CAMS Exam Dumps - Certified Anti-Money Laundering Specialist (the 6th edition)

The rules imposed by the Office of Foreign Assets Control (OFAC) for legal entities and persons related to the US are:

Nationals of the US must comply with OFAC rules, regardless of where they are located in the world. This means that US citizens, permanent residents, and entities organized under US law are subject to OFAC sanctions and prohibitions, even if they operate or reside outside the US12.

Any foreign corporation is also penalized if it conducts transactions with sanctioned countries under OFAC rules. This means that non-US entities that engage in trade or financial dealings with OFAC-designated countries, entities, or individuals are liable to face civil or criminal penalties, as well as secondary sanctions that could restrict their access to the US market or financial system34.

The other options are not correct, because:

A subsidiary of a legal entity of the US, which is formally registered in a foreign country, is not exempt from OFAC rules. This means that foreign-incorporated entities that are owned or controlled by US persons or entities are also subject to OFAC sanctions and prohibitions, unless they are specifically authorized or licensed by OFAC12.

A foreign individual visiting the US for a short vacation is not obligated to follow OFAC rules. This means that non-US persons who are temporarily present in the US are not subject to OFAC sanctions and prohibitions, unless they are involved in transactions that have a US nexus or violate other US laws.

The head office of a foreign legal entity which has a branch in the US does not need to comply with OFAC rules. This means that non-US entities that have a presence or operation in the US are not subject to OFAC sanctions and prohibitions, unless they are involved in transactions that have a US nexus or violate other US laws.

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.

When investigating an AML event, the following techniques would be used to investigate suspected mule accounts:

A. Determine if the suspected accounts are being accessed by a common person, telephone number, or device. This can help identify if the accounts are controlled by the same person or group, or if they are part of a larger network of mules. It can also help detect if the accounts are opened using synthetic identities or stolen credentials12.

B. Reconcile the stated purpose of the account with actual transaction history and compare with peer groups. This can help assess if the account activity is consistent with the customer profile, risk rating, and expected behavior. It can also help identify anomalies, such as sudden changes in transaction patterns, large or frequent transfers, or transactions with high-risk jurisdictions or entities12.

E. Establish the frequency with which the funds are moved in and out of the accounts. This can help measure the velocity and volume of the funds flowing through the accounts, which can indicate if the accounts are used for layering or integration of illicit funds. It can also help detect if the accounts are used for smurfing, which is a technique of breaking down large amounts of cash into smaller deposits to avoid detection or reporting thresholds13.

 A financial institution should consult with its legal counsel before responding to a grand jury subpoena regarding a customer, as such subpoenas may involve complex legal issues and potential conflicts of interest. A grand jury subpoena is a legal order issued by a federal or state grand jury that compels a person or entity to produce documents, testify, or both, in connection with a criminal investigation. A financial institution that receives a grand jury subpoena should not disclose its existence or contents to the customer or any third party, unless authorized by law or the court, as doing so may constitute obstruction of justice or violate the secrecy rules of the grand jury. A financial institution should also assess and review all relevant information it has about the customer that is the subject of the subpoena, in accordance with its risk-based AML program, and consider filing a SAR if it identifies any suspicious activity.

The United Nations Security Council (UNSC) is authorized under the UN Charter to imposebinding sanctions measureson member states. These sanctions may target countries, entities, or individuals and can include arms embargoes, travel bans, asset freezes, and restrictions on trade or financial services.

Statement Ais correct:

Circumventing or evading UNSC sanctionsmay constitute a criminal offenseif the jurisdiction has incorporated UN obligations into domestic law. While the UNSC does not directly impose criminal penalties,member states must implement these measures locally, andmany jurisdictions have lawsthat make such violations criminal acts.

Statement Bis incorrect:

The UNSC is empowered toimpose broad restrictions, includingtrade bans beyond arms, such as on luxury goods, fuel, or specific commodities. Therefore, the idea that it cannot prohibit exports beyond arms is inaccurate.

Statement Cis correct:

Member countries of the United Nations are expected to implement and enforce UNSC sanctions, in accordance with their obligations under the UN Charter (specifically Chapter VII). Countries are responsible for transposing these sanctions into their national legal frameworks.

Statement Dis incorrect:

Although member countries are required to enforce sanctions,not all countries automatically consider breaches a criminal offense. Whether a violation is criminal depends on how each country enacts UN sanctions domestically.

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.

According to the Financial Action Task Force (FATF), financial institutions should apply a risk-based approach to customer due diligence (CDD), which includes obtaining and updating information on the identity, beneficial ownership, and business activities of their clients. If a client refuses to provide or update such information, or provides false or misleading information, the financial institution should consider this as a red flag for potential money laundering or terrorist financing, and should exit the relationship with the client, unless the circumstances warrant otherwise. Exiting the relationship with a client who refuses to update information is also consistent with the FATF’s Recommendation 10, which requires financial institutions to terminate the business relationship if they are unable to perform CDD measures.

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.