CAMS Exam Questions Tutorials

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.

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 83 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 84 3: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 85 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 86 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 87 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 4, p. 88

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.

Wolfsberg Correspondent Banking Principles 20221, Section 4.5: Nested Relationships

Guidance on Correspondent Banking Services2, Section 3.2.2: Nested Correspondent Banking Relationships

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

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

A suspicious transaction report (STR) is a document that financial institutions must file with the relevant authorities when they detect or suspect any activity that may be related to money laundering, terrorist financing, or other criminal offences. An STR should include the details of the customer, the transaction, the reason for suspicion, and any other relevant information.

One of the indicators of suspicious activity is the use of financial instruments, such as checks, money orders, or cashier’s checks, that are drawn on other institutions and deposited in amounts under the currency reporting thresholds. This may suggest that the customer is trying to avoid the detection and reporting of large cash transactions, which is a technique known as structuring or smurfing. Structuring is illegal and may indicate that the customer is laundering money from illicit sources or evading taxes.

Another indicator of suspicious activity is the use of financial instruments that are sequentially numbered, meaning that they have consecutive serial numbers. This may suggest that the customer has obtained the instruments from the same source or issuer, and that they are using them to launder money or finance illegal activities. Sequentially numbered instruments may also indicate that the customer is involved in fraud, such as check kiting or counterfeit checks.

Therefore, if a bank conducts a quarterly review on a retail customer’s account and finds that the customer has made a number of large deposits of financial instruments drawn on other institutions in amounts under the thresholds, and that the instruments were sequentially numbered, the bank will most likely file an STR. This is because this activity does not fit the customer’s historical profile, and it raises a high level of suspicion that the customer is engaged in money laundering or other criminal activities.

CAMS Study Guide - 6th Edition, Chapter 4, Section 4.2, page 108

Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations, Question 5, page 7

Anti-money laundering – handling suspicious activity, Section 6.3, page 3

Tell us about suspicious activity that may be linked to money laundering, Section 3, page 1