest. This information must be updated within 30 days of any change.

According to the ACAMS study guide, one of the training elements that should be delivered to new tellers during employee orientation is “large cash transaction reporting procedures” (p. 224). This is because tellers are often the first line of defense against money laundering and have the responsibility to identify and report any transactions that exceed the threshold of $10,000 or are otherwise suspicious. The other options are not relevant for tellers, as they are more suitable for higher-level or specialized staff.

A corporate account opened on behalf of several beneficial owners is a red flag because it may indicate an attempt to conceal the identity or source of funds of the ultimate beneficiaries1. The customer’s stated investment goal of long-term investment is not reflective of the account activity, which involves frequent and large transfers, currency exchanges, and account depletion within a short period of time. This discrepancy may suggest that the customer is using the account for money laundering or other illicit purposes2.

 The next course of action for the anti-money laundering officer to take is to determine if there is a readily identifiable cause for the increase in compliance deficiencies. This could involve analyzing the data, interviewing the staff, reviewing the procedures, or conducting a root cause analysis. The anti-money laundering officer should try to find out if the deficiencies are due to human error, system failure, policy ambiguity, training gap, external factors, or any other reason. By identifying the cause, the anti-money laundering officer can then take appropriate corrective or preventive measures to address the issue and improve the compliance performance.

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 37, one of the red flags of money laundering or terrorist financing is the use of nominees, trusts, or third parties to hide the identity, ownership, or control of the funds or assets involved in the transaction. Nominees are individuals or entities that act on behalf of the actual or beneficial owners of a company, trust, or account, and may be used to conceal the source, destination, or purpose of the funds or assets. Nominees may also be used to evade taxes, sanctions, or regulatory requirements.

In this case, the compliance officer is unable to verify the identity of the beneficial owners of the company, and only information on the nominee owners was provided. This raises the suspicion that the company may be involved in money laundering or terrorist financing activities, and that the nominee owners may be acting as fronts or intermediaries for the actual or beneficial owners. The compliance officer should conduct further due diligence on the company, the nominee owners, and the beneficial owners, and report any suspicious or unusual activity to the relevant authorities.

 these are the essential components of an effective anti-money laundering program for any financial institution, especially an offshore one. According to the CAMS Study Guide, 6th Edition, an anti-money laundering program should include the following elements1:

A risk assessment that identifies and evaluates the money laundering and terrorist financing risks faced by the institution, and the measures taken to mitigate them.

A compliance program that establishes policies, procedures, and controls to prevent, detect, and report money laundering and terrorist financing activities, and to comply with the applicable laws and regulations of the host and chartering countries.

A designated compliance officer who is responsible for overseeing the implementation and maintenance of the compliance program, and for liaising with the relevant authorities and stakeholders.

A training program that provides regular and appropriate education and awareness to senior management and staff on their roles and responsibilities in relation to anti-money laundering and terrorist financing, and on the latest trends and typologies in these areas.

An independent audit function that reviews and tests the adequacy and effectiveness of the compliance program, and reports the findings and recommendations to senior management and the board of directors.

The Basel Committee on Banking Supervision’s capital adequacy requirements for the host country (answer A) are not directly related to anti-money laundering, but rather tothe prudential regulation and supervision of banks. They are important for ensuring the financial soundness and stability of banks, but they are not sufficient to prevent or combat money laundering and terrorist financing2.

 According to the ACAMS study guide, one of the insurance products that is particularly vulnerable to money laundering is annuity, which is “a contract that provides a series of payments over a specified period of time, usually for the life of the annuitant” (p. 223). Annuities can be used by money launderers to deposit large sums of illicit funds in a single transaction, or to receive regular payments from a legitimate source after paying the premiums with dirty money. Annuities can also be surrendered or transferred to third parties, making it difficult to trace the origin and destination of funds.

According to the Basel Committee on Banking Supervisionprinciples, one of the core principles for effective banking supervision is that the supervisor determines that banks have adequate policies and processes for identifying, assessing and managing the risk and impact of exposures to and transactions with related parties, and that these policies and processes are effectively implemented1. Failure to conduct proper due diligence on a close relative of a senior manager who requests to open an account posesthe highest operational risk, as it could result in conflicts of interest, reputational damage, legal liability, or financial losses for the bank. The other options are not necessarily the highest operational risk, as they depend on the nature and extent of the relationship, the type and size of the account, and the regulatory and legal framework of the jurisdiction.

The most important consideration when deciding whether to recommend closing the account is the requests from the competent authority, such as the Financial Intelligence Unit (FIU), the regulator, or the law enforcement. According to the FAQs related to Suspicious Transaction Reporting issued by theFinancial Monitoring Unit of Pakistan1, reporting entities should not terminate the relationship with the customer after filing a STR, unless instructed by the competent authority. This is because closing the account may alert the customer of the STR, compromise the investigation, or hinder the collection of further evidence. Therefore, the reporting entity should consult with the competent authority before taking any action to close the account.

The other options are less important or irrelevant considerations. The institution’s anti-money laundering policy may provide some guidance on how to handle high-risk customers or accounts, but it should not override the requests from the competent authority. Customer relations and the Chief Executive’s reputational risk are not valid reasons to keep the account open if there is evidence of money laundering or terrorist financing. The reporting entity should act in accordance with the law and the best interests of the public, not the personal or business interests of the customer or the bank’s management.

According to the Wolfsberg Group, a correspondent bank should evaluate the distribution of downstream correspondents and identify any direct or indirect issues when it permits “nested” relationships, which are arrangements where a respondent bank provides correspondent banking services to other banks that are not customers of the correspondent bank. This step is important to understand the types of financial institutions to whom the services are being offered and the potential risks they pose. The correspondent bank should also obtain information on the nature and extent of the nested activity, the due diligence performed by the respondent bank on the nested banks, and the controls and monitoring in place to prevent financial crime.

these are the main factors that determine the inherent money laundering risk of a financial institution. The customer base, location, products and services of a financial institution affect the type, volume, and complexity of transactions that it processes, as well as the exposure to high-risk customers, jurisdictions, and activities12. A financial institution should review these factors regularly and conduct a comprehensive risk assessment to identify, measure, and mitigate its money laundering risk34.

This potential action is authorized by Section 319 of the USA PATRIOT ACT, which allows the U.S. government to seize funds from a foreign bank’s correspondent account in the U.S. if the foreign bank refuses to cooperate with a request for records relating to an investigation of money laundering or terrorist financing. The U.S. government can seize an amount equal to the funds in the account of the target of the investigation, regardless of whether those funds are actually in the correspondent account. In this case, the U.S. government can seize $1 million from Bank A’s correspondent account in the U.S. because Bank A holds $1 million in the account of the WTS, which is the target of the forfeiture action.

The other potential actions are not authorized by the USA PATRIOT ACT or other U.S. laws. The U.S. government cannot seize Bank A’s entire $5 million correspondent account in the U.S. because that would exceed the amount in the WTS’s account andwould violate the principle of proportionality. The U.S. government cannot seize the WTS’s $1 million account at the non-U.S. branch of Bank A because that would require the cooperation of the foreign jurisdiction where the branch is located, which may not be forthcoming. The U.S. government cannot seize $5 million from the non-U.S. branch of Bank A where the WTS’s account is located because that would also require the cooperation of the foreign jurisdiction and would exceed the amount in the WTS’s account.

A commission rogatory, also known as a letter rogatory or a letter of request, is a formal request from a court in one country to a court in another country for some type of judicial assistance, such as service of process, taking of evidence, or enforcement of judgments1. A commission rogatory would be used in the context of a mutual legal assistance treaty (MLAT) request, which is a bilateral or multilateral agreement that enables countries to cooperate and provide legal assistance to each other in criminal matters2. MLATs are one of the main gateways for obtaining information from another country, especially when the information is not available through other means, such as financial intelligence units (FIUs), supervisory authorities, or international organizations3. FIUs are national agencies that collect, analyze, and disseminate financial information related to money laundering and terrorist financing, and they can exchange information with their counterparts in other countries under the Egmont principles. Supervisory authorities are regulators that oversee the compliance of financial institutions and other entities with anti-money laundering and counter-terrorism financing (AML/CFT) obligations, and they can share information with their peers in other jurisdictions through supervisory channels, such as the Basel Committee on Banking Supervision. The Financial Action Task Force (FATF) is an inter-governmental body that sets standards and monitors the implementation of AML/CFT measures, and it can provide information and guidance to its members and other jurisdictions, but it does not have the authority to request or compel information from them.

 A key risk indicator associated with terrorism financing is the link between the charity group and a known terrorist group. This indicates that the funds transferred to the charity group may be used to support the terrorist group’s activities, such as recruitment, training, propaganda, or attacks. Charities are often vulnerable to abuse by terrorist financiers, as they may operate in high-risk areas, have access to large amounts of cash, and enjoy public trust and legitimacy. Therefore, financial institutions (FIs) should conduct due diligence on the charity group, its directors, its beneficiaries, and its sources and uses of funds, and monitor the transactions for any red flags, such as unusual patterns, amounts, or destinations. FIs should also comply with the relevant sanctions and regulatory requirements, and report any suspicious or unusual activity to the authorities.

The Patriot Act, enacted in 2001, introduced several provisions to enhance the anti-money laundering and counter-terrorist financing (AML/CFT) measures for U.S. banks and their foreign correspondent relationships. Some of the potential issues for foreign financial institutions (FFIs) maintaining correspondent accounts with U.S. banks under the Patriot Act are:

Cancellation of correspondent banking relationships: The Patriot Act requires U.S. banks to conduct due diligence and enhanced due diligence on their foreign correspondent accounts, and to terminate any account that poses a significant risk of money laundering or terrorist financing. This may result in the cancellation of correspondent banking relationships with FFIs that do not meet the U.S. standards or cooperate with the U.S. authorities. The loss of correspondent banking relationships may affect the FFIs’ ability to access the U.S. financial system and provide services to their customers.

Forfeiture of funds in a U.S. interbank account: The Patriot Act authorizes the U.S. government to seize and forfeit any funds in a U.S. interbank account that are involved in or traceable to money laundering or terrorist financing activities. This means that FFIs may face the riskof losing their funds in a U.S. interbank account if they or their customers are suspected or accused of engaging in illicit activities. The forfeiture of funds may have significant financial and reputational consequences for the FFIs and their customers.

Prohibition of correspondent accounts for shell banks: The Patriot Act prohibits U.S. banks from establishing or maintaining correspondent accounts for shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group. This means that FFIs that are shell banks or have relationships with shell banks cannot access the U.S. financial system through correspondent accounts. The prohibition of correspondent accounts for shell banks aims to prevent the use of shell banks as vehicles for money laundering and terrorist financing.

According to the Basel guidelines on customer due diligence for banks, a trust is a legal arrangement whereby a person (the settlor or grantor) transfers the legal ownership of specific assets to another person or entity (the trustee) to hold for the benefit of a third person or persons (the beneficiaries)1. The Basel guidelines recommend that banks should identify and verify the identity of the following parties to determine the true nature of the trust relationship:

The trustee, who is the person or entity that has the legal authority and duty to manage the trust assets and distribute them to the beneficiaries according to the trust deed2. The trustee may also be the settlor, the beneficiary, or both, depending on the type and structure of the trust3.

The beneficiaries, who are the persons or entities that have a beneficial interest in the trust assets or income, either presently or in the future4. The beneficiaries may be named individuals, classes of persons, or charitable causes.

The settlor or grantor, who is the person or entity that creates the trust and transfers the legal ownership of the assets to the trustee. The settlor or grantor may also retain some rights or powers over the trust, such as the ability to appoint or remove trustees, beneficiaries, or protectors.

The other three options are incorrect because:

Respondents are not trust parties, but rather financial institutions that maintain correspondent banking relationships with other financial institutions. Respondents are not relevant for the identification of the trust relationship, but rather for the due diligence of the correspondent banking relationship.

Payees are not trust parties, but rather persons or entities that receive payments from the trust or other sources. Payees are not relevant for the identification of the trust relationship, but rather for the monitoring of the transactions and activities of the trust.

Trust administrators are not trust parties, but rather persons or entities that provide administrative services to the trust, such as accounting, record-keeping, or tax compliance. Trust administrators are not relevant for the identification of the trust relationship, but rather for the assessment of the risk and complexity of the trust.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, an AML training program should include the requirement that new staff receive training during employee orientation or shortly thereafter on bank procedures. This is because new staff need to be aware of the bank’s policies and procedures for complying with the money laundering regulations, such as customer due diligence, transaction monitoring, record-keeping, and reporting of suspicious activities. Training new staff as soon as possible also helps to reduce the risk of human errors or oversights that could facilitate money laundering or terrorist financing.

According to Section 319(b) of the USA PATRIOT Act, U.S. financial institutions that provide correspondent accounts to foreign banks must maintain records of the owners of the foreign banks and the name and address of a U.S. resident authorized to accept service of legal process for records regarding the correspondent accounts. This requirement is intended to prevent foreign shell banks from accessing the U.S. financial system and to facilitate the investigation and prosecution of money laundering and terrorist financing activities involving foreign banks.

According to the ACAMS Study Guide, 6th Edition, page 184, “The decision to close an account should be made in consultation with the institution’s legal counsel and AML compliance officer, and in accordance with the institution’s policies and procedures.” Closing an account may not always be the best option, as it may trigger the customer’s suspicion, interfere with law enforcement investigations, or expose the institution to legal risks. Therefore, the institution should carefully weigh the pros and cons of closing an account, and follow its own internal guidelines.

 Bearer shares are unregistered equity securities owned by the possessor of the physical share documents. The issuing company does not record the identity or ownership of the shareholders, nor does it track the transfers of ownership. This means that the holder of the bearer share can claim ownership and exercise the rights associated with the share, such as voting and receiving dividends, by simply presenting the physical certificate. This also makes the transfer of ownership very easy, as it only requires the delivery of the physical document, without any formalities or intermediaries. Bearer shares are therefore attractive for those who seek anonymity, privacy, and flexibility in their corporate structures.

According to the ACAMS CAMS Study Guide, one of the common methods of money laundering and terrorist financing is to structure transactions to avoid reporting or record keeping requirements. Structuring involves breaking down a large amount of cash into smaller transactions that fall below a specified threshold, or using different accounts, agents, locations, or days to conduct the transactions. Therefore, the fact that the two customers remit the same amount of funds, $2,500, each week to the samerecipient in a high-risk country is a red flag for possible money laundering or terrorist financing activity, as itsuggests that they are trying to evade the record keeping threshold of $3,000 for money transmitters in the United States12.

 A key reason why a FI conducts an enterprise-wide AML risk assessment is to assess money laundering and terrorist financing risks and ensure there are adequate controls to mitigate those risks. An enterprise-wide AML risk assessment allows the FI to identify and appropriately manage the ML/TF and other illicit financial activity risks within its banking operations. It also helps the FI to establish global AML control standards and determine the effectiveness of its AML risk management program, including internal preventive and detective controls. By understanding its risk profile, the FI can better apply appropriate risk management processes to the BSA/AML compliance program to mitigate and manage risk and comply with BSA regulatory requirements. The BSA/AML risk assessment should provide a comprehensive analysis of the FI’s ML/TF and other illicit financial activity risks, and should be documented in writing and communicated to all relevant stakeholders.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the best practices for conducting an internal investigation is to request formal company authorization to conduct the investigation. Such authorization should be granted, if possible, by the board of directors or audit committee, as this will help to establish the independence and legitimacy of the investigation, as well as the protection of the attorney-client privilege and the work product doctrine1. The other options are incorrect because:

B. Refusing to provide any records or documents to law enforcement may be seen as obstructing justice or violating regulatory obligations, and may also result in the loss of the privilege or the imposition of sanctions or penalties23.

C. Letting the bank hire any and all contract investigators may compromise the quality and integrity of the investigation, as well as the protection of the privilege or the work product doctrine, as the investigators may not be properly supervised or instructed by legal counsel, or may not be covered by the Kovel doctrine45.

D. Not marking files or documents with privileged and confidential: attorney-client privilege and/or work-product may undermine the claim of the privilege or the work product doctrine, as it may indicate that the materials were not prepared for the purpose of seeking or providing legal advice or in anticipation of litigation, or that they were not intended to be kept confidential67.

 An automated transaction monitoring system is a tool that analyzes transactions and customer behavior for signs of money laundering or other financial crimes, and generates alerts when suspicious or unusual activity is detected. The system relies on a set of rules and parameters that define what constitutes normal and abnormal transactions, based on the risk profile and business nature of the financial institution or business. These rules and parameters need to be periodically reviewed and updated to ensure that they are effective and compliant with the latest regulations and best practices.

One of the factors that would most likely result in a change in the monitoring system parameters is when the national Financial intelligence Unit (FIU) issues new risk indicators. The FIU is a central authority that collects, analyzes, and disseminates financial intelligence related to money laundering, terrorist financing, and other financial crimes. The FIU also provides guidance and feedback to financial institutions and businesses on how to comply with their anti-money laundering (AML) obligations and improve their transaction monitoring systems. The FIU may issue new risk indicators based on its analysis of emerging trends, typologies, and threats in the financial sector, or based on international standards and recommendations. These risk indicators are intended to help financial institutions and businesses identify and report suspicious transactions more effectively and efficiently.

Therefore, when the FIU issues new risk indicators, the financial institution or business should review its existing monitoring system parameters and adjust them accordingly to reflect the new risks and scenarios. For example, the FIU may issue new risk indicators related to the use of cryptocurrencies, virtual assets, or online platforms for money laundering or terrorist financing. In that case, the financial institution or business should update its monitoring system parameters to include new rules, thresholds, or patterns that capture these activities and generate alerts for further investigation.

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.

According to the FATF Recommendation 10, financial institutions should conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds. This is one of the core measures of customer due diligence (CDD) that aim to prevent and detect money laundering and terrorist financing risks.

 Enhanced due diligence (EDD) is a set of additional measures that must be applied by financial institutions (FIs) in higher-risk situations, such as when dealing with customers or transactions from high-risk third countries, customers who are politically exposed persons (PEPs), or customers who present a higher risk of money laundering or terrorist financing. EDD may include obtaining more information on the customer’s identity, source of funds, source of wealth, business relationships, and purpose of the transaction, as well as conducting more frequent and intensive ongoing monitoring of the customer’s activities.

However, EDD may be bypassed for certain situations where the risk of money laundering or terrorist financing is low, and where the customer is subject to adequate supervision and regulation in the EU or the US. According to the CAMS Study Guide - 6th Edition1, one such situation is when on-boarding a casino that is part of an international hotel chain, provides less than 50% of overall revenue and that fully complies with group-wide policies and procedures. This is because such a casino is likely to have a low risk profile, as it is not the main source of income for the hotel chain, and it adheres to the same standards and controls as the rest of the group. Therefore, EDD may not be necessary for this situation, and the FI may apply simplified due diligence (SDD) instead.

The other situations listed in the question are not eligible for bypassing EDD, as they involve higher-risk factors, such as dealing with customers or entities from high-risk third countries, customers with complex ownership structures, or customers who are PEPs. These situations require FIs to apply EDD measures to mitigate the risk of money laundering or terrorist financing.

 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.

"Transaction Monitoring Systems and Ongoing Monitoring: Since the transactional monitoring system is key to mitigating ML risk within the bank, the Committee recognizes that AML risks require more than just appropriate policies and procedures; banks must have adequate and appropriate monitoring systems. For most banks, this will involve an IT monitoring system. If the bank does not believe it needs an IT monitoring system, it should document the rationale for why it does not need one.

Wire stripping is the process of removing or altering the identifying information associated with a wire transfer to make it difficult to trace the origin or destination of the funds. This technique is commonly used in money laundering schemes to conceal the illicit source of funds and avoid detection by authorities or sanctions screening systems. In this case, the bank’s operations team deliberately removed the reference to the sanctioned company from the wire transfer message, thus violating the FinCEN “Travel Rule” and facilitating the evasion of sanctions.

An enterprise-wide compliance culture is a centralized, coordinated approach to ethics and compliance program design and assessment that cuts across multiple business units within an organization1. One key aspect of promoting such a culture is that the relevant information should be shared throughout the organization, so that all employees are aware of the compliance risks, policies, procedures, and expectations, and can act accordingly2. Sharing information also facilitates collaboration, communication, and feedback among different functions and levels of the organization, and helps identify and address any gaps or issues in the compliance program3. By contrast, the other options are not conducive to an enterprise-wide compliance culture, as they either create silos, conflicts, or inefficiencies in the compliance function.

A financial intelligence unit (FIU) is a national body or government agency that collects, analyzes, and disseminates financial information related to potential financial crimes, such as money laundering and terrorist financing. One of the core functions of an FIU is to receive disclosures filed by reporting entities, such as banks, money service businesses, casinos, and other obliged entities, that are required to report suspicious or unusual financial activity. These disclosures, also known as suspicious activity reports (SARs) or suspicious transaction reports (STRs), provide valuable intelligence for the FIU and other competent authorities to identify and investigate financial crimes and trace illicit funds. The other statements do not describe the duties of an FIU, but rather the roles of other agencies or bodies, such as the Office of Foreign Assets Control (OFAC) in the US, which administers and enforces economic and trade sanctions, or the Financial Action Task Force (FATF), which sets international standards for anti-money laundering and counter-terrorist financing (AML/CFT) supervision and regulation.

A comprehensive risk analysis is the first and most important step in developing an effective anti-money laundering program. A risk analysis helps a financial institution identify and assess its exposure to money laundering and terrorist financing risks, based on its products, services, customers, geographic locations, and other factors. A risk analysis also enables a financial institution to tailor its policies, procedures, controls, and training to mitigate the specific risks it faces. A risk analysis should be conducted periodically and updated as necessary to reflect changes in the institution’s risk profile.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the institution should develop a system to monitor all the activity of the customer’s accounts to mitigate the risk associated with these accounts. This is because the customer’s behavior and profile may indicate some red flags of money laundering, such as:

Operating an import-export business, which is a common sector for trade-based money laundering, where trade transactions are used to disguise the movement of illicit funds, either by over- or under-invoicing, misrepresenting the quantity or quality of goods, or falsifying documents1.

Receiving funds from a jurisdiction perceived as highly corrupt, which may increase the risk of the funds being derived from bribery, embezzlement, fraud, or other predicate offences2. Transparency International is a global civil society organization that publishes an annual CorruptionPerceptions Index, which ranks countries by their perceived levels of public sector corruption based on expert assessments and surveys3.

Making frequent transfers among the accounts, which may indicate a layering technique, where funds are moved through multiple accounts, institutions, or jurisdictions to obscure the audit trail and the source and ownership of the funds4.

Preferring to manage the accounts separately, which may indicate a lack of transparency or an attempt to avoid detection or reporting by the institution.

By developing a system to monitor all the activity of the customer’s accounts, the institution can:

Identify and verify the identity and beneficial ownership of the customer and the parties involved in the transactions.

Obtain and verify information on the nature and purpose of the business relationship and the source and destination of the funds.

Conduct a risk assessment of the customer and the transactions based on the customer’s profile, behavior, and geographic locations.

Apply enhanced due diligence and ongoing monitoring measures for higher-risk customers and transactions, such as obtaining additional information, documentation, or approval, or conducting more frequent or in-depth reviews.

Detect and report any suspicious or unusual transactions or activities to the relevant authorities.

The other three options are incorrect because:

File a suspicious transaction report is not the best answer, as it is a reactive measure that should be taken after the institution has identified or suspected money laundering or terrorist financing activity, not before. The institution should first conduct due diligence and monitoring of the customer and the transactions, and then file a report if there are reasonable grounds to believe that the activity is suspicious or unusual.

Diminish the importance of the subjective Transparency International rating is not the best answer, as it is a complacent and irresponsible attitude that may expose the institution to legal, regulatory, reputational, or operational risks. The Transparency International rating is not subjective, but based on credible sources and methodologies, and it is widely used as a reference by governments, businesses, civil society, and the public to assess the level of corruption in different countries3. The institution should not ignore or downplay the rating, but rather use it as one of the factors to evaluate the risk of the customer and the transactions.

Conduct a trade-price manipulation analysis is not the best answer, as it is a specific and technical measure that may not be sufficient or appropriate to mitigate the risk associated with these accounts. A trade-price manipulation analysis is a method of detecting trade-based money laundering by comparing the prices of goods or services in a transaction with the market prices or other benchmarks, and identifying any significant discrepancies or anomalies. However, this measure may not be feasible or effective if the institution does not have access to reliable and comparable data, or if the goods or services are not standardized or homogeneous. Moreover, this measure may not address other aspects of the risk, such as the identity, ownership, or behavior of the customer and the parties involved in the transactions.

This action is the most appropriate because it demonstrates the local manager’s responsibility and accountability for the sanctions compliance program. Sanctions screening is an important part of the Know Your Customer (KYC) and Anti-Money Laundering (AML) processes, as it helps to identify and prevent transactions with sanctioned individuals or entities, which could expose the financial institution to legal, regulatory, and reputational risks. Failing to perform sanctions screening could result in violations of sanctions laws and regulations, which could lead to fines, penalties, sanctions, or even criminal prosecution. Therefore, the local manager should immediately inform senior management of the issue, so that they can take corrective actions, such as implementing screening procedures, conducting a risk assessment, reviewing existing customers, reporting any potential violations, and providing training and guidance to the staff.

The other actions are not appropriate because they either do not address the root cause of the problem, or they could worsen the situation. Starting screening new customers without informing senior management could create a false sense of compliance, and it could also miss the existing customers who may be sanctioned. Immediately informing the regulators without informing senior management could undermine the trust andcommunication within the organization, and it could also trigger an investigation or enforcement action before the issue is resolved internally. Doing nothing because the department only handles a very small number of mortgages could be a sign of negligence or indifference, and it could also expose the financial institution to significant risks, as even one transaction with a sanctioned party could have serious consequences.

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.

a qualified compliance officer is a mandatory element of all anti-money laundering programs, regardless of the type or size of the financial institution. The compliance officer is responsible for developing, implementing, and overseeing the anti-money laundering program, ensuring its compliance with the relevant laws and regulations, and reporting any suspicious activity to the appropriate authorities12. The compliance officer should have sufficient authority, resources, and expertise to perform these duties effectively.

A fundraising organization is a type of non-profit organization that may be vulnerable to money laundering and terrorist financing risks, as they often operate in high-risk areas, deal with large amounts of cash, and have complex and opaque structures. Therefore, a fundraising organization warrants enhanced due diligence, which is a higher level of customer verification and monitoring that goes beyond the standard customer due diligence measures. Enhanced due diligence may include obtaining additional information on the source of funds, the purpose of the relationship, the beneficiaries, and the governance of the organization.

Shell companies are business entities that exist only on paper, with no physical presence, no employees, and no operations. They are often used for legitimate purposes, such as facilitating mergers and acquisitions, protecting assets, or managing investments. However, they are also frequently exploited for illegal activities, such as tax evasion and money laundering, due to their ability to obscure ownership and financial transactions12. Money launderers can use shell companies to disguise the origin of illicit funds, evade sanctions, and avoid the anti-money laundering (AML) measures that financial institutions use to detect suspicious activity23. The process typically involves setting up a shell company in a jurisdiction known for strict privacy laws, such as a tax haven, and then using it to move and hide illicit funds while hiding the identity of the ultimate beneficiaries13.

In this scenario, the fact that the company has been a client for many years does not rule out the possibility of money laundering. The company could have changed its ownership, activities, or risk profile over time, or it could have been involved in money laundering all along without being detected. The fact that the company has added several new subsidiaries that are recently created shell companies is a red flag that indicates potential money laundering. The company could be using the shell companies to hide the source and destination of its funds, or to conceal the identity of its beneficial owners. The institution should perform enhanced due diligence on the company and its subsidiaries, and report any suspicious transactions or activities to the relevant authorities.

The company regularly understating the value of goods exported is an indicator of possible money laundering because it may suggest that the company is involved in trade-based money laundering (TBML), which is the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illicit origins or finance their activities. One of the common TBML techniques is over-invoicing or under-invoicing, which involves manipulating the price, quantity or quality of goods or services in order to transfer value between the importer and exporter. By understating the value of goods exported, the company may be transferring funds to a foreign counterpart who is either a co-conspirator or a third-party money launderer, who will then pay the company the difference in cash or through other means. This way, the company can avoid currency reporting requirements, evade taxes, conceal the source and destination of funds, and integrate the illicit proceeds into the formal economy.

International wire transfers are considered to be of highest money laundering risk because they can facilitate the rapid and anonymous movement of funds across borders and jurisdictions, making it difficult for law enforcement and regulators to trace the origin and destination of the funds, and to identify the beneficial owners and controllers of the accounts involved. International wire transfers can also be used to layer and integrate illicit proceeds into the legitimate financial system, by disguising the source, ownership, and purpose of the funds. International wire transfers can involve multiple intermediaries, complex payment chains, and inconsistent or incomplete information, whichcan increase the risk of money laundering and terrorist financing. Therefore, international wire transfers are subject to enhanced due diligence, record-keeping, and reporting requirements under various anti-money laundering and counter-terrorist financing (AML/CTF) regulations and standards, such as the Financial Action Task Force (FATF) Recommendations1, the European Union (EU) Funds Transfer Regulation2, and the United States (US) Bank Secrecy Act3.

A financial institution should examine the country or location where the customer is from or does business, the type and size of the business the customer runs, and the legal structure of the customer’s business, because these factors can indicate the level ofmoney laundering risk associated with the customer. For example, some countries or locations may have weak anti-money laundering laws or high levels of corruption, some types or sizes of businesses may be more prone to generating or concealing illicit funds, and some legal structures may be more complex or opaque than others, making it harder to identify the beneficial owners or controllers of the customer.

According to the FATF 40 recommendations, the focus of AML efforts has been expanded beyond financial institutions to include other businesses and professions that are vulnerable to money laundering and terrorist financing risks. These include:

Casinos, when customers engage in financial transactions equal to or above a designated threshold. Casinos are required to identify and verify the identity of their customers, keeprecords of transactions, report suspicious transactions, and implement internal controls and compliance programs to prevent money laundering and terrorist financing. The designated threshold is USD/EUR 3,000 or more1.

Real estate agents, when they are involved in transactions for clients concerning buying and selling properties. Real estate agents are required to identify and verify the identity of their customers and beneficial owners, keep records of transactions, report suspicious transactions, and implement internal controls and compliance programs to prevent money laundering and terrorist financing. Real estate transactions can involve large amounts of money and complex legal arrangements that can be used to conceal the source or destination of illicit funds2.

Trust and company service providers, when they prepare for or carry out transactions for a client concerning the creation, operation or management of legal persons or arrangements. Trust and company service providers are required to identify and verify the identity of their customers and beneficial owners, keep records of transactions, report suspicious transactions, and implement internal controls and compliance programs to prevent money laundering and terrorist financing. Trust and company service providers can facilitate the misuse of legal persons or arrangements, such as shell companies or trusts, to hide the true ownership and control of assets or funds3.

The other option, dealers in art, when they engage in any cash transaction with a customer at or above a designated threshold, is not covered by the FATF 40 recommendations. However, dealers in precious metals and stones are covered when they engage in any cash transaction with a customer at or above a designated threshold of USD/EUR 15,000 or more. Dealers in art may be subject to national or regional regulations that impose AML obligations on them, depending on the jurisdiction.

The Third European Union Money Laundering Directive (3MLD) is a legal framework that aims to prevent the use of the financial system for the purposes of money laundering and terrorist financing. It was adopted in 2005 and repealed by the Fourth European Union Money Laundering Directive (4MLD) in 2015. The 3MLD applies to a range of entities that are considered to be exposed to the risk of money laundering and terrorist financing, such as:

Financial institutions, which include credit institutions, financial intermediaries, insurance companies, investment firms, and payment service providers.

Casinos, which include both online and offline gambling services that involve wagering a stake with monetary value.

Real estate agents, which include both natural and legal persons that act as intermediaries in the buying and selling of real property or rights over it.

The 3MLD requires these entities to implement a number of measures to prevent and detect money laundering and terrorist financing, such as:

Conducting customer due diligence, which involves identifying and verifying the customer and the beneficial owner, understanding the purpose and nature of the business relationship, and applying enhanced or simplified measures depending on the level of risk.

Keeping records of customer and transaction data for at least five years after the end of the business relationship or the execution of the transaction.

Reporting suspicious transactions or activities to the competent authorities without delay and without tipping off the customer.

Establishing internal policies, procedures, and controls to ensure compliance with the 3MLD, and providing adequate training and awareness to staff.

Cooperating with the relevant supervisory and regulatory authorities and financial intelligence units.

The 3MLD does not apply to defense attorneys, as they are not considered to be obliged entities under the directive. However, the 3MLD does apply to other legal professionals, such as notaries, lawyers, and accountants, when they perform certain activities on behalf of their clients, such as:

Buying and selling of real property or business entities

Managing of client money, securities, or other assets

Opening or managing bank, savings, or securities accounts

Organizing contributions for the creation, operation, or management of companies

Creating, operating, or managing trusts, companies, foundations, or similar structures

Organized crime groups often use front companies to disguise the origin and destination of their illicit funds, and to integrate them into the legitimate economy. Front companies are businesses that appear to be engaged in lawful activities, but are actually controlled by criminals for money laundering purposes.

One reason why organized crime groups use front companies is to gain control over an entire sector of the economy, such as construction, transportation, or gambling. By using multiple front companies, they can create a network of interrelated businesses that can manipulate prices, evade taxes, and influence public contracts. This can give them a competitive advantage over legitimate businesses, and allow them to launder large amounts of money through seemingly legitimate transactions.

Another reason why organized crime groups use front companies is to comingle their illicit funds with those of legal businesses. By using the bank accounts of front companies, they can deposit cash from criminal activities along with the revenues from legitimate operations, making it harder to trace the source of the funds. They can also transfer funds between different front companies, or use them to pay for goods and services, creating layers of transactions that obscure the money trail.

"The first European Union Directive, “Prevention of the Use of the Financial System for the Purpose of Money Laundering (Directive 91/308/EEC),” was adopted by the Council of the European Communities in June 1991. Like all directives adopted by the Council, it required member states to achieve (by amending national law, if necessary) the specified results. This First Directive required the members to enact legislation to prevent their domestic financial systems from being used for money laundering"

According to the Egmont Group of Financial Intelligence Units, which is a network of over 160 FIUs that promotes international cooperation and information exchange, FIUs should share information with foreign FIUs spontaneously, without prior request, when they have reasonable grounds to believe that the information is relevant for the receiving FIU1. This principle is also reflected in the FATF Recommendation 40, which states that FIUs should exchange information with other FIUs, especially when this information concerns money laundering, predicate offences, or terrorist financing2. Spontaneous information sharing can enhance the effectiveness of FIUs, as it can help to identify new leads, trends, patterns, or typologies, as well as to prevent or disrupt criminal activities1.

The other options are not consistent with the best practices of FIU information sharing. For example:

In accordance with Wolfsberg guidelines, submit the information to the other FIU in written form. The Wolfsberg Group is an association of 13 global banks that issues guidance and standards on anti-money laundering and counter-terrorist financing. However, the Wolfsberg guidelines are not binding for FIUs, and they do not specify the format or channel of informationexchange between FIUs3. Moreover, submitting information in written form may not be the most efficient or secure way of communication, as it may cause delays, errors, or breaches of confidentiality.

Take no action until contacted by the other FIU. This option contradicts the principle of spontaneous information sharing, as it implies that the FIU with the relevant information will wait for a formal request from the other FIU, instead of proactively sharing the information. This may result in missed opportunities, inefficiencies, or failures in detecting or preventing money laundering or terrorist financing.

Request approval from the Egmont Group prior to sharing the information with the other FIU. This option is unnecessary and impractical, as the Egmont Group does not have the authority or the capacity to approve or deny individual information requests or exchanges between FIUs. The Egmont Group provides a platform and a framework for FIU cooperation, but it does not interfere with the operational autonomy or the bilateral relations of its members4.

According to the Anti-Money Laundering Specialist (the 6th edition) resources, PEPs are individuals who are or have been entrusted with prominent public functions, such as heads of state, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, or important political party officials1. PEPs pose a higher risk of money laundering and corruption due to their position and influence2. Therefore, financial institutions should apply enhanced due diligence and ongoing monitoring measures when dealing with PEPs as customers3. This includes:

Conducting enhanced ongoing monitoring of the businessrelationship to detect and report any suspicious transactions or activities4. This may involve more frequent reviews, higher-level approvals, or increased documentation of the transactions and the rationale behind them.

Taking adequate measures to establish the source of wealth and source of funds which are involved in the business relationship or occasional transaction. This may involve verifying the origin, legitimacy, and purpose of the funds, as well as the economic activities and assets of the PEP.

The other two options are incorrect because:

Expedite due diligence when a PEP is pre-approved by a member of senior management is not a recommended course of action, as it may compromise the quality and integrity of the due diligence process. Pre-approval by senior management does not exempt the financial institution from conducting thorough and timely due diligence on the PEP and the business relationship.

Obtain appropriate senior management approval for establishing a business relationship with a PEP from a high risk country is a necessary but not sufficient course of action, as it does not address the ongoing monitoring and source of funds aspects of the PEP risk management. Senior management approval is required for establishing or continuing a business relationship with a PEP, regardless of the country of origin or residence of the PEP.

 New business products should be evaluated for AML concerns before they are launched into the market. This is because new products may introduce new risks or vulnerabilities that could be exploited by money launderers or terrorist financiers. By conducting a pre-launch assessment, a financial institution can identify and mitigate these risks, design appropriate controls and procedures, and ensure compliance with the relevant laws and regulations. A pre-launch assessment can also help a financial institutionto align its AML strategy with its business objectives, and avoid potential reputational damage or regulatory sanctions.

According to the risk-based approach, financial institutions should apply enhanced due diligence and ongoing monitoring to higher-risk clients, and take appropriate measures to mitigate the risks of money laundering and terrorist financing. If the client exceeds the criteria of an acceptable risk model created by the institution, the institution shouldcommunicate the issues to the client and request remedial actions, such as providing additional information, documentation, or evidence of compliance. If the client does not cooperate or comply with the institution’s requirements, the institution should consider terminating the relationship with the client, as the risk may outweigh the benefits of continuing the business relationship.

A qualified independent party/auditor is the most effective resource to evaluate the effectiveness of an anti-money laundering program. This is because an independent auditor can provide an objective and unbiased assessment of the program, identify any weaknesses or gaps, and make recommendations for improvement. An independent auditor can also verify the compliance of the program with the relevant regulations and best practices, and test the adequacy and functionality of the internal controls, customer due diligence processes, and transaction monitoring systems. An independent auditor can also help an organization prepare for regulatory examinations and audits, and avoid potential penalties or sanctions.

one of the key roles of FATF-Style Regional Bodies (FSRBs) is to support the system of mutual evaluation, which is a peer review process that assesses the level of compliance and effectiveness of each member country’s anti-money laundering and counter-terrorism financing (AML/CFT) regime12. FSRBs conduct mutual evaluations in accordance with the FATF’s methodology and standards, and share the results and recommendations with the FATF and other FSRBs3. Mutual evaluations help identify the strengthsand weaknesses of each country’s AML/CFT system, and provide a basis for technical assistance and follow-up actions4.

Based on the USA PATRIOT Act, one action that the US might take to demonstrate extraterritorial reach is to send requests for information to a non-US based financial institution (FI). The USA PATRIOT Act expanded the authority of the US government to issue subpoenas and other legal orders to foreign banks that maintain a correspondent account in the US, requiring them to produce records relating to such account or any account at the foreign bank, including records maintained outside the US12. This provision was intended to enhance the ability of the US to investigate and prosecute money laundering and terrorist financing activities that involve foreign FIs3.

When an FI is being investigated for possible money laundering, it is important that it cooperates with the law enforcement agencies (LEAs) in a professional and transparent manner. This means that the FI should take the following steps:

Maintain centralized control over all requests and responses to ensure completeness and timely responses. This will help the FI to avoid duplication, inconsistency, or omission of information, as well as to track the status and progress of the requests and responses. It will also facilitate the communication and coordination between the FI and the LEAs, and demonstrate the FI’s willingness to cooperate12.

Review subpoenas and other information requests by senior management and an investigations group or counsel. This will help the FI to assess the scope, relevance, and legality of the requests, as well as to identify any potential risks, conflicts, or sensitivities. It will also enable the FI to prepare and provide the requested information in an accurate and timely manner, and to seek clarification or negotiation if necessary13.

The other options are not advisable, as they may indicate a lack of cooperation, obstruct the investigation, or damage the FI’s reputation. For example:

Making employees, including corporate officers, unavailable for interviews and refusing documents upon receipt of a subpoena may be considered as non-compliance, evasion, or contempt of court, and may result in legal sanctions or penalties4.

Addressing the document destruction policy to ensure the relevant documents are destroyed may be seen as tampering with evidence, destroying records, or concealing information, and may constitute a criminal offence or a breach of regulatory obligations5.

Not answering inquiries from the media directly, but rather replying, “No comment” may create a negative impression, fuel speculation, or invite criticism, and may harm the FI’s image, credibility, or trustworthiness.

 The FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system1. The FATF identifies jurisdictions with serious strategic deficiencies in their anti-money laundering / counter financing of terrorism (AML/CFT) regimes and issues public statements to warn the international community of the risks emanating from these jurisdictions2. These jurisdictions are also known as high-risk jurisdictions subject to a call for action, or the “black list” in external sources2. The FATF urges its members and all other jurisdictions to apply counter-measures to protect themselves from the money laundering and terrorist financing risks posed by these jurisdictions2. Counter-measures are enhanced due diligence or restrictive measures that go beyond the normal AML/CFT requirements, such as requiring additional information or documentation, rejecting transactions, restricting business relationships, or terminating correspondent banking relationships3. The FATF also provides guidance on the types and levels of counter-measures that may be appropriate, depending on the specific risks and circumstances of each jurisdiction3.

The payment received from an account in an offshore jurisdiction and the lack of beneficial ownership details for the originating account are two money laundering red flags.Offshore jurisdictions are often used by money launderers to hide the source and destination of their funds, as they typically have low transparency and weak regulatory oversight. The absence of beneficial ownership information makes it difficult to identify the true owners and controllers of the funds, and to assess the legitimacy and risk of the transaction. These factors increase the possibility that the payment is related to money laundering, tax evasion, or other illicit activities.

The first line training program is the training that is provided to the employees who are directly involved in the day-to-day operations of the business, such as sales, customerservice, or compliance staff1. The first line training program should cover the essential knowledge and skills that are required for the employees to perform their roles effectively and in compliance with the anti-money laundering and counter-terrorism financing (AML/CFT) policies and procedures of the organization2. The first line training program should also be updated regularly to reflect any changes in the business environment, the regulatory framework, the customer base, the products and services, or the risk assessment of the organization2.

Among the four activities listed, the one that would require an update to the first line training program is the expansion to customer segments that will utilize newly established products. This is because the new customer segments and products may pose different or higher AML/CFT risks than the existing ones, and the employees need to be aware of these risks and how to mitigate them. For example, the new customer segments may include politically exposed persons, non-resident customers, or high-net-worth individuals, who may have higher exposure to corruption, tax evasion, or fraud risks3. The new products may include prepaid cards, mobile payments, or cryptocurrencies, which may have higher vulnerability to money laundering, terrorist financing, or cybercrime risks. Therefore, the first line training program should be updated to include the relevant information and guidance on how to identify, verify, monitor, and report these new customer segments and products, and how to apply the appropriate customer due diligence and transaction monitoring measures2.

The other three activities do not necessarily require an update to the first line training program, unless they involve significant changes in the AML/CFT policies and procedures of the organization. The implementation of a new system that provides information for monitoring customer accounts may improve the efficiency and effectiveness of the existing AML/CFT processes, but it does not change the nature or level of the AML/CFT risks. The maintenance of regulatory requirements for onboarding documentation collections of a customer base is a routine and ongoing task that should already be covered by the existing first line training program. The onboarding of a new customer type which was previously reviewed and risk rated does not introduce any new AML/CFT risks, as long as the risk rating and the corresponding controls are consistent with the organization’s risk appetite and policy.

High-risk: The risks here are significant, but are not necessarily prohibited. To mitigate the heightened risk presented, the financial institution should apply more stringent controls to reduce the ML/FT risk, such as conducting enhanced due diligence and more rigorous transaction monitoring. Countries that maintain a reputation for corruption or drug trafficking are generally considered high-risk. High-risk customers may include politically exposed persons (PEPs) or certain types of money services businesses orcash-intensive businesses; high-risk products and services may include correspondent banking and private banking.

According to the Wolfsberg Anti-Money Laundering (AML) Principles for Correspondent Banking, one of the key aspects of establishing and maintaining a correspondent relationship is to conduct a risk-based due diligence on the respondent bank, which includes obtaining approval from at least one person other than the person sponsoring the relationship12. This is to ensure that the correspondent bank has a clear understanding of the nature, purpose, and expected activity of the relationship, as well as the respondent bank’s ownership, governance, AML policies, and customer base12.

Another aspect of the Wolfsberg AML Principles is to recognize and assess the factors that may increase the risk inherent in a correspondent relationship, such as the involvement of politically exposed persons (PEPs), the presence of downstream (nested) correspondents, the geographic location of the respondent bank and its customers, and thetypes of products and services offered by the respondent bank12. These factors may require enhanced due diligence, monitoring, and reporting of suspicious activities by thecorrespondent bank, as well as the application of appropriate risk mitigation measures12.

2.4 Senior Management Approval

The bank's internal policies should indicate whether, for any one or more among these categories, Senior

Management must approve entering into new relationships.

Relationships with Politically Exposed Persons may only be entered into with the approval of Senior Management.

an employee who avoids taking periodic vacations despite having accrued vacation time may be trying to conceal fraudulent or illegal activities that would be exposed in their absence. This is a common red flag for internal fraud and money laundering, as it indicates a lack of segregation of duties, internal controls, and oversight. Employees who engage in such behavior may also exhibit other signs of stress, defensiveness, or secrecy.

account opening documents and account statements are examples of supporting documentation that can help the law enforcement agency to verify the identity, profile, and activity of the customer involved in the suspicious transaction. These documents can provide useful information such as the customer’s name, address, date of birth, identification number, occupation, source of funds, transaction history, and beneficiaries. These documents can also help to establish the baseline of normal and expected activity for the customer, and to identify any deviations or anomalies that may indicate money laundering, fraud, or other criminal activities.

According to the Anti-Money Laundering Specialist (the 6th edition) by ACAMS, the independent testing of an institution’s anti-money laundering program should be conducted by a person who reports directly to the Board of Directors or a Board Committee. This ensures that the person conducting the testing has the necessary authority, independence, and objectivity to evaluate the program’s adequacy and effectiveness, and to report any findings or recommendations to the senior management1. The person conducting the testing should also have the appropriate knowledge, skills, and experience in the anti-money laundering field, and should be familiar with the institution’s products, services, customers, and risks2.

The other options are not necessarily suitable or qualified to perform the independent testing of an institution’s anti-money laundering program. For example:

A certified specialist in the anti-money laundering field may have the relevant expertise and credentials, but may not have the required independence or reporting line to conduct the testing. For instance, if the certified specialist is an employee of the institution who is involved in the implementation or operation of the anti-money laundering program, then there may be a conflict of interest or a lack of objectivity in the testing process1.

A former anti-money laundering officer from a similar institution may have the relevant experience and background, but may not have the current knowledge or familiarity with the institution’s anti-money laundering program, policies, procedures, or systems. Moreover, the formeranti-money laundering officer may have a personal or professional relationship with the institution or its staff, which may compromise the independence or integrity of the testing process1.

A retired government regulator or federal law enforcement officer may have the relevant authority and credibility, but may not have the specific skills or qualifications to conduct the testing. For instance, the retired regulator or law enforcement officer may not be well-versed in the latest anti-money laundering standards, regulations, or best practices, or may not be able to apply them to the institution’s unique risk profile, products, services, or customers1.

Before sharing customer records within the same jurisdiction, an FI should consider the legal and regulatory framework that governs the protection of personal data and the disclosure of client information. Different jurisdictions may have different laws and rules regarding the privacy and confidentiality of customer data, the consent and notification requirements for data sharing, the purposes and scope of data sharing, and the safeguards and accountability measures for data protection. An FI should ensure that it complies with the applicable restrictions and obligations when sharing customer records within the same jurisdiction, and that it does not violate the rights and expectations of its customers.

According to the Financial Action Task Force (FATF) 40 Recommendations, financial institutions should obtain senior management approval before establishing new correspondent banking relationships1. This is to ensure that the financial institution has assessed the money laundering and terrorist financing risks associated with the respondent institution and has applied appropriate due diligence measures. The FATF also requires financial institutions to gather sufficient information about the respondent institution, its business activities, its reputation, its supervision, and its anti-money laundering and counter-terrorist financing policies and procedures1. Additionally, the FATF recommends that financial institutions document the respective responsibilities of each institution and prevent the use of their accounts by shell banks1.

The 40 Recommendations provide a complete set of countermeasures against money laundering

and terrorist financing, covering

• the identification of risks and development of appropriate policies;

• the criminal justice system and law enforcement;

• the financial system and its regulation;

• the transparency of legal persons and arrangements; and

• international cooperation.

Sanctions screening and transaction monitoring rules are two of the most common controls that FIs use to identify suspicious money-laundering activity. Sanctions screening is the process of checking customers, transactions, and counterparties against various lists of sanctioned individuals, entities, and countries issued by national and international authorities. Sanctions screening helps FIs to avoid doing business with or facilitating the activities of those who are involved in terrorism, proliferation, human rights violations, or other criminal activities. Transaction monitoring rules are the criteria or scenarios that FIs use to detect unusual or potentially suspicious patterns of transactions or behaviors of customers or accounts. Transaction monitoring rules help FIs to identify transactions that deviate from the expected norms, such as large cash deposits, frequent wire transfers, or transactions with high-risk jurisdictions. Transaction monitoring rules also help FIs to comply with their reporting obligations, such as filing Suspicious Activity Reports (SARs) or Currency Transaction Reports (CTRs).

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.

Retail banks typically have a high inherent risk of money laundering due to their provision of cash services. This is because cash is a preferred medium of exchange for criminals and terrorists, and retail banks provide a convenient way for them to move large sums of money without detection. Retail banks are also vulnerable to money laundering through the use of false identities and other deceptive practices. (CAMS Manual, 6th Edition, Page 8).

The best course of action for the FI in this scenario is to consider retaining qualified, experienced legal counsel. This is because the investigation request from the local law enforcement agency may involve complex legal issues, such as confidentiality, privacy, data protection, and cooperation obligations. The FI may need to balance the interests of the customer, the law enforcement agency, and the FI itself, and ensure that it complies with the applicable laws and regulations in responding to the request. The legal counsel can advise the FI on the scope, validity, and implications of the request, and help the FI to prepare and submit the required information in a timely and appropriate manner. The legal counsel can also protect the FI from any potential liability or litigation arising from the investigation.

IT expanded the definition of criminal activity to all serious crimes. The first EU Directive on Money Laundering, adopted in 1990, was the first major international agreement to combat money laundering. It expanded the definition of criminal activity to all serious crimes and established drug trafficking as a predicate offense of money laundering. The Directive also extended the scope of money laundering beyond drug-related crimes, making it applicable to all serious crimes. This was a major step forward in the fight against money laundering, as it made it easier for law enforcement to investigate and prosecute money laundering cases.

Here is the exact information from the Financial Action Task Force (FATF) Guidance for a Risk-Based Approach for Trust and Company Service Providers:

"Understanding the management and ownership structure of a trust is crucial in assessing the ML/TF risk it poses. This includes the identity of all settlors, trustees and beneficiaries, and their respective roles and responsibilities, as well as the nature and purpose of the trust."

"TCSPs should obtain and maintain up-to-date information on the purpose and intended nature of the business relationship, the source of funds and wealth, and where relevant, the source of funds or wealth of the settlor and beneficiaries."

Based on this information, the correct answers are A and D. Trust and Company Service Providers must understand the responsibility and authority in the structure, as well as the general purpose behind the structure in order to assess the overall risk of the trust and ensure that any transactions with the trust are legitimate.

A TCSP providing services should have policies and procedures in place to identify critical information of the signatory, as this is one of the key elements of the customer due diligence (CDD) process. The signatory is the person who has the authority to sign documents or contracts on behalf of the customer, such as a company, a trust, or a partnership. The signatory may also be the beneficial owner, the controller, or a nominee of the customer. The TCSP should verify the identity and the capacity of the signatory, as well as the source and origin of the funds or assets involved in the transaction or business relationship. The TCSP should also monitor the activities of the signatory and report any suspicious or unusual transactions or changes in the signatory’s behaviour or profile.

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.

According to the Certified Anti-Money Laundering Specialist (CAMS) Sixth Edition manual, the AML compliance officer should inform senior leadership and the board of the investigation (page 124) and monitor the progress of the investigation by keeping clear records (page 127). Additionally, the AML compliance officer should provide all information to the FIU as soon as possible to avoid delays (page 126).

According to the CAMS Manual, when a financial institution is being investigated by the financial intelligence unit (FIU), the AML compliance officer should inform senior leadership and the board of the investigation and monitor the progress of the investigation by keeping clear records. The manual states:

"The AML compliance officer should inform senior leadership and the board of any investigations and then monitor the progress of the investigation by keeping clear records of what has been requested and submitted, deadlines and extensions granted, and any findings or reports received. This will allow the financial institution to respond effectively and efficiently to the investigation and take appropriate action if necessary." (CAMS Manual, Section 7.4.1 - Financial Intelligence Units, p. 366)

According to the CAMS Study Guide, one of the methods to launder money using TCSPs is to create a complex web of transactions involving multiple entities and jurisdictions, often using shell companies and nominees. The payment of consultancy fees to unrelated companies and service providers established in a foreign jurisdiction could be a sign of such a scheme, as it could be used to disguise the origin and destination of illicit funds, or to evade taxes and regulations. Therefore, this transaction indicator warrants further escalation to the compliance officer.

The most suspicious transaction indicators related to casino activities are:

A client requests a winnings check (cheque) in a third party’s name. This could indicate an attempt to conceal the source or ownership of the funds, or to evade reporting requirements.

Acquaintances bet against each other in even-money games and it appears they are intentionally losing to one of the parties. This could indicate a scheme to launder money through the casino by transferring funds from one party to another without attracting attention.

A client requests the transfer of winnings to the bank account of a third party in a country without an effective anti-money laundering regime. This could indicate an attempt to move funds to a high-risk jurisdiction or to a person or entity that is involved in illicit activities.

The option that is not suspicious is:

A new client who is a large volume player asks the casino operator about the ability to transfer the funds to other locations in the same country. This could be a legitimate inquiry from a high-net-worth individual who travels frequently and wants to access their funds conveniently.

According to the Certified Anti-Money Laundering Specialist (CAMS) Manual , 6th edition, if a bank's transaction surveillance system triggers an alert for a deposit of 250.000 USD into a client's account, the bank should take the following actions:

Request information and documentation from the client on the background of the transaction (CAMS Manual, 6th edition, page 46).

Contact the client advisor to learn if he has any insight on the transaction background (CAMS Manual, 6th edition, page 47).

Review the transaction background in the bank's transaction platform (CAMS Manual, 6th edition, page 47).

Discarding the alert as a false positive hit and reviewing the alert if the deposit is made in cash should not be done.

The bank should request additional information and documentation from the client to better understand the nature of the transaction. Additionally, the bank should reach out to the client advisor to learn if they have any insight on the transaction background. Finally, the bank should review the transaction background in the bank's transaction platform to determine if any additional alerts or anomalies are present. (CAMS Manual, 6th Edition, Pages 117-118)

The individual responsible for setting the anti-money laundering software parameters should recommend ensuring that the alert parameters are based on risk, rather than on default software rules. This means that the software should be configured to generate alerts only when transactions or customers exhibit a high level of risk, based on factors such as the source and destination of funds, the amount and frequency of transactions, the type and purpose of the account, the customer profile and behavior, and the presence of any red flags or indicators of money laundering or terrorist financing. By aligning the alert parameters with the risk assessment of the financial institution, the software can reduce the number of false positives and focus on the most relevant and suspicious cases, thus improving the efficiency and effectiveness of the anti-money laundering staff.

 This is a red flag of money laundering or terrorist financing that involves the use of non-profit organizations (NPOs) as conduits for illicit funds. NPOs may be vulnerable to abuse by criminals who exploit their legitimate activities, reputation, and access to funds and resources. A transaction monitoring process that would alert a bank for this red flag activity is to analyze the source, destination, frequency, and purpose of the funds transferred to and from the charity account, and to compare them with the expected profile and activity of the NPO. If the bank detects any inconsistency, discrepancy, or deviation from the norm, it should raise an alert and conduct further investigation.

 Submitting the concern anonymously to the bank’s internal Compliance Hotline is the most appropriate action that a bank CEO’s assistant should take when the bank CEO expenses large sums of money to a charitable organization run by the bank CEO’s direct family member. This is because this action would allow the assistant to report a potential case of fraud, conflict of interest, or misuse of funds without fear of retaliation or reprisal from the bank CEO. The Compliance Hotline is a confidential and secure channel for employees to raise any concerns or suspicions about unethical or illegal activities within the bank. The Compliance Hotline would then forward the concern to the relevant authorities or departments for further investigation and action.

Funds transfers are electronic payments that move money from one account to another, either within the same financial institution or across different institutions, countries, or currencies1. Funds transfers are commonly used for legitimate purposes, such as remittances, trade, or investment, but they can also be abused by money launderers, terrorists, or fraudsters to move illicit funds or conceal their origin or destination2. Therefore, financial institutions and other entities that offer funds transfer services are required to apply anti-money laundering and counter-terrorism financing (AML/CFT) measures, such as customer due diligence, transaction monitoring, record-keeping, and reporting of suspicious activities2.

One of the red flags for funds transfers that may indicate money laundering or other criminal activity is when funds transfers are repeatedly sent to the same beneficiary out of line with the business purpose3. This could suggest that the originator and the beneficiary are colluding to layer or integrate illicit funds, or to evade reporting or sanctions requirements. For example, a business may send multiple funds transfers to the same supplier, but the amounts or frequencies do not match the invoices or contracts, or the supplier is located in a high-risk jurisdiction or is subject to sanctions. Alternatively, an individual may send frequent funds transfers to the same person, but the relationship or the reason for the transfers is unclear or inconsistent, or the person is associated with a criminal or terrorist organization. In such cases, the financial institution or the funds transfer service provider should conduct enhanced due diligence, verify the source and purpose of the funds, and report any suspicious activity to the relevant authorities.

Failure to report suspected fraud activity is a serious breach of the anti-money laundering (AML) and anti-fraud obligations of a financial institution (FI). It could expose the FI to legal risks, such as civil lawsuits, criminal prosecutions, regulatory sanctions, and reputational damage. One possible legal risk is that the FI could be held liable for the losses suffered by the victims of the fraudster, either by the victims themselves or by a third party acting on their behalf, such as a government agency or a class action representative. This could result in significant financial costs and damages for the FI, as well as loss of trust and confidence from its customers and stakeholders.

According to the CAMS Study Guide, EDD is a higher level of scrutiny applied to customers who pose a greater risk of money laundering or terrorist financing. EDD may include obtaining additional information on the customer’s identity, source of funds, businessactivities, beneficial owners, and expected transactions. Details on individuals with control over the account are relevant for EDD, as they may indicate the involvement of politically exposed persons (PEPs), sanctioned individuals, or other high-risk entities. Therefore, this information should be gathered as part of EDD for a high-risk customer.

According to the FATF Recommendations, financial institutions should maintain all necessary records on transactions and customers for at least five years, and make them available to competent authorities upon appropriate authority1. This includes records and documents related to suspicious transactions that have been reported to the financial intelligence unit (FIU) or other designated authorities. Providing the supporting documentation to competent authorities upon request is essential for the investigation and prosecution of money laundering and terrorist financing offences, as well as for the identification and tracing of criminal assets2.

Hinting to the customer that she should come in and explain her behavior is not a correct answer, as it may tip off the customer about the suspicion and compromise the effectiveness of the reporting system. Financial institutions should not disclose to the customer or to third parties that a suspicious transaction report (STR) or related information is being reported to the FIU3.

Maintaining adequate written documentation of all individuals and transactions reported is not a sufficient answer, as it does not imply cooperation with competent authorities. Financial institutions should not only keep records, but also provide them to the authorities when requested.

Submitting information upon receiving a legal request from parties involved in a civil lawsuit is not a relevant answer, as it does not relate to the cooperation with competent authorities for AML/CFT purposes. Civil lawsuits are not part of the AML/CFT framework, and financial institutions should not disclose confidential information to private parties without proper legal grounds.

Reputational risk is the potential for negative publicity, public perception, or legal action to adversely affect a financial entity’s image, brand, or customer loyalty1. Violating AML laws can have significant reputational risks for financial entities, as they may be perceived as facilitating or enabling money laundering, terrorist financing, or other illicit activities. This can result in a loss of trust, credibility, and revenue from existing and potential customers, especially those who are high-profile, sensitive, or socially responsible23. Moreover, violating AML laws can also attract negative media attention, regulatory scrutiny, and legal action, which can further damage the reputation of the financial entity and expose it to additional sanctions, fines, or penalties4.

 The correct answer is C because the European Union Money Laundering Directives require lawyers and other independent legal professionals to report suspicious transactions to the competent authority when they are involved in certain activities on behalf of their clients, such as creating or managing companies, trusts, or other legal arrangements. The directives also provide that the obligation to report overrides any professional secrecy or confidentiality rules, except when the lawyer is ascertaining the legal position of the client or representing the client in legal proceedings or in connection with such proceedings. Therefore, the lawyer in this scenario should report the activity as suspicious to the competent authority, as creating a financial holding company for the client falls within the scope of the reporting obligation and does not qualify for the exemption12

 Structuring transactions is a common method of money laundering, where cash deposits or withdrawals are broken down into smaller amounts to avoid reporting or record-keeping requirements. Employees who unintentionally assist customers in structuring transactions may not be aware of the legal and regulatory implications of their actions, or may have been misled or coerced by the customers. Therefore, the most appropriate and proportionate response is to provide remedial training to these employees, to ensure they understand the anti-money laundering policies and procedures, the red flags of suspicious activity, and their reporting obligations. Terminating, contacting law enforcement, or transferring these employees may be excessive, premature, or ineffective measures, depending on the circumstances and the level of involvement of the employees.

The FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the internationalfinancial system. The FATF conducts mutual evaluations of its members and other jurisdictions to assess their compliance with the FATF Recommendations and the effectiveness of their AML/CFT regimes1.

The FATF defines effectiveness as "the extent to which a country’s AML/CFT regime is achieving the defined outcomes of an effective regime that allows them to mitigate their risks and threats of ML/TF"2. The FATF assesses effectiveness based on 11 immediate outcomes, which are grouped into three thematic goals: financial system integrity, legal system and operational issues, and international cooperation2.

One of the immediate outcomes under the financial system integrity goal is that “FIs adequately apply preventive measures commensurate with their risks, and report suspicious transactions” (IO.4)2. This outcome measures how well FIs implement the FATF Recommendations on customer due diligence, record-keeping, internal controls, risk assessment, and suspicious transaction reporting. These preventive measures are essential for FIs to identify and mitigate the risks of being misused for money laundering or terrorist financing, and to provide useful information to the authorities for investigation and prosecution2.

Therefore, the correct answer is D. FIs adequately apply preventive measures, as this is one of the FATF characteristics used to assess a country’s effectiveness of its AML regime.

Broker-dealers cannot have correspondent accounts with a foreign bank that does not have a physical presence in any country. The USA PATRIOT Act has an extraterritorial effect in that it prohibits broker-dealers from having correspondent accounts with foreign banks that do not have a physical presence in any country. This rule is designed to help prevent money laundering and terrorist financing by making it more difficult for funds to be moved to or through jurisdictions with less stringent anti-money laundering laws.

The Basel Committee on Banking Supervision (BCBS) is a global standard-setting body for the prudential regulation of banks. It does not have any formal authority to enforce its standards, but relies on its members’ commitment and peer pressure to implement them. The BCBS’s principles on customer due diligence (CDD) are part of its guidelines on anti-money laundering and combating the financing of terrorism (AML/CFT), which aim to enhance the soundness and integrity of banking systems. The BCBS’s principles on CDD provide guidance to banks and bank supervisors on the essential elements of a CDD programme, such as customer acceptance, identification, verification, risk assessment, monitoring, and record-keeping. The BCBS’s principles on CDD are not legally binding, but are intended to be a benchmark for national practices and for banks to design their own policies and procedures. The BCBS’s principles on CDD are consistent with the recommendations of the Financial Action Task Force (FATF), the global standard-setter for AML/CFT.

Under the Egmont Group Principles, information exchange among financial intelligence units (FIUs) should be conducted freely, spontaneously, and upon request, on the basis of reciprocity. This means that FIUs should be willing to share information without the expectation of reciprocity on how the information will be used. The goal is to facilitate the cooperation and exchange of information among FIUs to combat money laundering, terrorist financing, and other financial crimes.

According to the Certified Anti-Money Laundering Specialist (the 6th edition), Section 2.2.2 The EU Fourth AML Directive, the release of the EU’s Fourth AML Directive resulted in the threshold for reporting suspicious transactions decreasing from 15,000 EUR to 10,000 EUR (Answer A) and all financialinstitutions were required to identify and verify the beneficial owner of legal entities (Answer B). The directive also defined money laundering and terrorist financing as separate crimes, which expanded the directive's measures (Answer C). Answer D is incorrect as the scope of obliged entities was not enlarged from casinos to all providers of gambling services, but rather to all providers of payment services. Answer E is also incorrect as the directive does not provide that knowledge of criminal conduct can be inferred from objective factual circumstances. Reference: Certified Anti-Money Laundering Specialist (the 6th edition), Section 2.2.2 The EU Fourth AML Directive, p. 12.

According to the Basel Committee on Banking Supervision, banks should adopt a risk-based approach to customer due diligence, which includes four essential elements1:

A customer acceptance policy that defines the types of customers that are likely to pose a higher than average risk to the bank.

A customer identification program that collects and verifies information about the customer’s identity, beneficial ownership, and purpose of the account or relationship.

An on-going monitoring of high-risk accounts to detect and report any unusual or suspicious activity, and to keep customer information up-to-date.

A risk management program that ensures that the bank’s policies and procedures are implemented effectively, and that the bank’s staff are trained and aware of their AML/CFT obligations.

Therefore, documenting a customer acceptance policy and establishing on-going monitoring of high-risk accounts are the correct choices for the essential elements that should be included in the program based on Basel’s KYC principles.

 The customer activity that should trigger a suspicious transaction report is purchasing travelers checks (cheques) for trips to a Non-Cooperative Countries and Territories (NCCTs). This could indicate an attempt to evade currency reporting requirements, avoid sanctions or embargoes, or facilitate money laundering or terrorist financingthrough high-risk jurisdictions12. NCCTs are countries or territories that have been identified by the Financial Action Task Force (FATF) as having serious deficiencies in their anti-money laundering and counter-terrorist financing regimes, and that pose a threat to the international financial system3.

The other options are not necessarily grounds for a suspicious transaction report, although they may require further due diligence or monitoring depending on the customer profile and the nature of the transaction. For example:

The increased activity is due to money order deposits. This could be a legitimate source of income for the customer’s export business, or it could be a way of disguising the origin or destination of the funds. The anti-money laundering specialist should verify the identity and background of the customer and the issuers of the money orders, and check for any red flags or suspicious indicators4.

Wire transfers are coming from a Financial Action Task Force member country. This could be a normal business practice, or it could be a sign of involvement in trade-based money laundering or other illicit activities. The anti-money laundering specialist should assess the customer’s source of funds, business rationale, and market conditions, and monitor for any changes or inconsistencies.

The client changed his address without advising the institution. This could be a simple oversight, or it could be a way of concealing the customer’s true location or identity. The anti-money laundering specialist should update the customer’s information, verify the new address, and check for any adverse media or sanctions.

Microstructuring is a method of money laundering that involves breaking down large transactions into smaller amounts that are below the reporting threshold or the level of scrutiny of financial institutions. One of the red flags of microstructuring is frequent visits to make cash deposits of nominal amounts, as this may indicate an attempt to avoid detection and conceal the source or destination of illicit funds. Other red flags of microstructuring include checking accounts receiving cash deposits in amounts under $1,000 as infrequently as several times a month, followed by ATM withdrawals in foreign countries, or deposits that are inconsistent with the customer’s profile or business activity.

The two most relevant measures for a professional dealer in precious metals and stones to reduce the risk of being misused for money laundering purposes are:

B. Stop accepting payments from persons other than the beneficiary: This measure can help to ensure that the source of funds is legitimate and can be traced back to the customer.

D. Limit the acceptance of purchases without adequate customer identification information: Adequate customer identification information is necessary for the purpose of identifying and verifying the customer's identity and determining whether the customer is a politically exposed person (PEP) or has any other risk characteristics that may require enhanced due diligence measures.

According to the Basel Committee on Banking Supervision, a sound KYC program should include four essential elements: customer acceptance policy, customer identification, on-going monitoring of higher risk accounts, and risk management1. Customer acceptance policy defines the types of customers that the financial institution (FI) is willing to accept and the criteria for doing so. Customer identification involves verifying the identity and beneficial ownership of the customers and obtaining information on their activities and sources of funds. On-going monitoring of higher risk accounts involves reviewing the transactions and behavior of the customers that pose higher risks of money laundering or terrorist financing and updating their information and risk profiles. Risk management involves establishing appropriate policies, procedures, controls, and audit functions to ensure the effective implementation and oversight of the KYC program1.

The Certified Anti-Money Laundering Specialist (the 6th edition) Study Guide states that financial institutions should address all requests from law enforcement agencies completely and in a timely manner (Page 83). Disregarding requests when there is a justifiable reason for doing so is not recommended, as this could impede the investigation. Sharing information about the investigation with analysts is not recommended, as this could compromise the investigation. Delaying responses by informing senior management of requests is also not recommended, as this could result in a delay in the investigation.

This is an emerging risk associated with cyber-enabled fraud because the use of false identities and documents can allow criminals to disguise their activities and evade detection. In such cases, the name and address provided on the account may not match the name and address on the government-issued documentation. This discrepancy can be difficult to detect, making it a potential risk for financial institutions.

The bank’s current anti-money laundering program is inadequate because it does not include a process for monitoring customer account activity, which is a key component of detecting and reporting suspicious transactions. The fact that the consultant and the bank have mutual clients does not affect the risk rating of those customers, nor does it justify a lower level of scrutiny. The bank should revise its procedures to ensure that it has a comprehensive and risk-based approach to customer due diligence, transaction monitoring, and reporting.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, ongoing training is a key element of an effective anti-money laundering compliance program, as it ensures that the staff are aware of their roles and responsibilities, the latest regulatory developments, and the emerging risks and trends in money laundering and terrorist financing1. Ongoing training also helps to foster a culture of compliance within the institution, where the staff are committed to adhering to the policies and procedures, detecting and reporting suspicious activities, and protecting the institution from reputational and legal damages2.

According to a report by the OECD, government officers are among the occupations that are particularly vulnerable to the use of false identities and identity theft. This is because government officers have access to sensitive and confidential information, such as personal data, tax records, social security benefits, passports, visas, and licenses. Identity fraudsters may target government officers to obtain or alter such information, or to impersonate them to access restricted areas or systems. Identity fraud involving government officers may facilitate tax evasion, money laundering, corruption, terrorism, and other crimes1.

Some examples of identity fraud schemes involving government officers are:

Rogue agents in the immigration services sector who issue fake or fraudulent documents, such as passports, visas, orresidence permits, to facilitate the entry or stay of illegal immigrants, criminals, or terrorists12.

Corrupt tax officials who use false identities to create fictitious taxpayers or employers, or to modify tax records, to evade taxes or to claim fraudulent refunds or credits13.

Impostors who pose as government officers, such as police, customs, or revenue agents, to extort money or information from unsuspecting victims, or to access secure facilities or databases1 .

The red flags that most likely triggered the referral are:

B. Several cash deposits along the country's border that are quickly withdrawn by third parties. C. Several lodging and food payments made on the same day at unusual hours for a business.

Red flag B suggests possible structuring activity, where individuals are trying to avoid currency transaction reporting requirements by depositing and withdrawing cash in amounts below the reporting threshold. This activity is often associated with money laundering and could indicate human trafficking activity.

Red flag C suggests unusual activity that may be indicative of human trafficking, such as lodging and food payments made at unusual hours or in unusual patterns. This type of activity could indicate that the business is being used as a front for human trafficking or that the individuals involved in the trafficking are using the business to facilitate their activities.

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.

 According to the USA PATRIOT Act, a shell bank is defined as “a bank that has no physical presence in any country” (Section 313(a)(1)). A physical presence means “a place of business that is maintained by a bank and is located at a fixed address, other than solely a post office box or an electronic address, in a country in which the bank is authorized to conduct banking activities, at which location the bank employs one or more individuals on a full-time basis and maintains operating records related to its banking activities” (Section 313(a)(2)). Therefore, option A is the correct answer, as it describes a bank that has no physical presence or employees in any country. Options B, C, and D are not correct, as they describe banks that have some form of physical presence or affiliation with another bank in a country.

 a financial institution must perform a continuing review of the account for a period of 90 days. The continuing review must include an analysis of any transactions that occur in the account, as well as any changes in the customer's risk profile. The review should be updated as needed to ensure that the customer is not engaging in any suspicious activities.

The potential red flag that alludes to money laundering is option B, where the trio engage in minimal gambling and combine the funds to request a casino cheque for the chips presented. This behavior is indicative of structuring, which involves breaking down large transactions into smaller ones to avoid detection by the casino and regulatory authorities. The fact that the trio only used a small amount of chips to play games, and then combined their funds to request a casino cheque, raises suspicions that they may be attempting to disguise the origin of their funds.

A Mutual Legal Assistance Treaty (MLAT) is an agreement between two or more countries that allows for the exchange of information and evidence in the investigation and enforcement of criminal laws. MLATs provide a framework for countries to assist each other with investigations, prosecutions, and other legal matters, including the exchange of information, evidence, documents, and testimony. MLATs are commonly used in investigations related to money laundering, terrorism, and other transnational crimes.

In accordance with Financial Action Task Force (FATF) standards [1][2], when the minimum AML requirements of the host country where a financial institution (Fl) operates are less strict than those of the Fl's home country, the Fl is required to ensure that their branches and majority-owned subsidiaries in host countries implement the requirements of the home country, to the extent that host country laws and regulations permit. This means that the Fl should not impose more strict requirements on host country branches, disregarding if host country laws and regulation permit such action, and should not close down its operations in the host countrieswhere minimum AML requirements are less strict than those of the home country. However, the Fl should always apply additional measures on their branches and majority-owned subsidiaries in host countries to manage the money laundering and terrorist financing risk overseas.

 The anti-money laundering officer (AML officer) is responsible for overseeing the implementation and effectiveness of the anti-money laundering (AML) program of a financial institution. The AML officer should have sufficient authority, independence, and access to resources to perform this role. Reporting to the Sales Director may compromise the independence and objectivity of the AML officer, as the Sales Director may have conflicting interests or incentives that could influence the AML officer’s decisions or actions. The AML officer should report to a senior management level that is independent of business functions and has direct access to the board of directors or a relevant committee. This would ensure that the AML officer can communicate any AML issues orconcerns to the board without any interference or undue influence from the business functions.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the main challenges of providing on-line services to customers is the verification of theiridentity and the authentication of their transactions1. The lack of face-to-face contact and the use of electronic documents increase the risk of identity fraud, impersonation, and account takeover2. Therefore, financial institutions offering on-line services need to implement robust customer due diligence (CDD) measures, such as using multiple sources of information, verifying biometric data, and applying risk-based monitoring3.

A. Geographic risks should be used to identify the priority of the Fl in this scenario. According to the CAMS Manual (6th Edition), "Geographic risk refers to the possibility that the location of a customer, transaction, or product may increase the likelihood of money laundering or terrorist financing because of weak or nonexistent AML/CFT controls" (p. 59). In this scenario, the expansion to an area of the world with weak AML laws would increase the Fl's geographic risk.

Using cash to buy multiple cashier's checks over a period of time is considered suspicious activity of money laundering. This method is commonly known as structuring, where individuals or entities use cash to buy multiple monetary instruments such as cashier's checks in small amounts, to avoid reporting requirements. This behavior could be an attempt to evade transaction monitoring and reporting requirements by a financial institution. Additionally, the fact that the account also receives multiple electronic transfers for the same amount could be a red flag for money laundering as it is a common technique used to layer or disguise the origin of illicit funds.

A personal banking customer who simultaneously opens several accounts with almost identical names will most likely cause further inquiry, as this could indicate an attempt to evade transaction monitoring, reporting, or identification requirements. For example, a customer could open accounts with slight variations of their name, such as John Smith, Jon Smith, J. Smith, or John Smyth, to avoid detection or aggregation of their transactions. This could also be a sign of identity theft, fraud, or money muling. Therefore, the bank should verify the customer’s identity and the purpose of the accounts, and monitor the activity for any suspicious patterns or behaviors.

The practice of brokerage firms maintaining securities as nominees and the speed of the transactions are two factors specific to the securities industry that increase the exposure to money laundering risk. Nominee accounts can be used to conceal beneficial ownership and obscure transaction trails. The speed of transactions can make it difficult to detect and prevent suspicious activity in real time.

According to the Basel Committee's principles on customer due diligence, banks must obtain the necessary information to establish the identity of their customers, beneficial owners, and any persons acting on behalf of their customers. This includes verifying the identity of the customer and the beneficial owners and assessing the customer's risk profile. Additionally, banks must conduct ongoing due diligence to ensure that the customer does not give rise to suspicions of money laundering or terrorist financing [1].

According to the FATF Procedures for the Fourth Round of AML/CFT Mutual Evaluations1, jurisdictions that are determined to have strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing are subject to the FATF’s International Cooperation Review Group (ICRG) process. The ICRG process involves the following actions for such jurisdictions:

Demonstrate a high-level commitment to swiftly resolve the identified deficiencies in the FATF mutual evaluation report. This commitment should be made in writing to the FATF President and should include an action plan with specific deadlines and milestones to address the deficiencies.

Report to FATF on the implementation of their progress under the enhanced follow-up mechanism. The FATF will monitor the progress of the jurisdiction through regular reports and on-site visits, and will decide whether the jurisdiction has made sufficient progress to exit the ICRG process or whether further actions are required, such as public statements, counter-measures, or suspension of membership.

The other options are not resulting actions for jurisdictions with strategic deficiencies, as they are either not part of the FATF procedures or not consistent with the FATF’s objectives and principles. For example, the FATF does not issue private statements regarding the level of compliance of a jurisdiction, nor does it allow a jurisdiction to appeal for a technical compliance re-rating based on its own criteria. The FATF also does not grant extensions of deadlines for jurisdictions to improve their regimes, as this would undermine the credibility and effectiveness of the mutual evaluation process.

According to the Certified Anti-Money Laundering Specialist (the 6th edition), Section 2.2.5 Suspicious Activity Reporting (SAR) Requirements, a Suspicious Activity Report (SAR) filing is required when a financial institution is aware of, or suspects, a possible violation of law or regulation, or any other suspicious activity related to money laundering, terrorist financing, or other unlawful activity. In this case, Answer A would require a Suspicious Activity Report filing as the deposits are made on a daily basis without providing a legitimate purpose.

According to the Financial Crimes Enforcement Network's (FinCEN) guidance, one example of a suspicious transaction is "frequent deposits of cash or monetary instruments in amounts under $10,000 to the same account, or a pattern of such deposits, unless the financial institution has a reasonable explanation for the pattern." (CAMS Manual, 6th Edition, Page 209)

 Money laundering has severe social and economic impacts, including increased crime rates, corruption and erosion of public trust. Money laundering fuels criminal activities by providing the necessary financial resources for criminals to continue their operations. As illicit funds circulate within the financial system, they enable the growth of criminal organizations and contribute to an increase in crime rates, including organized crime1. Money laundering also facilitates corruption and undermines public trust in financial institutions and the wider economy. This erosion of public trust is exacerbated by trade-based money laundering, which involves the manipulation of international trade transactions to disguise the origins of illicit funds2. Money laundering also weakens financial institutions by exposing them to reputational, operational, legal and regulatory risks. Money launderers exploit the vulnerabilities of financial systems and compromisetheir integrity and stability. Money laundering can also distort the allocation of resources, create inflationary pressures, and undermine the effectiveness of monetary policy3.

One of the criteria that the Financial Action Task Force (FATF) uses to define non-cooperative countries and territories (NCCTs) is the lack of adequate rules for the licensing and creation of financial institutions, especially those with no or minimal presence, and the lack of effective systems for checking the backgrounds of managers and beneficial owners of such institutions. This criterion aims to prevent the establishment and operation of shell banks or other entities that can be used for money laundering or terrorist financing purposes. The FATF requires that countries and territories should have laws and regulations that ensure that financial institutions are subject to adequate licensing or registration procedures, that the authorities have the power to deny or revoke licenses or registrations, and that the authorities have access to information on the identity, reputation, and financial soundness of the managers and beneficial owners of financial institutions.

The Office of Foreign Assets Control (OFAC) is a department of the US Treasury that administers and enforces economic and trade sanctions imposed by the US against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. The main purpose of the US Treasury Department for OFAC’s extraterritorial reach is to apply these sanctions to any person or entity that is subject to US jurisdiction, or that engages in transactions involving US persons, US dollars, or US goods or services. This way, the US can exert pressure on the targets of the sanctions and prevent them from accessing the US financial system or market. OFAC’s extraterritorial reach is authorized by Congressional legislation or presidential emergency powers, and is often based on UN Security Council resolutions or multilateral agreements.

The USA PATRIOT Act stipulates that US banks that maintain correspondent accounts for foreign banks must keep identification records of foreign bank owners with 50% or more ownership in the bank. This ensures that the US government can track the flow of funds through the correspondent accounts and prevent money laundering and terrorist financing. Additionally, the US federal banking agency can require foreign banks to produce records or information related to any account opened in the US or other countries. This allows the agency to monitor the activities of foreign banks and ensure compliance with US regulations.