ACAMS Updated CAMS Exam Questions and Answers by aniyah

The Wolfsberg Principles for Private Banking are a set of guidelines for private banking relationships that aim to prevent and detect money laundering and terrorist financing risks. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners in certain circumstances that may indicate a higher risk of money laundering or terrorist financing. Among the options given, A, B, and C are the correct choices that reflect the circumstances listed in the Principles.

Foreign jurisdictions are countries or territories other than the one where the bank operates or where the client or beneficial owner resides. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are connected to foreign jurisdictions, especially those that have weak or inadequate anti-money laundering standards, or that are subject to sanctions, embargoes, or similar measures.

High Risk Countries are countries or territories that are identified by credible sources, such as the Financial Action Task Force (FATF), as having inadequate anti-money laundering standards, or as being a source, transit, or destination of illicit funds. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are connected to high risk countries, and apply enhanced measures to mitigate the risks.

High Risk activities are activities that involve clients and beneficial owners whose source of wealth or funds originates from sectors or industries that are known to be vulnerable to money laundering, such as cash-intensive businesses, gambling, arms trade, precious metals and stones, or art and antiquities. The Principles state that the bank should conduct additional due diligence on clients and beneficial owners who are engaged in high risk activities, and verify the legitimacy and origin of their wealth and funds.

References: = The main reference for this question is the document titled “Wolfsberg Anti-Money Laundering Principles for Private Banking (2012)” published by the Wolfsberg Group. You can access it by clicking here. You can also find more information about the Wolfsberg Principles and their application on the Wolfsberg Group website and the Lexology website.

shell banks are banks that have no physical presence in any country and are not affiliated with any regulated financial institution. They are often used by money launderers and terrorist financiers to hide their illicit activities and evade regulatory oversight. The USA PATRIOT Act prohibits US financial institutions from opening or maintaining correspondent accounts with shell banks, and requires them to take reasonable steps to ensure that their foreign correspondent banks do not provide services to shell banks12. Therefore, the US does not have jurisdiction over shell banks operating in foreign jurisdictions, unless they are involved in transactions that violate US laws or sanctions.

References:

USA PATRIOT Act Section 313: Prohibition on U.S. Correspondent Accounts with Foreign Shell Banks1

Fact Sheet Regarding the Treasury Department’s Use of Sanctions Authorities to Combat Money Laundering and Terrorist Financing3

The compliance officer is the person who has the day-to-day responsibility of communicating and reinforcing the established anti-money laundering (AML) compliance culture and program within the organization. The compliance officer is also responsible for overseeing the implementation, maintenance, and improvement of the AML policies, procedures, controls, and training. The compliance officer should have sufficient authority, independence, and resources to perform their duties effectively and report to senior management and the board of directors on the status and effectiveness of the AML program.

References:

1, Chapter 4: Designing and Implementing an AML Compliance Program

2, FFIEC BSA/AML Examination Manual, Compliance Program - Overview

3, FinCEN Advisory, Guidance on Promoting a Culture of Compliance

High-risk: The risks here are significant, but are not necessarily prohibited. To mitigate the heightened risk presented, the financial institution should apply more stringent controls to reduce the ML/FT risk, such as conducting enhanced due diligence and more rigorous transaction monitoring. Countries that maintain a reputation for corruption or drug trafficking are generally considered high-risk. High-risk customers may include politically exposed persons (PEPs) or certain types of money services businesses or cash-intensive businesses; high-risk products and services may include correspondent banking and private banking.