ACAMS Updated CAMS Exam Questions and Answers by ela

The two most relevant measures for a professional dealer in precious metals and stones to reduce the risk of being misused for money laundering purposes are:

B. Stop accepting payments from persons other than the beneficiary: This measure can help to ensure that the source of funds is legitimate and can be traced back to the customer.

D. Limit the acceptance of purchases without adequate customer identification information: Adequate customer identification information is necessary for the purpose of identifying and verifying the customer's identity and determining whether the customer is a politically exposed person (PEP) or has any other risk characteristics that may require enhanced due diligence measures.

According to the Basel Committee on Banking Supervision standards, the following statements best describe sound practices in relation to customer due diligence (CDD) policies and procedures:

Banks should take into consideration the occasional banking transaction or the size/level of assets to build an understanding of the customer’s profile and behavior. This is because the nature and frequency of transactions and the size of the account balance may indicate the level of risk associated with the customer and the need for ongoing monitoring1

Banks should develop and implement clear acceptance policies and procedures to identify the types of customer that are likely to pose a higher risk of financing terrorism or money laundering. This is because banks should not enter into or maintain relationships with customers who pose unacceptable risks to the bank or the financial system. Banks should also apply a risk-based approach to CDD and apply more stringent measures to higher-risk customers12

Banks should implement enhanced due diligence measures for entering business relationships with high-risk customers, such as approval by senior management. This is because banks should ensure that they have adequate information and controls to manage the risks posed by such customers and to comply with the relevant laws and regulations. Senior management should be involved in the decision-making process and be accountable for the outcomes12

References: 1: Basel Committee on Banking Supervision, Consolidated KYC Risk Management, October 2004, page 6-7. 2: Basel Committee on Banking Supervision, Customer due diligence for banks, October 2001, page 8-9.

Large and frequent credit balances on a credit card resulting in request for refunds is an indicator of suspicious activity because it may suggest that the cardholder is using the credit card to launder money or to conceal the source of funds. This is also known as credit card refund fraud or credit card laundering. The cardholder may make purchases with the credit card using illicit funds, then request refunds to another account or in cash, thus transferring the funds to a legitimate or less traceable channel. This activity may also be used to evade currency reporting requirements or to avoid detection by law enforcement or financial institutions.

References:

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Money Laundering Risks and Methods, page 381

Suspicious Activity Reporting Indicators and Examples, U.S. Department of Homeland Security, Indicator 14: Excess Purchases or Transactions2

Credit Card Laundering, Money Laundering Bulletin, Issue 245, October 2019

 According to the CAMS Study Guide, the most commonly used risk criteria for assessing the money laundering and terrorist financing risks are country risk, customer risk, and product and service risk. These criteria are based on the FATF Recommendations and the Basel Committee’s guidance on sound management of risks related to money laundering and financing of terrorism.

Country risk refers to the level of exposure to potential money laundering and terrorist financing activities in a specific jurisdiction, based on factors such as the quality of its AML/CFT regime, its level of corruption, its political and economic stability, its involvement in illicit activities, and its cooperation with international bodies.

Customer risk refers to the level of exposure to potential money laundering and terrorist financing activities associated with a specific customer or customer segment, based on factors such as the nature and purpose of the business relationship, the source and destination of funds, the type and volume of transactions, the customer’s profile and behavior, and the customer’s geographic location.

Product and service risk refers to the level of exposure to potential money laundering and terrorist financing activities associated with a specific product or service offered by a financial institution, based on factors such as the complexity, transparency, anonymity, and accessibility of the product or service, the delivery channels and payment methods used, and the degree of oversight and monitoring applied.

Reputation risk is not a risk criterion for assessing the money laundering and terrorist financing risks, but rather a potential consequence of failing to manage those risks effectively. Reputation risk refers to the potential damage to the public trust and confidence in a financial institution due to its involvement or association with money laundering and terrorist financing activities, whether directly or indirectly.

References:

CAMS Study Guide, 6th Edition, Chapter 2: Risk Assessments, pp. 41-461

FATF Recommendations, Recommendation 1: Assessing Risks and Applying a Risk-Based Approach2

Basel Committee on Banking Supervision, Sound management of risks related to money laundering and financing of terrorism, June 2017, pp. 9-143