ACAMS Updated CAMS Exam Questions and Answers by neave

The Third European Union Money Laundering Directive (3MLD) is a legal framework that aims to prevent the use of the financial system for the purposes of money laundering and terrorist financing. It was adopted in 2005 and repealed by the Fourth European Union Money Laundering Directive (4MLD) in 2015. The 3MLD applies to a range of entities that are considered to be exposed to the risk of money laundering and terrorist financing, such as:

Financial institutions, which include credit institutions, financial intermediaries, insurance companies, investment firms, and payment service providers.

Casinos, which include both online and offline gambling services that involve wagering a stake with monetary value.

Real estate agents, which include both natural and legal persons that act as intermediaries in the buying and selling of real property or rights over it.

The 3MLD requires these entities to implement a number of measures to prevent and detect money laundering and terrorist financing, such as:

Conducting customer due diligence, which involves identifying and verifying the customer and the beneficial owner, understanding the purpose and nature of the business relationship, and applying enhanced or simplified measures depending on the level of risk.

Keeping records of customer and transaction data for at least five years after the end of the business relationship or the execution of the transaction.

Reporting suspicious transactions or activities to the competent authorities without delay and without tipping off the customer.

Establishing internal policies, procedures, and controls to ensure compliance with the 3MLD, and providing adequate training and awareness to staff.

Cooperating with the relevant supervisory and regulatory authorities and financial intelligence units.

The 3MLD does not apply to defense attorneys, as they are not considered to be obliged entities under the directive. However, the 3MLD does apply to other legal professionals, such as notaries, lawyers, and accountants, when they perform certain activities on behalf of their clients, such as:

Buying and selling of real property or business entities

Managing of client money, securities, or other assets

Opening or managing bank, savings, or securities accounts

Organizing contributions for the creation, operation, or management of companies

Creating, operating, or managing trusts, companies, foundations, or similar structures

International wire transfers are considered to be of highest money laundering risk because they can facilitate the rapid and anonymous movement of funds across borders and jurisdictions, making it difficult for law enforcement and regulators to trace the origin and destination of the funds, and to identify the beneficial owners and controllers of the accounts involved. International wire transfers can also be used to layer and integrate illicit proceeds into the legitimate financial system, by disguising the source, ownership, and purpose of the funds. International wire transfers can involve multiple intermediaries, complex payment chains, and inconsistent or incomplete information, whichcan increase the risk of money laundering and terrorist financing. Therefore, international wire transfers are subject to enhanced due diligence, record-keeping, and reporting requirements under various anti-money laundering and counter-terrorist financing (AML/CTF) regulations and standards, such as the Financial Action Task Force (FATF) Recommendations1, the European Union (EU) Funds Transfer Regulation2, and the United States (US) Bank Secrecy Act3.

A qualified independent party/auditor is the most effective resource to evaluate the effectiveness of an anti-money laundering program. This is because an independent auditor can provide an objective and unbiased assessment of the program, identify any weaknesses or gaps, and make recommendations for improvement. An independent auditor can also verify the compliance of the program with the relevant regulations and best practices, and test the adequacy and functionality of the internal controls, customer due diligence processes, and transaction monitoring systems. An independent auditor can also help an organization prepare for regulatory examinations and audits, and avoid potential penalties or sanctions.

The Patriot Act, enacted in 2001, introduced several provisions to enhance the anti-money laundering and counter-terrorist financing (AML/CFT) measures for U.S. banks and their foreign correspondent relationships. Some of the potential issues for foreign financial institutions (FFIs) maintaining correspondent accounts with U.S. banks under the Patriot Act are:

Cancellation of correspondent banking relationships: The Patriot Act requires U.S. banks to conduct due diligence and enhanced due diligence on their foreign correspondent accounts, and to terminate any account that poses a significant risk of money laundering or terrorist financing. This may result in the cancellation of correspondent banking relationships with FFIs that do not meet the U.S. standards or cooperate with the U.S. authorities. The loss of correspondent banking relationships may affect the FFIs’ ability to access the U.S. financial system and provide services to their customers.

Forfeiture of funds in a U.S. interbank account: The Patriot Act authorizes the U.S. government to seize and forfeit any funds in a U.S. interbank account that are involved in or traceable to money laundering or terrorist financing activities. This means that FFIs may face the riskof losing their funds in a U.S. interbank account if they or their customers are suspected or accused of engaging in illicit activities. The forfeiture of funds may have significant financial and reputational consequences for the FFIs and their customers.

Prohibition of correspondent accounts for shell banks: The Patriot Act prohibits U.S. banks from establishing or maintaining correspondent accounts for shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group. This means that FFIs that are shell banks or have relationships with shell banks cannot access the U.S. financial system through correspondent accounts. The prohibition of correspondent accounts for shell banks aims to prevent the use of shell banks as vehicles for money laundering and terrorist financing.