ACAMS Updated CAMS Exam Questions and Answers by lina

 Enhanced due diligence (EDD) is a set of additional measures that must be applied by financial institutions (FIs) in higher-risk situations, such as when dealing with customers or transactions from high-risk third countries, customers who are politically exposed persons (PEPs), or customers who present a higher risk of money laundering or terrorist financing. EDD may include obtaining more information on the customer’s identity, source of funds, source of wealth, business relationships, and purpose of the transaction, as well as conducting more frequent and intensive ongoing monitoring of the customer’s activities.

However, EDD may be bypassed for certain situations where the risk of money laundering or terrorist financing is low, and where the customer is subject to adequate supervision and regulation in the EU or the US. According to the CAMS Study Guide - 6th Edition1, one such situation is when on-boarding a casino that is part of an international hotel chain, provides less than 50% of overall revenue and that fully complies with group-wide policies and procedures. This is because such a casino is likely to have a low risk profile, as it is not the main source of income for the hotel chain, and it adheres to the same standards and controls as the rest of the group. Therefore, EDD may not be necessary for this situation, and the FI may apply simplified due diligence (SDD) instead.

The other situations listed in the question are not eligible for bypassing EDD, as they involve higher-risk factors, such as dealing with customers or entities from high-risk third countries, customers with complex ownership structures, or customers who are PEPs. These situations require FIs to apply EDD measures to mitigate the risk of money laundering or terrorist financing.

References:

CAMS Study Guide - 6th Edition, Chapter 3, Section 3.4, page 84

White Paper on KYC — Enhanced Due-Diligence, page 2

Anti-money laundering – a guide to customer due diligence, page 3

Enhanced Due Diligence for High-risk Customers, page 1

A compliance officer should cooperate with the law enforcement inquiry as much as possible, but also ensure that the request is valid, lawful, and does not violate any confidentiality or privacy obligations. Therefore, the compliance officer should collaborate with the FI’s designated department, such as the legal counsel, the senior management, or the board of directors, to determine the appropriate course of action to comply with the request12. The compliance officer should also ensure that all communication, written and oral, is funneled through a centralized place, and that the FI maintains a record of the request and the response12.

References:

1: Requests by Law Enforcement for Financial Institutions to Maintain Accounts, FinCEN, 2014

2: Best Practices for Compliance and Enforcement-Related Information Requests, EPA, 2018

A fundraising organization is a type of non-profit organization that may be vulnerable to money laundering and terrorist financing risks, as they often operate in high-risk areas, deal with large amounts of cash, and have complex and opaque structures. Therefore, a fundraising organization warrants enhanced due diligence, which is a higher level of customer verification and monitoring that goes beyond the standard customer due diligence measures. Enhanced due diligence may include obtaining additional information on the source of funds, the purpose of the relationship, the beneficiaries, and the governance of the organization.

References:

ACAMS Study Guide for the CAMS Certification Examination, 6th Edition, Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Section 2.2: Customer Due Diligence, p. 33-34

Anti-money laundering – a guide to customer due diligence

Customer due diligence | The Law Society

 the compliance officer should cooperate with the law enforcement investigation, but only after receiving a formal written request that specifies the scope and purpose of the information sought. This is to ensure that the compliance officer complies with the legal and regulatory obligations of the bank, such as confidentiality, privacy, and data protection. The compliance officer should also document the request and the information provided, and report the incident to the senior management and the board of directors as appropriate.

References:

FFIEC BSA/AML Assessing the BSA/AML Compliance Program - BSA Compliance Officer, section “BSA Compliance Officer”, paragraph 3: “The BSA compliance officer is responsible for ensuring that the bank’s BSA/AML compliance program is implemented effectively, including timely updates in response to changes in regulations or business activities, and for managing all aspects of the BSA/AML compliance program. The BSA compliance officer is also responsible for ensuring that the bank’s BSA/AML compliance program is communicated to all personnel and that adequate training is provided to appropriate personnel.”

Guidelines on the role of AML/CFT compliance officers, section “Guidelines on the role of AML/CFT compliance officers”, paragraph 36: “The AML/CFT compliance officer should ensure that the institution cooperates with the competent authorities, including by providing them with all the information they require in a timely manner, in accordance with the applicable legal and regulatory framework.”

Anti-Money Laundering Compliance Officer Job Description, section “Responsibilities of an AML Compliance Officer”, bullet point 6: “Cooperate with law enforcement and regulatory bodies as required.”