ACAMS CAMS Online Practice Questions and Exam Preparation

ACAMS CAMS Online Questions & Answers

• Question 1:

  Enhanced due diligence (EDD) may be bypassed for which situation?

  A. On-boarding a branch or majority-owned subsidiary of an EU or US FI located in a high-risk third country that fully complies with group-wide policies and procedures.
  B. On-boarding a subsidiary in a high-risk country with a complex ownership structure of a long-standing and reputable customer based in the EU or US.
  C. On-boarding a casino headquartered in the EU or US 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.
  D. On-boarding a reputable Politically Exposed Person (PEP) from the EU onto the wealth management arm of a US financial institution (FI).
  C. On-boarding a casino headquartered in the EU or US 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.

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  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. References: CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 84 White Paper on KYC -- Enhanced Due-Diligence, page 2 Anti-money laundering ?a guide to customer due diligence, page 3 Enhanced Due Diligence for High-risk Customers, page 1

• Question 2:

  An AML analyst at a bank is investigating cases triggered by transaction monitoring alerts .

  Which circumstances might cause the analyst to suspect a case involves terrorist financing ? (Select Two.)

  A. Transactions involving non-profit organizations with no internet presence.
  B. Small-dollar payments sent to crowdfunding initiatives with detailed descriptions of the project being financed.
  C. Small-dollar payments sent to higher-risk jurisdictions with no prior history.
  D. Transactions involving domestic non-profit organizations providing charitable aid to refugees from higher-risk countries.
  E. Transactions involving structured currency deposits below the reporting threshold to avoid paying taxes.
  A. Transactions involving non-profit organizations with no internet presence.
  C. Small-dollar payments sent to higher-risk jurisdictions with no prior history.

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  Terrorist financing (TF) differs from traditional money laundering, as funds can originate from legitimate sources (e.g., donations, charities) and often involve low-value transactions . Option A (Correct): Non-profits with no online presence can be shell 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 details are generally low-risk . Option D (Incorrect): Charities helping refugees may be high-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.

• Question 3:

  One of the red flags of microstructuring is:

  A. depositing sequentially numbered checks.
  B. check deposits followed by ATM withdrawals using debt card in retail store.
  C. single activity in an account immediately following the opening of the account.
  D. frequent visits to make cash deposits of nominal amounts.
  D. frequent visits to make cash deposits of nominal amounts.

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  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. References: FinCEN Advisory ?FIN-2010-A001, page 4 Red Flags of Money Laundering | PPT, slide 9 Red Flags of Microstructuring | CAMS Exam Preparation | ACAMS Reference: https://www.acamstoday.org/developing-terrorist-financing-typologies-for-aml-programs/

• Question 4:

  What is the term for trading through multiple accounts, where an individual generates offsetting profits and losses and transfers of positions through accounts that do not appear to be commonly controlled?

  A. Ponzi scheme
  B. Market Manipulation
  C. Net Trading
  D. Wash Trading
  D. Wash Trading

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  Wash trading is the term for trading through multiple accounts, where an individual generates offsetting profits and losses and transfers of positions through accounts that do not appear to be commonly controlled. Wash trading is a form of market manipulation that creates artificial trading activity and volume, and may be used to evade taxes, inflate prices, or launder money. Wash trading can also involve the use of third parties or intermediaries to conceal the true identity and source of funds of the trader. References: The main references for this question are the following sources: The document titled "Money Laundering and Terrorist Financing Typologies and Trends in Canadian Securities Dealers" published by the Investment Industry Regulatory Organization of Canada (IIROC) in December 2019. You can access it by clicking here. This document states that "Wash trading is a form of market manipulation where an individual simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. Wash trading is illegal under securities law because it misleads investors and regulators about the true supply and demand of the securities involved. Wash trading can also be used to evade taxes, inflate prices, or launder money." The document titled "Market Manipulation" published by the Financial Industry Regulatory Authority (FINRA). You can access it by clicking here. This document states that "Wash sales are a form of market manipulation in which an investor simultaneously sells and buys the same security to create misleading, artificial activity in the marketplace. Wash sales are illegal under Section 9(a)(1)(A) of the Securities Exchange Act of 1934. Wash sales can be used to manipulate the price of a security, evade taxes, or launder money."

• Question 5:

  Which is the first valid step in the Mutual Legal Assistance Treaties (MLAT) international cooperation process?

  A. The central authority that receives the request sends it to a local judicial officer to find out if the information is available.
  B. The central authority of the requesting country sends a commission letter of request to the central authority of the other country.
  C. The investigator may remove the evidence collected without asking permission to do so.
  D. An investigator from the requesting country visits the country where the information is sought and takes statements from the identified witnesses or suspects.
  B. The central authority of the requesting country sends a commission letter of request to the central authority of the other country.

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  Mutual Legal Assistance (MLA) is a form of cooperation between different countries for the purpose of collecting and exchanging information and evidence in criminal matters. MLA is usually governed by bilateral or multilateral treaties that establish the procedures and requirements for requesting and providing assistance. The first valid step in the MLA process is to send a formal request from the central authority of the requesting country to the central authority of the requested country. The central authority is the designated entity that is responsible for making, receiving, and facilitating the execution of MLA requests. The request should contain the necessary information and documents to enable the requested country to assess and execute the request, such as the nature and purpose of the request, the legal basis, the description of the assistance sought, the identity of the persons involved, the applicable legal provisions, and the deadline for the response. The request may also be accompanied by a commission letter of request, which is a judicial document that authorizes a foreign authority to perform certain acts on behalf of the requesting authority, such as taking evidence or statements from witnesses or suspects.

• Question 6:

  The Board of Directors and the senior management of a financial institution should ensure that which three are established and followed with regard to an effective AML program?

  A. There is a strong compliance program
  B. International guidance is followed and understood
  C. They are kept informed of all major AML issues
  D. Regulatory compliance is made part of all relevant job descriptions
  A. There is a strong compliance program
  C. They are kept informed of all major AML issues
  D. Regulatory compliance is made part of all relevant job descriptions

• Question 7:

  Which three elements should be considered in an institution's enhanced due diligence process to assure itself that it has secured sufficient understanding of its higher risk respondent bank customers according to the Wolfsberg Principles on Correspondent Banking?

  A. The quality of the respondent's AML and client identification controls
  B. A risk-based determination as to whether or not the respondent is a shell bank
  C. Whether a Politically Exposed Person (PEP) has an interest or management role in the respondent
  D. The sources of wealth for all significant ownership interests
  A. The quality of the respondent's AML and client identification controls
  B. A risk-based determination as to whether or not the respondent is a shell bank
  C. Whether a Politically Exposed Person (PEP) has an interest or management role in the respondent

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  According to the Wolfsberg Principles on Correspondent Banking1, an institution should consider the following three elements in its enhanced due diligence process for higher risk respondent bank customers: The quality of the respondent's AML and client identification controls: The correspondent should assess the adequacy and effectiveness of the respondent's AML policies, procedures, and systems, as well as its compliance with applicable AML laws and regulations. The correspondent should also verify that the respondent has implemented appropriate customer identification and verification measures, and that it maintains sufficient records of its customers and transactions. A risk-based determination as to whether or not the respondent is a shell bank: The correspondent should ensure that the respondent is not a shell bank, which is defined as a bank that has no physical presence in any country and is not affiliated with a regulated financial group. The correspondent should also avoid establishing or maintaining relationships with banks that are known to allow their accounts to be used by shell banks. Whether a Politically Exposed Person (PEP) has an interest or management role in the respondent: The correspondent should identify and assess the potential risks associated with any PEPs who have an ownership or management interest in the respondent, or who are customers of the respondent. The correspondent should apply enhanced scrutiny and monitoring to such relationships, and obtain senior management approval before establishing or continuing them. References: Wolfsberg Correspondent Banking Principles 2022 by the Wolfsberg Group, October 2022.

• Question 8:

  A legal instrument executed between two nations governing cross-border information sharing is called a:

  A. Memorandum of agreement
  B. Declaration of understanding
  C. Memorandum of understanding
  D. Mutual legal assistance treaty
  D. Mutual legal assistance treaty

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  A Mutual Legal Assistance Treaty (MLAT) is a formal agreement between nations allowing law enforcement cooperation in criminal investigations . Option D (Correct): MLATs allow authorities to exchange information, request evidence, and collaborate on AML enforcement . Option A (Incorrect): A Memorandum of Agreement (MOA) is a non-binding document for cooperation, not a legal treaty. Option B (Incorrect): A Declaration of Understanding is informal and does not carry legal obligations. Option C (Incorrect): MOUs are non-binding agreements , while MLATs create legal obligations .

• Question 9:

  What does the Egmont Group's support for its members include?

  A. Issuing due diligence models for financial institutions
  B. Expanding and systematizing international cooperation in the reciprocal exchange of information
  C. Issuing strategic products for law enforcement agencies and FIUs on topics of international interest
  D. Expanding the ability of FIUs to enforce laws and exchange information globally to combat money laundering and terrorist financing
  B. Expanding and systematizing international cooperation in the reciprocal exchange of information

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  The Egmont Group is a global network of Financial Intelligence Units (FIUs) that aims to enhance the capabilities and cooperation of its members in combating money laundering, terrorist financing, and other financial crimes. The Egmont Group supports its FIU members by helping them to expand and systematize the exchange of financial intelligence and information, improve expertise and capabilities of personnel, and enable secure communication with one another12. The Egmont Group does not issue due diligence models for financial institutions, as this is the responsibility of national regulators and standard-setting bodies. The Egmont Group does not issue strategic products for law enforcement agencies and FIUs, as this is the role of other international organizations such as the Financial Action Task Force (FATF) and the United Nations Office on Drugs and Crime (UNODC). The Egmont Group does not expand the ability of FIUs to enforce laws and exchange information globally, as this depends on the legal and operational frameworks of each FIU and the bilateral or multilateral agreements they have with other FIUs. References: Egmont Group Working Groups - Egmont Group Overview of the Egmont Group of Financial Intelligence Units The Egmont Group of Financial Intelligence Units | FinCEN.gov Egmont Group - Qatar Financial Information Unit

• Question 10:

  A Financial Intelligence Unit (FIU) in a country has received a SAR involving significant suspicious fund transfers , not only within its jurisdiction but also in a foreign country . Further information is required from the foreign country to determine whether the matter needs to be referred for prosecution locally. Which of the following statements is true in this scenario?

  A. Sovereignty of nations means that information cannot be accessed from foreign countries .
  B. It is against international laws on data protection to access information from foreign countries.
  C. Any information related to money laundering can be received from any organization at any time , regardless of jurisdiction.
  D. Countries that are members of the Egmont Group can request assistance for information from each other.
  D. Countries that are members of the Egmont Group can request assistance for information from each other.

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  International cooperation is essential in AML investigations , and the Egmont Group facilitates FIU-to- FIU information sharing . Option D (Correct): Egmont Group members can request and share information for AML/CFT investigations . Option A (Incorrect): Sovereignty does not prevent cooperation under proper agreements . Option B (Incorrect): AML laws allow data sharing under legal frameworks like Mutual Legal Assistance Treaties (MLATs) . Option C (Incorrect): Information sharing is restricted to FIUs and authorized agencies , not all organizations .