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NEW QUESTION # 71
There are three types of factors that can be used to authenticate someone ownership, knowledge, and inherent factors.
Which of the following factors falls under inherent factors?
- A. Challenge-response
- B. Passphrase
- C. Fingerprint
- D. Security token
Answer: C
Explanation:
Fingerprint is an inherent factor because it is a biometric trait - something the user is. Inherent factors rely on physical or behavioral characteristics such as fingerprints, facial recognition, or voice, which are unique to the individual.
NEW QUESTION # 72
Which of the options below is an indicator of potential insider activity that may warrant escalation For further investigation?
- A. A relationship manager makes an exception to company policy and proceeds with onboarding a customer without documenting a passport for customer identification
- B. An investigator does not complete the automated transaction monitoring system alerts assigned to them before the time required by company procedures.
- C. A relationship manager advocates for overriding the results of the company's client risk rating model that resulted in a client's high-risk rating.
- D. An If employee shares information about a firm's risk management framework with employees of other firms at an industry convention.
Answer: C
NEW QUESTION # 73
Which insurance product is considered the lowest risk for money laundering?
- A. Group insurance products
- B. Annuity contracts
- C. Cash-secured products
- D. Permanent life insurance policies
Answer: A
Explanation:
Among insurance products, group insurance products are generally considered the lowest risk for money laundering, according to FATF and insurance-sector AML guidance.
Group insurance policies are typically employer-sponsored, cover a large number of individuals, and involve limited individual control over premium payments, beneficiaries, or payouts. These characteristics significantly reduce the opportunity for misuse as a money laundering vehicle.
By contrast, permanent life insurance policies and annuities often include investment components, cash surrender values, or flexible premium structures, which increase their attractiveness for laundering illicit funds. Cash-secured products may also present placement or layering risks depending on structure and liquidity.
Therefore, group insurance products pose the lowest inherent AML risk.
NEW QUESTION # 74
A recruitment manager in the human resources department of a bank has shortlisted a candidate for the position of relationship manager in its private banking division. The compliance policy of the bank stipulates that proper background checks on new employees must be completed by the recruiting team to protect the bank against potential risks, including fraud and money laundering.
Which resources would be most useful for identifying any potential negative information regarding the shortlisted candidate? (Select Three.)
- A. Personal references from close associates
- B. Personal resume
- C. Criminal history searches
- D. Internet and public media searches
- E. Past employment records
Answer: C
NEW QUESTION # 75
The Wolfsberg Group's 2012 "Principles (or Private Banking" established that.
- A. risk based approaches are insufficient to address the heightened risk presented through private banking
- B. private banks agree that transparency of client beneficial ownership Is necessary and appropriate.
- C. private banks need to better coordinate and align their global AML control environment strategies.
- D. due diligence requirements tor private banking customers are necessary to prevent predicate offenses.
Answer: B
NEW QUESTION # 76
A key factor in the independence of an AML audit is that the auditor should.
- A. have no involvement with the organization's AML/CP T compliance staff.
- B. have been screened by the board of directors before the audit starts
- C. have never worked in previous assignments within the AMUCFT departments.
- D. be sufficiently trained in AML to be able to provide an independent review.
Answer: D
NEW QUESTION # 77
According to the Egmont Group, which benefits do public-private partnerships (PPPs) provide to Financial Intelligence Units (FIUs)? (Select Three.)
- A. Helping to alleviate the financial cost burden on law enforcement
- B. Offering flexibility, agility, and opportunities to adjust to the ML/TF threat environment
- C. Helping to design common approaches and identify desired deliverables
- D. Helping overcome data protection and information sharing limitations
- E. Enhancing the quality of reporting and additional informational input
Answer: B,D,E
Explanation:
According to the Egmont Group and CAMS 6th Edition, PPPs benefit FIUs by:
* A: "PPPs help address challenges around data protection and facilitate information sharing between public and private sectors, overcoming common legal barriers."
* B: "PPPs result in higher-quality reports from the private sector and provide valuable additional informational input for FIUs."
* E: "These partnerships give FIUs increased flexibility and agility, allowing them to respond dynamically to evolving ML/TF threats."(CAMS 6th Edition, Egmont Group Guidance on PPPs; Egmont Group, Public-Private Partnerships for FIUs) References:
CAMS 6th Edition, Public-Private Partnerships
Egmont Group, "Public-Private Partnerships: FIU Benefits and Considerations"
NEW QUESTION # 78
A key advantage of privacy enhancing technologies (PETs) in anti-money laundering is that they offer:
- A. transfer, decryption and storage of data by the data processor.
- B. full access to underlying data with full and uninterrupted calculations made on the data.
- C. secure processing of data while it remains encrypted.
- D. simultaneous encryption and decryption for underlying data.
Answer: C
Explanation:
A key advantage of privacy enhancing technologies (PETs) in anti-money laundering is their ability to securely process data while it remains encrypted. This enables data analysis and collaboration without exposing sensitive information, helping to maintain privacy while still supporting financial crime detection.
NEW QUESTION # 79
The Basel Committee on Banking Supervision published guidelines on the "Sound management of risks related to money laundering and financing of terrorism." With regard to identifying and accepting customers, it recommends that banks: (Select Two.)
- A. Are prohibited from offering numbered accounts to customers, even if procedures are established to gather and maintain due diligence information.
- B. Establish policies and procedures to identify and verify customers, beneficial owners, and any individuals that can transact on behalf of their customers.
- C. Establish policies and procedures that encourage processing transactions while due diligence information is being established and verified.
- D. Establish policies and procedures to ensure due diligence activities are identical for all customers.
- E. Establish policies and procedures for customer due diligence that vary based on risk.
Answer: B,E
NEW QUESTION # 80
Red flags for potential money laundering in real estate include completing luxury real estate purchases.
(Select Two.)
- A. using shell companies or trusts for privacy, lax planning, or asset protection.
- B. using legal entities and intermediaries to protect the privacy of the purchasers.
- C. using the proceeds from selling a prior property or liquidating investments to make an all-cash purchase
- D. in the names of unrelated thud patties.
- E. using loans backed by cash or certificates of deposit.
Answer: B,D
NEW QUESTION # 81
The UN Security Council's primary role in imposing sanctions is that it has the authority to:
- A. impose sanctions lo maintain of restore international peace and security
- B. conduct research on and analyze the impacts of sanctions to improve the effectiveness of sanctions regimes.
- C. impose sanctions on economic targets to maintain or restore financial stability within a country.
- D. impose sanctions on countries that lack AML/CFT controls.
Answer: A
Explanation:
The UN Security Council has the authority to impose sanctions specifically to maintain or restore international peace and security.
NEW QUESTION # 82
A financial institution is conducting an enterprise-wide risk assessment (EWRA) and has identified a high inherent risk of money laundering associated with its private banking division due to the clientele's high net worth and complex financial structures. However, the institution has implemented robust customer due diligence (CDD) and enhanced due diligence (EDD) procedures, along with sophisticated transaction monitoring systems.
How would these controls impact the assessment of residual risk?
- A. The residual risk would remain high due to the inherent nature of the private banking business
- B. The residual risk would be eliminated entirely because the controls are sufficient to mitigate all potential risks
- C. The residual risk would be moderately reduced, but further controls may be necessary to achieve an acceptable level
- D. The residual risk would be significantly reduced due to the effectiveness of the controls in place
Answer: D
Explanation:
Strong CDD, EDD, and advanced transaction monitoring can significantly reduce residual risk in high-risk areas like private banking. While no control fully eliminates risk, effective implementation and ongoing oversight can bring the residual risk down to an acceptable level from its initially high inherent risk.
NEW QUESTION # 83
Potential risk indicators for a trade counterparty in trade-based money laundering include: (Select Three.)
- A. Engaging in transactions and shipping routes or methods that are not in line with standard business practices
- B. Transparent pricing structures with additional information provided to the receiving bank when pricing fluctuates by ±10%
- C. Irregular or inconsistent trade volume and frequency that does not align with the historical trading behavior of the counterparty
- D. Contracts, invoices, or other trade documents containing detailed descriptions of the traded commodities
- E. Cash deposits or other transactions consistently below the relevant reporting thresholds
Answer: A,C,E
Explanation:
Trade-Based Money Laundering (TBML) is a recognized method used to move and disguise illicit funds through trade transactions. Regulatory guidance from FATF highlights several red flags that may indicate TBML risks.
Irregular or inconsistent trade volume and frequency that deviates from a counterparty's historical activity can suggest artificial or manipulated transactions. This behavior may indicate over- or under-invoicing or fictitious trade.
Structuring transactions below reporting thresholds, such as repeated cash deposits just under regulatory limits, is a classic money laundering technique used to avoid detection and reporting obligations.
Engaging in unusual shipping routes, methods, or counterparties that do not align with normal business practices is another key TBML indicator. Criminals often use complex or illogical logistics to obscure the true nature of transactions.
Conversely, detailed trade documentation and transparent pricing with proactive explanations are indicators of legitimate trade activity and reduce AML risk rather than increase it.
NEW QUESTION # 84
A law firm is involved in setting up complex offshore corporate structures for a client with minimal documentation of the source of funds. The firm does not question the client's transactions or report any suspicious activity.
What is the primary money laundering risk associated with this behavior by the law firm?
- A. The law firm is acting as a gatekeeper, facilitating the movement and concealment of illicit funds through complex corporate structures
- B. The law firm is avoiding fees by minimizing documentation for clients in high-risk jurisdictions
- C. The law firm is engaging in aggressive tax planning to help the client avoid legal taxes
- D. The law firm is providing routine legal services that include creating complex legal structures, and no further scrutiny is required
Answer: A
Explanation:
Law firms are classified as gatekeepers under FATF standards when they provide services such as company formation, trust creation, or management of client funds. These services can be misused to facilitate money laundering if proper due diligence is not conducted.
In this scenario, the law firm is establishing complex offshore structures with minimal documentation of source of funds and without questioning suspicious activity. This behavior directly enables the concealment of beneficial ownership and the layering of illicit proceeds, both core money laundering techniques.
Failing to apply scrutiny or report suspicious activity allows criminals to exploit legal services to move and disguise illicit funds under the appearance of legitimacy. This is a recognized vulnerability across multiple FATF typologies.
The behavior described is not merely aggressive tax planning or routine legal work; rather, it represents facilitation of illicit financial flows through professional services.
NEW QUESTION # 85
Which non-governmental bodies typically issue information and guidance related to AML/CFT issues?
(Choose two.)
- A. Wolfsberg Group
- B. Transparency International
- C. Financial Action Task Force (FATF)
- D. Tax Justice Network
Answer: A,B
Explanation:
The Wolfsberg Group and Transparency International are non-governmental organizations that provide information and guidance on AML/CFT matters, helping institutions and policymakers strengthen financial crime prevention practices.
NEW QUESTION # 86
Interactions between the compliance department and other functions or departments within an organization contribute to making the anti-financial crime (AFC) compliance program more robust by addressing specific risk areas.
Which departments play a crucial role in enhancing the AFC compliance program of an organization? (Select Two.)
- A. Marketing and sales
- B. Data privacy office (DPO)
- C. Human resources (HR)
- D. Information security office (ISO)
Answer: B,D
Explanation:
* A (ISO): Ensures information security controls are aligned with AFC efforts, protecting sensitive data and reducing the risk of cyber-enabled financial crime.
* D (DPO): Helps ensure compliance with data privacy laws and enables secure, lawful information- sharing for AML purposes.
* "Collaboration with the ISO and DPO is critical to maintaining data security and privacy within AFC compliance frameworks."(CAMS 6th Edition, Governance and Cross-Functional Collaboration) References:
CAMS 6th Edition, Governance and Controls
FATF Guidance on Data Protection and Information Sharing
NEW QUESTION # 87
Which of the following corporate structures present a higher money laundering risk because of reduced transparency? (Select Three.)
- A. A private company that has no activity in a tax haven jurisdiction
- B. A private investment company incorporated in a tax haven jurisdiction with strict secrecy laws
- C. A company with nominee shareholders and directors in a local jurisdiction
- D. A company with bearer shares incorporated in a tax haven jurisdiction
- E. A limited liability company incorporated in a foreign jurisdiction
Answer: C,D,E
NEW QUESTION # 88
Non-compliance with relevant anti-money laundering laws and regulations can result in: (Select Two.)
- A. inclusion on the UN Consolidated List.
- B. civil and criminal penalties
- C. increased reputation risk.
- D. delisting of public filing status.
Answer: B,C
NEW QUESTION # 89
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