CAMS ACAMS Practice Test Questions and Exam Dumps
Question No 1 :
A compliance officer working in the financial crimes unit of an insurance company is tasked with monitoring client activity for any signs of suspicious behavior that could indicate money laundering. During a recent review, the officer comes across four transactions involving different clients. The officer must determine which of the transactions raises a red flag under anti-money laundering (AML) guidelines due to its unusual structure or characteristics.
Which of the following transactions is most indicative of potential money laundering activity?
A. A client paid a quarterly life insurance premium using multiple money orders issued by two separate banks.
B. A client from a jurisdiction classified as high-risk recently purchased property insurance for a large real estate project.
C. A corporation with multiple subsidiaries opened distinct group life insurance policies for each affiliate company.
D. A client contributed $100,000 to a charitable annuity with an internationally active nonprofit organization that provides health and safety support.
Correct Answer: A
A client paid a quarterly life insurance premium using multiple money orders from two different banks.
Explanation :
Money laundering involves disguising the origins of illicit funds to make them appear legitimate. Insurance companies are particularly vulnerable due to the long-term nature and high monetary value of certain products. Among the options presented, Option A is the most concerning from an AML standpoint.
The use of multiple money orders from different banks is a classic red flag. This behavior may be indicative of "structuring" or "smurfing," where an individual breaks down a large sum of money into smaller transactions to avoid detection. Money orders are often used for this purpose because they are harder to trace than wire transfers or checks, especially when purchased at different institutions.
In this case, the client avoided using a standard payment method and instead chose multiple money orders, which suggests an attempt to obscure the source of the funds. This is especially suspicious in the context of paying a routine insurance premium, which usually involves straightforward payments via bank transfer or credit card.
In contrast, Option B (high-risk jurisdiction) raises a flag but may be justifiable if there is proper due diligence. Option C involves legitimate corporate planning and does not inherently signal illegal intent. Option D, while involving a large donation, is less likely to be laundering-related if the nonprofit is properly vetted and regulated.
Therefore, Option A stands out as a transaction that merits further investigation under AML policies. It illustrates how seemingly minor payment anomalies can signal deeper issues in financial crime compliance.
Question No 2 :
A branch manager observes a pattern of behavior involving a particular teller and several commercial customers. These customers, who appear to be from the same ethnic background as the teller, consistently request to be served only by this teller when making their weekly deposits. During interactions, they communicate in a foreign language, and on occasion, the customers—many of whom are owners of local ethnic restaurants—bring the teller lunch. Furthermore, their cash deposit amounts are consistently the same each visit. This repetitive and exclusive behavior raises potential red flags related to collusion or suspicious activity.
What should be the most appropriate action for the branch manager to take in response to these observations?
A. Transfer the teller to another branch
B. Conduct further investigation before taking any other action
C. Encourage the teller to bring in more business from the ethnic community
D. Suggest to the teller to send the customers to other tellers to avoid the opportunity for collusion
Correct Answer:
B. Conduct further investigation before taking any other action
Explanation :
In this scenario, the branch manager is noticing a pattern that could indicate potential suspicious activity or collusion. However, it's essential to approach the situation objectively and follow due diligence protocols before making assumptions or taking drastic measures.
Answer B, “Conduct further investigation before taking any other action,” is the most appropriate and balanced approach. The Financial Crimes Enforcement Network (FinCEN) and other regulatory bodies encourage financial institutions to be vigilant and proactive in identifying unusual or repetitive behavior that may indicate potential money laundering, structuring, or collusion. That said, such behaviors—like speaking in another language or receiving food—are not, in themselves, proof of wrongdoing.
An internal investigation might include reviewing the teller’s transaction records, verifying the legitimacy and consistency of the deposits, checking for compliance with Know Your Customer (KYC) policies, and possibly monitoring other interactions. These steps can help determine whether the activity is legitimate or if further action is necessary, such as filing a Suspicious Activity Report (SAR).
Premature actions like transferring the teller (Option A), encouraging more business without clarity (Option C), or altering the customer service process without cause (Option D) could either be unfair or damage customer trust. A measured response that upholds regulatory compliance and internal controls is key.
Thus, the best course of action is to investigate further while documenting findings carefully.
Question No 3:
A branch manager has noticed a recurring pattern involving one of the tellers and several commercial customers. These customers—many of whom are owners of local ethnic restaurants—seem to share the same ethnic background as the teller. They consistently insist on being served only by this specific teller during their routine weekly deposit visits. The interactions are conducted in a foreign language, and at times, the customers bring food for the teller as a gesture of appreciation. Additionally, the cash deposit amounts made by these customers are identical during each visit.
This consistent and exclusive behavior raises concerns about possible collusion or suspicious financial activity, such as money laundering or structuring.
As a responsible leader, what should be the most appropriate next step the branch manager should take in response to these observations?
A. Transfer the teller to a different branch to break the pattern
B. Conduct a detailed internal investigation before initiating any further actions
C. Motivate the teller to attract more customers from the ethnic community
D. Advise the teller to redirect these customers to other tellers to avoid favoritism
Correct Answer:
B. Conduct a detailed internal investigation before initiating any further actions
Explanation :
In financial institutions, recognizing behavioral patterns that deviate from the norm is crucial to identifying potential risks such as collusion, structuring, or money laundering. In this scenario, the branch manager’s observations raise legitimate concerns. However, taking premature or reactionary steps without evidence can harm staff morale, customer relationships, or even breach employment policies.
Answer B is the most appropriate action—"Conduct a detailed internal investigation before initiating any further actions." Financial institutions have a responsibility to comply with anti-money laundering (AML) laws and regulatory standards, including proper documentation of any red flags. According to the Bank Secrecy Act and guidelines by FinCEN, institutions are required to monitor for suspicious behavior but must do so without making assumptions based on cultural or linguistic factors alone.
Speaking in another language, receiving gifts like food, or having loyal customers from the same background are not inherently illegal or unethical. However, consistent deposit amounts, repeated exclusive service requests, and limited transparency do require deeper scrutiny. The branch manager should review transaction patterns, verify that the deposits align with the customers’ business profiles, ensure adherence to KYC norms, and consider alerting the compliance department if warranted.
Taking immediate actions like transferring the teller or discouraging their customer relationships could be seen as discriminatory or unfounded without due process. Therefore, a thorough and unbiased investigation is the best way to protect both the institution and the individuals involved while maintaining compliance and fairness.
Question No 4 :
A bank’s compliance officer has activated advanced monitoring protocols to detect potential involvement in human trafficking. During a review of suspicious transactions, which of the following red flags would most likely warrant a deeper investigation due to its strong correlation with human trafficking indicators?
A. Wire transfers originating from countries known for having large migrant worker populations
B. Cash deposits made in cities where the account holder both resides and conducts legitimate business operations
C. Cash deposits made in cities where the account holder neither lives nor conducts regular business activities
D. Cash deposits made in cities unrelated to the account holder’s residence or business, followed by same-day cash withdrawals
Correct Answer:
D. Cash deposits made in cities unrelated to the account holder’s residence or business, followed by same-day cash withdrawals
Detailed Explanation :
Human trafficking often involves financial patterns that attempt to conceal the origins and movement of illicit funds. Financial institutions are required to implement anti-money laundering (AML) measures and identify behavioral red flags that may be linked to trafficking networks.
Among the listed options, Option D stands out as the most suspicious and most strongly associated with trafficking indicators. The combination of cash deposits made in cities unconnected to the customer’s usual activity, followed by same-day withdrawals, suggests a potential structuring scheme or funnel account setup. Funnel accounts are often used by traffickers to collect illicit cash from different geographic areas and then quickly move it, often to conceal the original source or final destination of the funds.
This behavior indicates an effort to distance the transaction from any one location and avoid scrutiny. It is atypical for a legitimate business or individual to engage in such activity without a clear, transparent purpose. These transactions might also be designed to avoid triggering automatic reports or thresholds set by AML systems.
In contrast:
Option A may raise concern but is too broad without context.
Option B is expected and normal behavior.
Option C is slightly suspicious, but without the same-day withdrawal component, it's less indicative of illicit intent.
Thus, Option D combines multiple red flags—geographic inconsistency, cash handling, and rapid movement of funds—which together create a stronger case for further review and potentially filing a Suspicious Activity Report (SAR).
Question No 5 :
A compliance officer at a private bank is developing a formal policy to govern the bank's interactions with intermediaries. In order to align this policy with the Wolfsberg Anti-Money Laundering (AML) Principles for Private Banking, which two key considerations should be included when dealing with intermediaries?
Select two appropriate actions that comply with the Wolfsberg Principles:
A. If an intermediary introduces clients to the bank, the bank does not need to conduct due diligence on those clients.
B. When an intermediary introduces clients to the bank, the bank must gather the same level of client information it would typically collect if the client had approached the bank directly.
C. If an intermediary holds an account on behalf of multiple clients and does not apply due diligence measures equivalent to those of the bank, the bank must carry out due diligence on the intermediary’s underlying clients.
D. If an intermediary is a regulated financial institution and facilitates account openings for its clients with the bank, the bank must still perform due diligence on the underlying clients.
Correct Answers:
B and C
Explanation :
The Wolfsburg Anti-Money Laundering Principles for Private Banking emphasize the importance of transparency and appropriate due diligence when dealing with intermediaries. These principles are designed to prevent the misuse of private banking services for illicit purposes, such as money laundering or terrorist financing.
Answer B is correct because the Wolfsburg Principles clearly state that when clients are introduced by an intermediary, the bank must still gather the same level of client information as if there were no intermediary involved. This ensures that the bank understands who its actual clients are and can assess their risk profile independently.
Answer C is also correct. If an intermediary holds a pooled account on behalf of several clients but does not perform due diligence to the same standards as the bank, the responsibility shifts to the bank to conduct due diligence on the underlying clients. This is critical because failure to do so may allow unidentified or high-risk clients to use the banking system without proper scrutiny.
Answer A is incorrect because the bank must always perform due diligence, even on clients introduced by an intermediary. Simply relying on the intermediary’s word is not sufficient.
Answer D is also incorrect. If the intermediary is a regulated financial institution that follows equivalent AML standards, the bank may rely on the intermediary’s due diligence, provided there is confidence in their compliance framework.
Thus, the bank’s policy must prioritize risk-based assessments, verify intermediary controls, and ensure transparency in all client relationships.
Question No 6 :
A financial institution located outside of the United States is seeking to establish a correspondent banking relationship with Bank A, a U.S.-based financial institution. Under the due diligence requirements of the USA PATRIOT Act, what specific information is required to be obtained by Bank A before opening the account?
A. A comprehensive list of all clients of the foreign bank
B. Information regarding the ownership structure of the foreign bank, including the identity and ownership percentages of its owners
C. Detailed information about the foreign bank’s executive and managerial team
D. Specifics of the foreign bank’s internal anti-money laundering (AML) training policies and procedures
Correct Answer:
B. Information regarding the ownership structure of the foreign bank, including the identity and ownership percentages of its owners
Explanation :
Under Section 312 of the USA PATRIOT Act, U.S. financial institutions are required to perform enhanced due diligence (EDD) when establishing or maintaining correspondent accounts for foreign financial institutions. One critical element of this due diligence process is the identification of the foreign bank's ownership structure, including the identity of each owner and their respective percentage of ownership.
This requirement is essential for ensuring that the U.S. bank is not indirectly facilitating money laundering, terrorist financing, or other illicit financial activity. By understanding who owns and controls the foreign institution, the U.S. bank can better assess the risk posed by the relationship.
Option A, which suggests obtaining a full client list from the foreign bank, is not required under the USA PATRIOT Act, although transaction monitoring remains essential. Option C, which involves reviewing the management structure, may be part of a general risk assessment but is not a mandated item under the Act. Option D, regarding AML training programs, while important for overall compliance, is also not specifically required information under Section 312.
The focus on ownership stems from the need to prevent “shell banks” (banks that have no physical presence and are often used for illicit activities) from accessing the U.S. financial system. Identifying beneficial owners is also in line with the broader goal of transparency and accountability in the global banking sector.
Therefore, the correct and required information under the USA PATRIOT Act is the identity and ownership percentages of the foreign bank’s owners.
Question No 7 :
Which type of insurance product is most susceptible to being exploited for the purpose of money laundering due to its investment-like features and ability to handle large sums of money over time?
A. Annuity
B. Casualty Insurance
C. Collateral Insurance
D. Regulated Pension Plan
Correct Answer:A. Annuity
Explanation :
Annuities are among the most vulnerable insurance products when it comes to money laundering. These are financial products offered by insurance companies that allow individuals to invest a lump sum or make regular payments, with the promise of receiving regular disbursements in the future—typically during retirement.
The primary reason annuities are attractive for money laundering is because they function similarly to investment vehicles. Criminals may use ill-gotten funds to purchase annuities, then later "legitimize" those funds through the payout process. The relatively low scrutiny compared to banks and the long-term nature of annuities provide an opportunity for criminals to clean their money over time.
Additionally, annuities often allow for early surrender (sometimes with a penalty), which can be used to withdraw a large portion of the invested amount. A money launderer may accept these penalties as a cost of turning illicit cash into seemingly legitimate funds.
In contrast, other options like casualty insurance, collateral insurance, and regulated pension plans are less attractive for money laundering. Casualty and collateral insurances are primarily used for protection against loss or damage and don't involve investment or large cash flows. Regulated pension plans have strict oversight, contribution limits, and transparency requirements, making them harder to abuse for laundering purposes.
Due to the risk associated with annuities, regulators and insurance companies are required to implement anti-money laundering (AML) measures, such as verifying client identities, monitoring large or unusual transactions, and reporting suspicious activity. Understanding how annuities can be exploited helps financial institutions and professionals remain vigilant in the fight against money laundering and financial crimes.
Question No 8 :
According to the Basel Committee on Banking Supervision's guidelines in the "Customer Due Diligence for Banks" paper, which of the following is considered a fundamental element of effective Know Your Customer (KYC) standards in banking operations?
A. Conducting mandatory annual training for all staff
B. Implementing a clearly defined customer acceptance policy
C. Applying uniform KYC requirements to all customers, regardless of risk
D. Ensuring senior management not involved in account opening reviews all KYC documentation
Correct Answer:
B. Implementing a clearly defined customer acceptance policy
Explanation :
The Basel Committee on Banking Supervision (BCBS) published the "Customer Due Diligence for Banks" paper to provide comprehensive guidelines on how banks should manage customer-related risks through effective Know Your Customer (KYC) policies. One of the key elements emphasized in the paper is the establishment of a sound customer acceptance policy (CAP).
A customer acceptance policy is essential because it provides a structured approach to identifying the types of customers that a bank is willing to serve. It includes risk-based criteria for accepting new customers, ensuring that banks do not engage in relationships that could expose them to reputational, operational, legal, or concentration risks. The policy helps banks determine the level of due diligence required based on customer type, geographical location, nature of business, and the purpose of the relationship.
This principle aligns with the risk-based approach advocated by the Basel Committee, which emphasizes flexibility and proportionality. Unlike a one-size-fits-all application of KYC (as suggested in option C), a customer acceptance policy allows banks to tailor due diligence efforts to the specific risk posed by each customer, thus optimizing compliance and resource allocation.
While staff training (option A) and oversight (option D) are important supporting components of a robust KYC program, they are not defined as foundational elements in the same way the customer acceptance policy is. Therefore, implementing a customer acceptance policy is not only an essential element of KYC but also a fundamental building block of effective risk management in banking, as emphasized by the Basel Committee.
Question No 9 :
A foreign financial institution that operates under an offshore banking license intends to establish a correspondent account with a United States (U.S.)-based financial institution. In addition, the foreign bank plans to offer payable-through account (PTA) services to certain customers, allowing them to directly access the U.S. correspondent account.
According to the requirements set forth under the USA PATRIOT Act, what specific information must the foreign bank provide to the U.S. financial institution before opening this correspondent account?
A. A list of politically exposed persons (PEPs) who are beneficial owners of the foreign bank
B. A list of individual customers of the foreign bank who will have direct access to the payable-through account
C. The name and contact information of a person located in the United States who is authorized to receive service of legal process on behalf of the foreign bank
D. Internal records of anti-money laundering (AML) training provided to employees monitoring the correspondent and PTA accounts
Correct Answer:
C. The name and contact information of a person located in the United States who is authorized to receive service of legal process on behalf of the foreign bank
Explanation :
Under Section 312 and 319(b) of the USA PATRIOT Act, U.S. financial institutions are required to perform enhanced due diligence (EDD) on foreign banks, particularly those offering correspondent banking services. One key requirement for foreign banks wishing to establish a correspondent account with a U.S. bank is the designation of a legal process contact within the United States.
This individual or entity must be authorized to receive service of legal documents, such as subpoenas or court orders, on behalf of the foreign bank. This requirement ensures that U.S. authorities can enforce subpoenas or take legal action, even if the foreign bank is located outside U.S. jurisdiction.
The foreign bank must also certify that it does not permit shell banks to use its account and disclose ownership information. However, when it comes to payable-through accounts, additional scrutiny applies. Although U.S. banks must understand who uses the PTA, the foreign bank is not required to submit a full list of its customers (Option B) unless requested. Similarly, politically exposed persons (Option A) and AML training records (Option D) are important for overall risk assessment but are not specifically mandated disclosures under the initial requirements of the USA PATRIOT Act for correspondent account establishment.
Thus, Option C is correct. It directly addresses a legal and regulatory requirement aimed at increasing accountability and transparency in cross-border banking relationships—two core goals of the USA PATRIOT Act in combating money laundering and terrorism financing.
