ACAMS Updated CAMS Exam Questions and Answers by wynter

Financial institutions must screen customers against adverse information and determine whether they pose a significant financial crime risk.

Option B (Correct):A direct link to an organized crime group is a severe red flag. Organized crime networks engage in money laundering, corruption, and other illicit activities. UnderFATF Recommendations 10 and 12, financial institutions must implement enhanced due diligence (EDD) for high-risk customers and consider account closure if they pose undue risk.

Option A (Incorrect):Bankruptcy does not necessarily indicate financial crime risk, though it may raise financial stability concerns.

Option C (Incorrect):While PEPs pose a higher risk for corruption, financial institutions typically apply EDD rather than immediately terminating the relationship.

Option D (Incorrect):Violating a construction permit is a regulatory issue, not directly linked to financial crime.

Money laundering can have negative effects on a country’s currencies and interest rates, as it distorts the allocation of resources and the demand and supply ofmoney. According to the IMF1, money laundering can also adversely affect currencies and interest rates as launderers reinvest funds where their schemes are less likely to be detected, rather than where rates of return are higher. This can create artificial fluctuations and imbalances in the exchange and interest rates, and undermine the effectiveness of monetary policy. For example, if launderers invest in low-yield assets such as government bonds or real estate, they may drive up the prices and lower the yields of these assets, while reducing the availability of funds for more productive investments. This can also affect the inflation and growth prospects of the country.

1: Macroeconomic Implications of Money Laundering by Peter J. Quirk, IMF Working Paper, 1996

2: Understanding Money Laundering: How It Impacts the Global Economy by Tookitaki, 2019

3: Money Laundering by U.S. Department of the Treasury, 2021

4: The Consequences of Money Laundering and Financial Crime by John McDowell and Gary Novis, U.S. Department of State, 2001

According to the FATF Guidance on Politically Exposed Persons1, financial institutions should assess the money laundering and terrorist financing risks associated with a business relationshipor transaction with a PEP, their family members and close associates, on a case-by-case basis. This includes obtaining information on the source of wealth and source of funds of the customer and the beneficial owner, as well as conducting enhanced ongoing monitoring of the business relationship. Therefore, the appropriate next step for the analyst is to review the beneficial ownership of the customer to determine if the PEP or any other person poses a higher risk, and to apply additional measures accordingly. Removing the PEP as the authorized signatory, re-categorizing the customer as high-risk, or categorizing the authorized PEP signatory as high-risk are not necessarily required or sufficient steps, as they do not take into account the specific circumstances and risk factors of the customer and the PEP.

The primary international authoritative body that designates sanctions is the United Nations (UN). The UN Security Council has the power to impose sanctions under Chapter VII of the UN Charter, which deals with threats to the peace, breaches of the peace, and acts of aggression. The UN sanctions are legally binding on all UN member states and aim to maintain or restore international peace and security. The UN sanctions can target individuals, entities, groups, sectors, or countries, and can include measures such as arms embargoes, travel bans, asset freezes, trade restrictions, or diplomatic isolation. The UN sanctions are implemented and enforced by the member states, with the assistance of the UN Secretariat and other specialized agencies. The UN sanctions are periodically reviewed and adjusted by the Security Council, based on the reports of the sanctions committees and expert panels.

1: UN Sanctions1

2: UN Charter, Chapter VII2

3: ACAMS Study Guide for the CAMS Certification Examination3