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

International business corporations (IBCs) are entities that are created in jurisdictions that offer low or no taxes, high confidentiality, and minimal regulation. They are often used by individuals and businesses to avoid or evade taxes, conceal assets, and launder money. Some of the risks associated with IBCs are:

They are created in a tax haven. Tax havens are countries or territories that have low or no taxes, lax financial regulation, and high secrecy. They attract IBCs that seek to reduce their tax liabilities, hide their beneficial owners, and evade scrutiny from authorities. Tax havens pose a risk to the global financial system, as they facilitate tax evasion, money laundering, corruption, and illicit financial flows12.

They are established with nominee directors. Nominee directors are individuals who act as the legal representatives of an IBC, but have no actual control or authority over its activities. They are often used to shield the true beneficial owners of the IBC from detection and accountability. Nominee directors pose a risk to the transparency and integrity of the IBC, as they can enable fraud, tax evasion, money laundering, and other criminal activities34.

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.

 According to the Basel Committee guidelines, banks should formulate a customer acceptance policy and a tiered customer identification programme that involves more extensive due diligence for higher risk customers12. The customer acceptance policy should be approved by senior management and include clear guidelines on the types of customers that are likely to pose a higher than average risk to the bank1. Senior management should also ensure that the bank has adequate resources and systems to effectively manage the risks associated with higher risk customers1. Therefore, senior management should determine whether or not to enter business relationships with higher risk customers, based on the bank’s risk appetite, policies, and procedures.

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.

SAR information ishighly sensitive, and institutionsmust follow strict confidentiality rulesto protect investigations and avoid “tipping off” customers.

Option D (Correct):Statistical summaries (e.g., the number of SARs filed, trends, typologies)help the Board monitor AML riskswithout disclosing confidential details.

Option A (Incorrect):Providingall possible detailsmay violateSAR confidentiality laws.

Option B (Incorrect):Sharing full SAR copieswith non-compliance staff isnot permittedunder AML regulations.

Option C (Incorrect):Naming specific customers under SAR reviewrisks"tipping off"or leaking confidential information.

Best Practices for SAR Reporting to the Board:

Provide anonymized statistics on SAR trends.

Highlight emerging AML risks and compliance effectiveness.

Avoid disclosing specific cases or customer names.

Human trafficking and modern slaveryinvolveillicit financial transactions, often conductedthrough banks, money service businesses (MSBs), or virtual assets.

Option B (Correct):Frequent payments for online advertisementscan indicaterecruitment for illicit labor or traffickingoperations.

Option C (Correct):Incoming funds from third-party processors with unclear originatorssuggestconcealed financial flows linked to illicit activities.

Why Other Options Are Incorrect:

Option A (Incorrect):Transactional activity with a virtual currency exchange alone is not a strong human trafficking red flag.

Option D (Incorrect):Cash payments to workers could indicate labor law violations but do not necessarily indicate human trafficking.

Common Financial Red Flags for Human Trafficking:

Unexplained cash deposits and withdrawals from multiple accounts.

Frequent wire transfers to high-risk jurisdictions.

Use of prepaid cards to move funds anonymously.

Best Practices for Detecting & Preventing Human Trafficking-Related Transactions:

Train frontline staff to recognize financial indicators of trafficking.

Monitor unusual transaction patterns in industries with high labor exploitation risks.

File Suspicious Activity Reports (SARs) when trafficking-related transactions are suspected.

Trade-based money laundering (TBML) involves manipulating trade transactions to move illicit funds rather than goods. One common technique is over-invoicing, where an exporter intentionally inflates the invoice value of goods. In this scenario, an England-based exporter would over-invoice a shipment to Cyprus. By doing so, the exporter creates a surplus amount that can be transferred back to the terrorist organization in England, effectively disguising the movement of illicit funds12.

Thelife insurance industryis vulnerable tomoney laundering and terrorist financing, especially when policies allowpayments to unknown third parties.

Option A (Correct):Allowing policyholders to transfer funds tounknown third partiesincreases therisk of money laundering. FATF andEU AML Directiveshighlight life insurance policies as high-risk products.

Option B (Incorrect):Completing KYC does not eliminate risk. Customers can use legitimate insurance products for illicit purposes.

Option C (Incorrect):While governance violations should be addressed, themain concern here is money laundering risk, not the compliance team’s involvement in product development.

Option D (Incorrect):Fast-tracking approvalwithoutproper risk assessmentcreates regulatory and reputational risks.