ACAMS Updated CAMS Exam Questions and Answers by karter

Enhanced due diligence (EDD) is a higher level of customer due diligence that is required for customers or accounts that pose a higher risk of money laundering or terrorist financing. According to the FATF Recommendations, EDD measures may include obtaining additional information on the customer, the beneficial owner, the intended nature and purpose of the business relationship, the source and destination of funds, and the reasons for transactions. EDD is also required for customers or accounts that are from or in countries that do not have adequate AML/CFT systems or are subject to sanctions or embargoes.

Among the four categories of customers or accounts listed in the question, lawyers, foreign exchange dealers, and precious metal dealers are considered as high-risk by the FATF and other international standards, and therefore require EDD. Lawyers may be involved in transactions that conceal the origin or ownership of illicit funds, such as creating shell companies, trusts, or foundations. Foreign exchange dealers may facilitate the movement of illicit funds across borders or jurisdictions, or provide anonymous or pseudonymous services. Precious metal dealers may deal with high-value goods that are easily convertible into cash, or may be used to launder proceeds of crime or evade sanctions.

Retail account holders, on the other hand, are generally considered as low-risk customers or accounts, unless they exhibit unusual or suspicious behavior or transactions. Therefore, they do not require EDD by default, but only when there are specific indicators of higher risk.

References:

[ACAMS Study Guide for the CAMS Certification Examination, 6th Edition], Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), pp. 75-76, 79-80.

FATF Guidance on Correspondent Banking Services, October 2016, pp. 7-8, 12-13.

Customer Due Diligence - Overview, Federal Financial Institutions Examination Council, April 2018, pp. 1-2, 5-6.

Customer due diligence, The Law Society, accessed on February 9, 2024.

Anti-Money Laundering (AML) Source Tool for Broker-Dealers, U.S. Securities and Exchange Commission, May 16, 2022, pp. 1-2, 5-6.

Art and Antiquities: Conduits for Money Laundering and Terrorist Financing

Why Fight the Antiquities Trade?

More recently, groups like Daesh (Islamic State [IS]), al-Qaida, the Taliban and their affiliates have been engaged in ****cultural racketeering and terrorism in Iraq, Syria, Yemen, Afghanistan and elsewhere, converting patrimony into cash for weapons and troops****.

https://www.un.org/press/en/2015/sgsm17427.doc.htm

As Terrorists Diversify Fundraising Tactics, Greater Efforts Needed to Shut Down Illicit Channels, Secretary-General Tells Finance Ministers’ Meeting

Terrorists continue to adapt their tactics and diversify their funding sources. Today, Da’esh runs a multi-million-dollar economy in territories under its control. Da’esh terrorists raise money through the oil trade, extortion, undetected cash couriers, kidnapping for ransom, trafficking of humans and arms and racketeering. They loot and sell precious cultural property, shamelessly profiting from the destruction of humanity’s common heritage.

A money laundering investigation that involves multiple countries can be challenging due to different legal systems, languages, cultures, and levels of cooperation. Two factors that can assist such an investigation are:

Law enforcement and other authorities should have access to financial information that is pertinent to the investigation. This can help them trace the flow of illicit funds, identify the perpetrators and beneficiaries, and gather evidence for prosecution. Financial information can be obtained from various sources, such as financial institutions, financial intelligence units, regulators, and international organizations.

Law enforcement and other authorities should be allowed to establish and utilize joint investigative teams with law enforcement in other countries. This can enhance coordination, communication, and information sharing among the authorities involved, and allow them to pool resources, expertise, and evidence. Joint investigative teams can also facilitate mutual legal assistance and extradition requests.

References:

Financial Action Task Force (FATF), International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, The FATF Recommendations, February 2012, updated June 2019, Recommendation 40, pp. 120-123

FATF, Best Practices on Establishing and Operating a Joint Investigative Team, June 2020, pp. 5-6

FATF, Money Laundering and Terrorist Financing Investigations, June 2018, pp. 11-12

 the internal investigation did not examine the brokerage account, which could be a potential source of money laundering. According to the CAMS Study Guide, 6th Edition, one of the common methods of money laundering is to use securities brokers to move funds through the purchase and sale of stocks, bonds, or other instruments1. The customer’s frequent transfers from the business account to the brokerage account, and the increased volume of activity in the business account, could indicate that the customer is trying to disguise the origin or ownership of illicit funds by investing them in money market securities. Therefore, the anti-money laundering specialist should recommend the internal investigator to concentrate on the trades made in the brokerage account, and to look for any signs of market manipulation, insider trading, or unusual patterns of transactions1.

References:

1: CAMS Study Guide, 6th Edition, Chapter 2: Money Laundering Risks and Methods, page 55-56.