CAMS Practice Questions

"Transaction Monitoring Systems and Ongoing Monitoring: Since the transactional monitoring

system is key to mitigating ML risk within the bank, the Committee recognizes that AML risks require

more than just appropriate policies and procedures; banks must have adequate and appropriate

monitoring systems. For most banks, this will involve an IT monitoring system. If the bank does not

believe it needs an IT monitoring system, it should document the rationale for why it does not need

one.

Structuring is the practice of breaking down large amounts of cash into smaller transactions to avoid

triggering currency transaction reports (CTRs) or suspicious activity reports (SARs) by financial

institutions. CTRs are required for cash deposits or withdrawals of more than $10,000 in the United

States, and SARs are filed when there is a reasonable suspicion of money laundering or other illicit

activity. By making multiple deposits of less than $10,000 at different tellers, the owner of the retail

store is attempting to evade the reporting requirements and conceal the source or destination of the

funds. This is a common technique used by money launderers in the placement stage of the money

laundering process, when they try to introduce illegal proceeds into the financialsystem. Structuring

is illegal under the Bank Secrecy Act and can result in civil and criminal penalties.

6: CAMS Certification Package - 6th Edition | ACAMS, Chapter 2: Money Laundering Risks and

Methods, page 43

1: Structuring Cash Deposits, Withdrawals, & Transactions Risk, Golding & Golding

2: Structuring - Wikipedia

According to the Certified Anti-Money Laundering Specialist (CAMS) Sixth Edition manual, the AML

compliance officer should inform senior leadership and the board of the investigation (page 124) and

monitor the progress of the investigation by keeping clear records (page 127). Additionally, the AML

compliance officer should provide all information to the FIU as soon as possible to avoid delays (page

126).

According to the CAMS Manual, when a financial institution is being investigated by the financial

intelligence unit (FIU), the AML compliance officer should inform senior leadership and the board of

the investigation and monitor the progress of the investigation by keeping clear records. The manual

states:

"The AML compliance officer should inform senior leadership and the board of any investigations and

then monitor the progress of the investigation by keeping clear records of what has been requested

and submitted, deadlines and extensions granted, and any findings or reports received. This will

allow the financial institution to respond effectively and efficiently to the investigation and take

appropriate action if necessary." (CAMS Manual, Section 7.4.1 - Financial Intelligence Units, p. 366)

According to the ACAMS Study Guide for the CAMS Certification Exam (6th edition), page 215, one of

the best practices for banks to prevent and detect mortgage fraud is to conduct internal

investigations when there are red flags or suspicions of fraud involving bank employees. The

investigation should include reviewing the employee’s loan files, interviewing the employee and

other relevant parties, verifying the information and documents provided by the employee, and

documenting the findings and actions taken. Filing a suspicious activity report (SAR) may be

appropriate after the investigation is completed and the bank has reasonable grounds to suspect

fraud. Filing a police report or initiating civil litigation may also be options depending on the

outcome of the investigation and the bank’s policies, but they are not the first steps to take when the

bank suspects an employee of mortgage fraud.

Reference:

ACAMS Study Guide for the CAMS Certification Exam (6th edition), page 2151

Mortgage Fraud: Understanding and Avoiding It2

Mortgage Fraud: What You Need To Know3

The scenario described in the question presents several indicators of potential money laundering

through real estate, which the broker should be aware of and report accordingly. The most relevant

red flags are:

Value: The student wants to buy a home that is overvalued, meaning that the asking price is higher

than the market value or the appraisal value of the property. This could indicate that the student is

trying to launder a large amount of illicit funds in one transaction, or that the seller is colluding with

the student to inflate the price and receive a kickback. Overvaluing or undervaluing properties is a

common technique used by money launderers to manipulate the price of real estate and conceal the

source or destination of their funds12.

Inconsistency: The student’s behavior and profile are inconsistent with the typical characteristics of a

legitimate home buyer. The student cancels the viewing of the home at the last minute due to illness,

which could suggest a lack of interest or a pretext to avoid scrutiny. The student also wants to buy an

expensive home despite being a student, which could indicate a discrepancy between the student’s

income and the source of funds. Moreover, the student disregards the broker’s objections to the

asking price, which could imply that the student is not concerned about the value or quality of the

property, but rather the amount of money that can be laundered through it34.

Transaction speed: The student wants to quickly buy the home, which could indicate a sense of

urgency or pressure to move the illicit funds before they are detected or seized by the authorities.

Money launderers often use fast transactions to avoid raising suspicion or leaving a paper

trail. Transaction speed is especially relevant when combined with other red flags, such as cash

payments, anonymous buyers, or overvalued properties5 .

Reference:

Understanding Money Laundering in Real Estate

RED FLAG INDICATORS FOR REAL ESTATE SECTOR

Investigating Money Laundering through Real Estate

AML Red Flags Associated with Real Estate Sector Businesses

FinCEN Proposes Rule to Combat Money Laundering and Promote Transparency in Residential Real

Estate

[ACAMS Study Guide, 6th Edition, Chapter 7, pp. 200-201]

According to the CAMS Certification Package - 6th Edition1, the decision to keep or close an account

after filing a suspicious transaction report (STR) should be based on a risk-based approach that

considers the nature and severity of the suspicious activity, the customer profile and relationship, the

regulatory and legal obligations, and the reputational and operational risks for the institution. The

financial impact, the administrativecosts, and the number of accounts closed are not the primary

factors in determining the appropriate course of action. Therefore, the correct answer is B.

Procedures to ascertain the potential risk to the organization.

CAMS Certification Package - 6th Edition1, Chapter 5: Risk Management, Section: Account Closure,

pp. 211-212.

The bank’s current anti-money laundering program is inadequate because it does not include a

process for monitoring customer account activity, which is a key component of detecting and

reporting suspicious transactions. The fact that the consultant and the bank have mutual clients does

not affect the risk rating of those customers, nor does it justify a lower level of scrutiny. The bank

should revise its procedures to ensure that it has a comprehensive and risk-based approach to

customer due diligence, transaction monitoring, and reporting.

CAMS Certification Package - 6th Edition, Chapter 3: Compliance Standards for Anti-Money

Laundering (AML) and Combating the Financing of Terrorism (CFT), pp. 67-69.

FATF Guidance for a Risk-Based Approach: Legal Professionals, pp. 10-11, 19-20.

BSA/AML Internal Audit: PwC, pp. 1-2.

According to the ACAMS CAMS Certification Study Guide (6th edition), one of the challenges of

information sharing within a financial group is the compliance with privacy and data protection rules

that may vary across jurisdictions. Therefore, before sharing information about a customer with an

affiliate, a bank should consider whether such sharing is permitted by the applicable laws and

regulations, and whether the customer has consented to it. The other options are not relevant

factors for information sharing in the case of an investigation.

ACAMS CAMS Certification Study Guide (6th edition), page 971; ACAMS CAMS Certification Video

Training Course, Module 4, Lesson 22

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 38, one of the steps that a

financial institution should take when it suspects money laundering activity is to file a suspicious

transaction report (STR) or a suspicious activity report (SAR) to the relevant authorities. This will alert

the regulators and law enforcement of the potentialmoney laundering scheme and provide them

with valuable information to trace the funds and identify the perpetrators.

Another step that a financial institution should take is to identify any unusual or suspicious wire

transfers initiated by casas de cambio to jurisdictions outside of Mexico that bear no apparent

business relationship with that casa de cambio. This could indicate that the casas de cambio are

involved in layering and integration stages of money laundering, where they are moving the illicit

funds across borders and disguising their origin and ownership. The financial institution should

monitor and document these wire transfers and report them to the authorities if necessary.

Option B is not a relevant step to trace funds through the bank, as it does not provide any

information about the source, destination, or purpose of the funds. A decrease in the sale of large

denomination U.S. bank notes to casas de cambio by the bank could be due to various factors, such

as market demand, exchange rates, or regulatory changes, and does not necessarily indicate money

laundering activity.

Option C is also not a relevant step to trace funds through the bank, as it does not indicate any

connection to the suspected money laundering scheme. Deposits by casas de cambio that include

third-party items, such as sequentially numbered monetary instruments, could be legitimate

transactions that are part of the normal business operations of the casas de cambio. Unless there is

evidence that these deposits are related to the sale of large denomination U.S. bank notes or the

Mexican syndicate, they are not useful for tracing the funds.

ACAMS Study Guide 6th Edition, Chapter 2, page 38

Combating Money Laundering and Other Forms of Illicit Finance

Sting Operation Snares Casa de Cambio for Allegedly Laundering Millions Through U.S. Banks

According to the Basel Committee on Banking Supervision guidelines, the internal audit

functionshould evaluate the adequacy and effectiveness of the bank’s compliance function and its

compliance risk management framework1. This includes assessing the compliance risk inherent in

the bank’s activities, products, services, and systems, as well as the compliance policies, procedures,

controls, and reporting mechanisms2. The internal audit function should also review the transactions

and records of the bank to ensure compliance with applicable laws, regulations, and internal

standards3.

The other statements are incorrect because:

B . An internal audit program of adequacy of the bank’s compliance function should be established,

but should not include review of transactions. This statement is false because the internal audit

function should review the transactions and records of the bank to ensure compliance, as mentioned

above3.

C . The compliance function and internal audit function should be combined. This statement is false

because the compliance function and the internal audit function should be separate and

independent from each other, to avoid conflicts of interest and ensure objectivity and credibility.

D . The auditors should not discuss internal audit findings with compliance management to maintain

independence. This statement is false because the internal audit function should communicate and

coordinate with the compliance function on a regular basis, to share information, insights, and

recommendations, and to avoid duplication of work. However, the internalaudit function should

maintain its independence and report directly to the board of directors or the audit committee.

1: The internal audit function in banks, Principle 10, p. 9

2: The internal audit function in banks, Principle 10, p. 10

3: The internal audit function in banks, Principle 10, p. 11

The internal audit function in banks, Principle 2, p. 4

The internal audit function in banks, Principle 10, p. 11