CAMS Dumps with Practice Exam Questions Answers

The main objective when a financial institution (FI) conducts an investigation is to track the movement of the money. Money laundering is a process of disguising the proceeds of criminal activity to make them appear legitimate. The movement of money is an essential element in the process of money laundering. Therefore, tracking the movement of funds is a crucial step in identifying and preventing money laundering. A financial institution must be able to recognize suspicious transactions and report them to the relevant authorities. An investigation is conducted to gather evidence and establish a clear understanding of the transaction flow, the parties involved, and the nature of the activity. This information is used to determine if the transaction is suspicious and if it violates any laws or regulations.

While keeping policies and procedures updated, keeping documentation, and knowing the customer are essential components of a comprehensive anti-money laundering (AML) program, these activities are not the primary objective of an investigation. Policies and procedures need to be updated to reflect changes in regulatory requirements and emerging money laundering risks. Documentation must be retained to provide evidence of the investigation process and outcomes. Knowing the customer is essential to identify and verify the customer’s identity and assess the risk associated with the relationship.

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 3: AML Programs, Section 3.2: AML Program Components, Subsection 3.2.4: Transaction Monitoring and Investigation, pp. 87-88

Main Objective of Conducting Investigations - exam-answer.com

'https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/wolfsberg-standards/8.%20Wolfsberg-Correspondent-Banking-Principles-2014.pdf - page 6 Monitoring and Reporting of Suspicious Activities The institution shall implement bank-wide policies and procedures to detect and investigate unusual or suspicious activity and report any such activity as required by applicable law. These will include guidance on what is considered to be unusual or suspicious and give examples thereof. The policies and procedures shall include appropriate monitoring of the Correspondent Bank’s activity, incorporating due diligence results such as customer risk rating and other factors considered meaningful in the assessment of transaction activity risk. In turn, the results of suspicious activity monitoring shall be factored into the periodic review of the client’s file, particularly when the results of transaction monitoring indicate elevated risk levels.

Wash trading is the term for trading through multiple accounts, where an individual generates offsetting profits and losses and transfers of positions through accounts that do not appear to be commonly controlled. Wash trading is a form of market manipulationthat creates artificial trading activity and volume, and may be used to evade taxes, inflate prices, or launder money. Wash trading can also involve the use of third parties or intermediaries to conceal the true identity and source of funds of the trader.

= The main references for this question are the following sources:

The document titled “Money Laundering and Terrorist Financing Typologies and Trends in Canadian Securities Dealers” published by the Investment Industry Regulatory Organization of Canada (IIROC) in December 2019. You can access it by clicking here. This document states that “Wash trading is a form of market manipulation where an individual simultaneously sells and buys the same financial instruments to create misleading, artificial activity in the marketplace. Wash trading is illegal under securities law because it misleads investors and regulators about the true supply and demand of the securities involved. Wash trading can also be used to evade taxes, inflate prices, or launder money.”

The document titled “Market Manipulation” published by the Financial Industry Regulatory Authority (FINRA). You can access it by clicking here. This document states that “Wash sales are a form of market manipulation in which an investor simultaneously sells and buys the same security to create misleading, artificial activity in the marketplace. Wash sales are illegal under Section 9(a)(1)(A) of the Securities Exchange Act of 1934. Wash sales can be used to manipulate the price of a security, evade taxes, or launder money.”

The first step in a financial investigation is to review and analyze allinternalsources of information related to the suspicious transaction.

Option C (Correct):Gathering and assessing internal data helps investigators establish a baseline for normal vs. suspicious customer behavior. This includes reviewing KYC (Know Your Customer) documentation, transaction history, and any previous alerts on the customer.

Option B (Incorrect):This is part of the investigation, but an investigator first needs togatherdata before determining consistency with expected behavior.

Option A (Incorrect):An FIU is typically contactedafterinternal analysis has been completed and a Suspicious Activity Report (SAR) is warranted.

Option D (Incorrect):External information is useful, but internal data should be reviewed first to confirm whether a case needs escalation.

The methods that are typically used to launder money using insurance companies are:

The policy holder overpays the policy and moves the funds out of the policy despite paying early withdrawal penalties. This method involves placing large amounts of illicit funds into an insurance policy, usually a life insurance or an annuity, and then requesting a refund or a surrender of the policy. The policy holder may incur some fees or penalties for the early withdrawal, but they will receive a check or a wire transfer from the insurance company that appears to be a legitimate source of income. This method allows the launderer to layer and integrate the funds into the financial system.

The policy holder uses an offshore company to pay the insurance installments. This method involves setting up a shell company or a trust in a jurisdiction with low or no tax and weak or no anti-money laundering regulations. The launderer then uses the offshore entity to purchase an insurance policy or a bond from a reputable insurance company. The offshore entity pays the premiums or the installments using the illicit funds, and the launderer can claim thebenefits or the returns from the policy or the bond as clean money. This method allows the launderer to hide the true ownership and origin of the funds.

The other options are not typical methods of money laundering using insurance companies, because:

The policy holder enters a sibling as a beneficiary of the insurance policy rather than themselves. This method does not involve any movement or disguise of the illicit funds, and it does not generate any income or return for the launderer. The beneficiary of the policy will only receive the payout upon the death of the policy holder, and the insurance company will conduct due diligence on the beneficiary before releasing the funds.

The policy holder purchases a bond and redeems it at a discount prior to its full term. This method does not make sense for a money launderer, because it involves losing money rather than gaining money. A bond is a fixed-income instrument that pays a regular interest and a principal amount at maturity. If the bond is redeemed before its full term, the bond holder will receive less than the face value of the bond, and will also forfeit the future interest payments. This method does not help the launderer to conceal or legitimize the source of the funds.

The policy holder is strongly interested in how many costs are incurred when taking out an insurance policy. This method does not indicate any money laundering activity, but rather a prudent and rational behavior of a potential customer. The policy holder may want to compare different insurance products and providers, and to understand the fees, charges, commissions, and taxes associated with the policy. This method does not involve any placement, layering, or integration of the illicit funds.

ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 1: Risks and Methods of Money Laundering and Terrorism Financing, Section 1.2: Methods of Money Laundering, Subsection 1.2.5: Insurance Products, pp. 19-20

AML in Insurance: How to Detect & Combat Money Laundering, Section: Common Money Laundering Methods in Insurance, Paragraphs 1-3