CAMS-FCI practice question 20 of 25

A financial institution (Fl) banks a money transmitter business (MTB) located in Miami. The MTB regularly initiates wire transfers with the ultimate…

A financial institution (Fl) banks a money transmitter business (MTB) located in Miami. The MTB regularly initiates wire transfers with the ultimate beneficiary in Cuba and legally sells travel packages to Cub a. The wire transfers for money remittances comply with the country's economic sanctions policies. A Fl investigator on the sanctions team reviews each wire transfer to ensure compliance with sanctions and to monitor transfer details. An airline located in Cuba, unrelated to the business, legally sells airline tickets in Cuba to Cuban citizens wanting to travel outside of Cuba. The airline tickets are purchased using Cuban currency (CUC). The MTB wants 100,000 USD worth of CUC. Purchasing CUC from a Cuban bank includes a 4% fee. The MTB contacts the airline to ask if the airline will trade its CUC for USD at a lower exchange fee than the Cuban bank. The airline agrees to a 1% fee. The MTB initiates a wire transfer to the airline which appears as normal activity in the monitoring system because of the business' travel package sales. Which investigative actions should the investigator take concerning the 100.000 USD wire transfer? (Select Three.)

Answer options

A: Review the wire transfer protocols for this customer. Correct answer

B: Gather all account activity for Fl clients that purchased packages from the airline.

C: Review a sampling of wire transfers initiated by travel companies with Cuba travel packages.

D: Recommend a plan for the Fl's management to restrict the account relationship.

E: Review regulations applicable to foreign currency trading transactions. Correct answer

F: Locate and review licenses, registrations, and account operating agreements associated with the MTB account. Correct answer

Correct Answer:

A. Review the wire transfer protocols for this customer.; E. Review regulations applicable to foreign currency trading transactions.; F. Locate and review licenses, registrations, and account operating agreements associated with the MTB account.

Explanation

The core of the suspicious activity is the MTB conducting a large, off-market currency exchange with an unusual counterparty (an airline), potentially to circumvent regulations or fees. The investigator must first understand the established protocols for this customer's wires to see if this is a deviation (A). Crucially, the investigator must determine the legality of this action by reviewing regulations for foreign currency trading (E) and checking the MTB's own licenses and agreements to see if it is authorized to perform such transactions (F). These steps verify whether the MTB is operating outside its expected and licensed business activity.

Why Incorrect

B. Investigating other FI clients is irrelevant to the MTB's specific activity and raises privacy concerns. The focus should be on the MTB.
C. A peer group review is a secondary step; the primary focus must be on the specific customer's actions and authorizations.
D. Recommending account restrictions is a potential outcome of an investigation, not an investigative step itself. It is premature at this stage.

References

1. Financial Action Task Force (FATF). (2012-2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations. Paris: FATF/OECD. Recommendation 10, "Customer Due Diligence," requires FIs to understand the nature of the customer's business and scrutinize transactions to ensure they are consistent with that business.

2. Wolfsberg Group. (2019). Wolfsberg Guidance on Sanctions Screening. While focused on sanctions, the principles apply to understanding customer transactions. Section 3.3 discusses the importance of understanding payment details and counterparties to assess risk and compliance.

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