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CAMS > Module 1 (Part 1) > Flashcards

Module 1 (Part 1) Flashcards

1
Q

What are the 4 Parts of the CAMS Examination

A
  1. Risks and Methods of Money Laundering and Terrorist Financing
  2. Compliance Standards for Anti-Money Laundering and Combating the Financing of Terrorism
  3. AML/CFT Compliance Programs
  4. Conducting and Responding to Investigations
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2
Q

What is money laundering

A

involves taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities

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3
Q

what is it simply put?

A

the process of making dirty money look clean

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4
Q

what is the Palermo Convention known as

A

The united Nations 2000 Convention Against Transnational Organized Crime

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5
Q

What does the organization define money laundering as

A

The conversion or transfer of property knowing it is derived from a criminal offense, for the purpose of concealing or disguising its illicit origin or of assisting any person who is involved in the commission of the crime to evade the legal consequences of his or her actions

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6
Q

What is the second part of the definition

A

The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that it is derived from a criminal offense

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7
Q

What is the third part of the definition

A

The acquisition, possession or use of property, knowing at the time of its receipt that it was derived from a criminal offense or from participation in a crime

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8
Q

What are the 7 listed criminal activities that can lead to money laundering

A
  1. Illegal arms sales
  2. Narcotics Trafficking
  3. Contraband Smuggling and other activities related to organized crime
  4. Embezzlement
  5. Insider Trading
  6. Bribery
  7. Computer Fraud Schemes
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9
Q

What are the three stages of Money Laundering

A
  1. Placement
  2. Layering
  3. Integration
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10
Q

What is Placement

A

The physical disposal of cash or other assets derived from criminal activity

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11
Q

what happens during this phase

A

The money laundering introduces the illicit proceeds into the financial system

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12
Q

how is this often accomplished

A

placing the funds into circulation through formal financial institutions, casinos, and other legitimate businesses, both domestic and international

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13
Q

What is layering

A

The separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds

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14
Q

What does this second stage involve

A

converting the proceeds of the crime into another form and creating complex layers of financial transactions to muddy/confuse the source and ownership of funds

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15
Q

What is the definition of integration

A

Supplying apparent legitimacy to illicit wealth through the re-entry of the funds into the economy in what appears to be normal business or personal transactions

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16
Q

what does this stage entail

A

using laundering proceeds in seemingly normal transactions to create the perception of legitimacy

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17
Q

What examples are given

A

purchase of luxury assets, financial investments, industrial/commercial investments

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18
Q

What is consequence 1 of money laundering

A

Increased exposure to organized crime and corruption

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19
Q

what does successful money laundering enhance

A

the profitable aspects of criminal activity

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20
Q

what is consequence 2 of money laundering

A

undermining the legitimate private sector

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21
Q

what is consequence 3

A

weakening financial institutions

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22
Q

what is consequence 4

A

dampening effect on foreign investments

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23
Q

what is consequence 5

A

loss of control of, or mistakes in, decisions regarding economic policy

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24
Q

what is consequence 6

A

economic distortion and instability

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25
Q

consequence 7

A

loss of tax revenue (tax evasion)

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26
Q

consequence 8

A

risks to privatization efforts

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27
Q

what does this mean

A

money laundering threatens the efforts of many states trying to introduce reforms into their economies through the privatization of state owned properties such as land, resources, or enterprises

28
Q

What are the 4 risks of money laundering to financial institutions

A
  1. Reputational
  2. Operational
  3. Legal
  4. Concentration Risk
29
Q

what is reputational risk

A

the potential that adverse publicity regarding an organization’s business practices and associations, whether accurate or not, will cause a loss of public confidence in the integrity of the organization

30
Q

What is operational risk

A

The potential for loss resulting from inadequate internal processes, personal or systems, or from external events

31
Q

what is legal risk

A

the potential for lawsuits, adverse judgments, unenforceable contracts, fines and penalties generating losses, increased expenses for an organization, or even the closure of the organization

32
Q

What are the two different types of channels listed in which illicit money can move through numerous different channels

A

Commercial products

Financial Intermediaries

33
Q

What are the 5 commercial products listed

A
  1. Checking Accounts
  2. Savings accounts
  3. Brokerage accounts
  4. Loans
  5. Wire Transfers
34
Q

What are the 5 Financial Intermediaries

A
  1. Trusts
  2. Company Service Providers
  3. Securities Dealers
  4. Banks
  5. Money Services Businesses
35
Q

What are the 5 areas listed for money laundering through banks

A
  1. Electronic Fund Transfers
  2. Correspondent Banking
  3. Private Banking
  4. Politically Expose Persons
  5. Structuring
36
Q

What is an electronic fund transfer

A

any transfer of funds that is initiated by electronic means

37
Q

such as what

A

Automated Clearing House (ACH)

ATM

Electronic terminals

Mobile telephones

telephones or magnetic tapes

38
Q

why are electronic funds transfers effective

A

illicit fund transfers can be easily hidden among the millions of legitimate transfers that occur each day

39
Q

what can money launderers also use electronic transfers for

A

to move the funds from one account to another, from one bank to another, and from one jurisdiction to another

40
Q

what does this do

A

it layers the transactions

41
Q

how does it make it more difficult for law enforcement and investigative agencies

A

they cannot trace the origin of funds as easily due to the layering

42
Q

What is the second area of money laundering through banks

A

Correspondent banking

43
Q

What is correspondent banking

A

the provision of banking services by one bank (the correspondent bank) to another bank (the respondent bank)

44
Q

What is the benefit of correspondent banking for banks

A

by establishing multiple correspondent relationships globally, banks can undertake international financial transactions for themselves and for their customers in jurisdictions where they have no physical presence

45
Q

what do large international banks typically act as

A

correspondents for thousands f other banks around the world

46
Q

What is the first main reason correspondent banking is vulnerable to money laundering

A

By their nature, correspondent banking relationships create a situation in which a financial institution carries out financial transactions on behalf of customers of another institution

47
Q

what is the second reason

A

the amount of money that flows through correspondent accounts can pose a significant threat to financial institutions as they process large volumes of transactions for their customers’ customers

48
Q

What is the example of Correspondent Banking

A

ABC Corp (Country A) USD

Bank 1 (Country A)

Correspondent Bank (Country B) Changes from USD to Euros

Respondent Bank (country B)

XYZ Corp (Country B) Euro

49
Q

What is the third area of money laundering through banks

A

Private banking

50
Q

What private banking

A

it provides highly personalized and confidential products and services to wealthy clients at fees that are often based on “assets under management.”

51
Q

What is significant about offshore or international financial centers

A

private banking customers are often “non-residents”

52
Q

what does this mean

A

they conduct their banking in a country outside the one in which they reside

53
Q

how may their assets move

A

overseas where they are held in the name of corporate vehicles like private investment companies

54
Q

where can these private investment companies be established

A

in secrecy havens

55
Q

wat are private investments companies

A

corporations established by individual bank customers and others in offshore jurisdictions to hold assets

56
Q

What is the fourth area of money laundering through banks

A

PEPs

57
Q

What are the two types of PEPs

A

Foreign

Domestic

58
Q

what are Foreign PEPs

A

individuals who are or have been entrusted with prominent public functons by a foreign country

59
Q

what are the 6 examples listed

A
  1. heads of state or of government
  2. senior politicians
  3. senior government
  4. Judicial or military officials
  5. Senior executives of state owned corporations
  6. important political party officials
60
Q

What are domestic PEPs

A

Individuals who are or have been entrusted domestically with prominent public functions

61
Q

What are the 6 examples listed

A
  1. heads of state or of government
  2. senior politicians
  3. senior government
  4. Judicial or military officials
  5. Senior executives of state owned corporations
  6. important political party officials
62
Q

What is the Fifth and final area of money laundering through banks

A

Structuring

63
Q

What is structuring

A

Designing a transaction to evade triggering a reporting or recordkeeping requirement by the financial institution

64
Q

True or false, Structuring is possibly the most commonly known money laundering method

A

True

65
Q

Since it is a crime in many countries what must a financial institution do

A

report the activity by filing a SAR

CAMS (19 decks)

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