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CAMS > Module 3 (Part 1) > Flashcards

Module 3 (Part 1) Flashcards

1
Q

What does this module cover

A

AML/CFT Compliance Programs

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2
Q

what does FATF and numerous member countries urge for effective AML/CFT compliance

A

risk based controls

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3
Q

What does a risk based approach require financial institutions to have

A

systems and controls that are commensurate with the specific risk of money laundering an terrorist financing facing them

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4
Q

Per FATF, what has to be taken when the risk of money laundering or terrorist is higher

A

enhanced CDD measures

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5
Q

what are the 3 risk factors FATF recommends considering when assessing risk

A
  1. Customer risk factors
  2. Country or geographic risks
  3. Product, service, transaction or delivery channel risk
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6
Q

What are the customer risk factors

A

Non-resident customers, cash intensive businesses, complex ownership structure of a company, companies with bearer shares

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7
Q

what is the country or geographic risks

A

countries with inadequate AML/CFT systems, countries subject to sanctions or embargos, countries involved with funding or supporting of terrorist activities, or those with significant levels of corruption

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8
Q

what about Product, service, transaction or delivery channel risk factors

A

such as private banking, anonymous transactions, and payments received from unknown third parties

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9
Q

What are the four AML/CFT Risk categories

A
  1. Prohibited.
  2. High Risk
  3. Medium Risk
  4. Low Risk
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10
Q

What does Prohibited level indicate

A

that the institution will not tolerate any dealings of any kind given the risk.

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11
Q

What else could this category include

A

transactions with countries subject to economic sanctions or designated as state sponsors of terrorism

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12
Q

What is the deal with high risk

A

the risks are significant but are not necessary prohibited

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13
Q

what may high risk customers include

A

PEPs or certain types of MSBs or cash intensive businesses

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14
Q

what about high risk products and services

A

may include correspondent banking and private banking

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15
Q

what do medium risks merit

A

additional scrutiny

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16
Q

but what

A

do not rise to the level of high risk

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17
Q

what is an example

A

a retail business that accepts low to moderate levels of cash, but is not considered cash-intensive

18
Q

what does low risk represent

A

the baseline risk of money laundering

19
Q

what does low risk typically indicate

A

normal, expected activity

20
Q

what does a risk scoring model use

A

numeric values

21
Q

what do the numeric values to determine the risk of

A

a financial institutions

  1. Customer type
  2. Geographical location
  3. Products/services
22
Q

What is the deal with assessing dynamic risk of customers

A

one critical component of a risk assessment is having a process to re-evaluate risks and to determine when the customer risk-ranking should be raised or lowered

23
Q

what is the deal with the importance of reevaluating customer risk

A

in addition to the initial assessment of the inherent risk of a customer, it is important to consider how a customer’s relationship, and risk, with the institution changes over time

24
Q

what is perhaps the most important consideration driving a customer’s risk rating

A

the actual activity that the customer conducts

25
Q

as every financial institution develops transaction history with customers, It should consider modifying the risk-rating of the customer based on what 4 factors

A
  1. Unusual activity
  2. Receipt of law enforcement inquiries such as subpoenas
  3. transactions that violate economic sanctions programs
  4. other considerations
26
Q

what are the other considerations

A

significant volumes of activity where it would not be expected, such as a domestic charity engaging in large international transactions or businesses engaged in large volumes of cash where this would not be expected

27
Q

what is a vital step in a risk assessment

A

the analysis of the users of the products and services that the institution or business offers

28
Q

what can customer types include

A

individuals

listed companies

private companies

join ventures

partnerships

financial institutions

29
Q

basically what

A

anyone who wants to establish a relationship with the financial institution

30
Q

what have supervisory authorities in various countries stated

A

some customer types are inherently high risk for money laundering

31
Q

what 6 types are listed

A
  1. casinos
  2. offshore corporations and banks located in tax/banking havens
  3. embassies
  4. MSB’s, including currency exchange houses, money remitters, check cashers
  5. Import/Export companies
  6. Cash intensive businesses (restaurants, retail stores, parking)
32
Q

what is a crucial step in devising a risk scoring model

A

involves jurisdictional risk

33
Q

what is the first key question to consider

A

in what countries or jurisdictions do your individual customers reside and what are the customers’ countries of citizenship

34
Q

what is the second question to consider

A

where are your corporate customers headquartered and where do they conduct the majority of their business

35
Q

When assessing the money laundering risks of various territories and countries what should you do

A
  1. scan the terrorism and sanctions lists published by governments and international organizations
  2. consider the overall reputation of the countries in question
  3. monitor major news media
36
Q

What is the deal with assessing the risk of products and services

A

An important element of assessing AML/CFT risk is to review new and existing products and services that the institution or business offers to determine how they may be used to launder money or finance terrorism

37
Q

what is the deal with the importance of risk rating

A

based on the type of product the customer seeks, a risk rating is calculated using a number of product-related factors.

38
Q

Among other things what

A

it depends on the likelihood that the product requested might be used for money laundering or terrorist financing

39
Q

is product scoring universal

A

no

40
Q

why

A

because different financial institutions face varying degrees of risk

41
Q

what are 5 risk rating considerations

A

does the particular new or current product or service:

  1. Enable significant volumes of transactions to occur rapidly
  2. allow the customer to engage in transactions with minimal oversight by the institution
  3. afford significant levels of anonymity to the users
  4. have an especially high transaction or investment value
  5. allow payments to third parties

CAMS (19 decks)

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