ACAMS CAMS Exam Dumps & Practice Test Questions
Question No 1:
An insurance company’s compliance officer, assigned to the financial crimes division, is reviewing client transactions to detect any irregularities that could suggest money laundering. Among several activities, four transactions stand out. The officer needs to identify which transaction most strongly signals suspicious behavior according to AML (Anti-Money Laundering) protocols.
Which of the following activities most likely indicates potential money laundering?
A. A customer paid their quarterly life insurance premium using several money orders from two separate banks.
B. A client based in a high-risk jurisdiction recently purchased property insurance for a large development project.
C. A corporate group with multiple subsidiaries opened group life insurance policies tailored to each subsidiary.
D. A client donated $100,000 to a charitable annuity through a nonprofit organization with global health initiatives.
Correct Answer: A
Explanation:
Money laundering involves concealing the illicit origins of money to make it appear as if it were obtained legally. Insurance companies are particularly vulnerable to money laundering due to the high value of premiums and the liquidity of certain products. In this scenario, Option A most clearly signals suspicious intent.
The use of multiple money orders from different banks is a classic AML red flag. This approach is often associated with “structuring” or “smurfing,” which refers to breaking a large transaction into smaller, less noticeable amounts to avoid regulatory reporting thresholds. Since money orders can be purchased anonymously and are less traceable than bank transfers, they are frequently used to obscure the origin of illicit funds.
This transaction becomes even more suspicious because paying a routine life insurance premium does not typically require fragmented payment methods—clients generally use bank transfers, checks, or credit cards. The deviation from normal payment behavior, especially in an industry where patterns are well understood, signals an intent to disguise financial activity.
In comparison:
Option B, although the client is from a high-risk area, might be justified with proper due diligence.
Option C appears to reflect standard corporate planning without irregularities.
Option D, although large in value, involves a reputable nonprofit, and such transactions are less likely to signal laundering if the organization is properly monitored.
Thus, Option A reflects a transaction structure designed to evade detection, warranting further investigation under AML protocols.
Question No 2:
A branch manager notices a pattern involving a specific bank teller and a group of commercial clients. These clients, seemingly from the same ethnic background as the teller, routinely request service only from this teller, communicate in a foreign language, and often bring meals as tokens of appreciation. The deposits they make each week are consistently the same in amount. This pattern is unusual and may raise AML or internal compliance concerns.
What should the branch manager’s first course of action be?
A. Reassign the teller to a different branch
B. Conduct a formal investigation before deciding on further action
C. Motivate the teller to bring in more clients from the same community
D. Advise the teller to redirect customers to other staff to prevent favoritism
Correct Answer: B
Explanation:
In financial institutions, it’s critical to detect and address signs of potential suspicious activity without jumping to conclusions. The scenario outlined involves a recurring pattern that could suggest collusion or money laundering; however, cultural practices and personal relationships can sometimes mimic red flags without indicating wrongdoing.
Option B, conducting an investigation before any other action, is the most prudent and responsible step. Regulatory agencies like FinCEN emphasize that suspicious behavior should be documented and evaluated thoroughly using internal protocols before taking any further steps, especially actions that might affect employee or customer treatment.
A proper investigation might include:
Reviewing the teller’s transaction history
Auditing deposit patterns for anomalies
Comparing the amounts to expected business revenue for those clients
Verifying customer profiles under KYC (Know Your Customer) standards
This due diligence ensures that any action taken is based on evidence, not assumptions. In contrast:
Option A (reassigning the teller) could be premature and potentially discriminatory.
Option C (encouraging more business) ignores the potential risk without first assessing it.
Option D (changing the teller-client arrangement) could disrupt service and be interpreted as unfair or biased.
Ultimately, financial institutions must strike a balance between vigilance and fairness. Conducting a structured internal investigation protects all parties while satisfying regulatory expectations.
Question No 3:
A bank branch manager has observed that a specific teller is regularly approached by the same group of commercial customers—mostly owners of local ethnic restaurants. These clients insist on being served only by this teller, speak a foreign language during their interactions, and often bring the teller food. Their cash deposits are identical each week. This repetitive behavior pattern could indicate structured transactions or collusion.
What should the manager do in light of these observations?
A. Move the teller to another branch to disrupt the routine
B. Launch an internal review before taking additional steps
C. Encourage the teller to attract more customers from their community
D. Recommend the teller refer these clients to other staff members
Correct Answer: B
Explanation:
When faced with potential indicators of financial misconduct or collusion, managers must take an evidence-based, non-discriminatory approach that aligns with compliance obligations. In this case, Option B—conducting an internal review—is the most appropriate next step.
The behaviors observed, including the exclusive service requests, identical deposit amounts, and gifts, may reflect innocent cultural gestures or personal rapport. However, the repetitive nature and uniformity of deposits—especially in cash—should prompt deeper analysis, as these characteristics align with typical money laundering tactics like structuring.
An internal investigation should include:
Verifying the consistency of deposits against the businesses’ expected cash flows
Auditing teller activities and patterns
Reviewing surveillance footage (if applicable)
Checking KYC compliance for the involved accounts
This step is critical because acting without evidence (e.g., Option A, transferring the teller) could damage morale and result in legal or reputational consequences. Similarly:
Option C may invite additional scrutiny if done prematurely.
Option D risks being seen as favoritism-based discipline without proper justification.
Regulatory bodies such as FinCEN and standards from the Bank Secrecy Act support the idea that suspicions must be substantiated before escalation. The key is to ensure that any potential red flag is validated through systematic checks while preserving fair treatment and ethical standards.
Question No 4:
A bank’s compliance officer has initiated advanced monitoring systems to detect potential connections to human trafficking. After reviewing suspicious transactions,
Which of the following behaviors is most likely to trigger further investigation due to its strong association with human trafficking indicators?
A. Wire transfers originating from countries with large migrant worker populations
B. Cash deposits in cities where the account holder both lives and conducts business
C. Cash deposits in cities where the account holder neither lives nor does business
D. Cash deposits in cities unrelated to the account holder’s residence or business, followed by same-day cash withdrawals
Correct Answer:
D. Cash deposits in cities unrelated to the account holder’s residence or business, followed by same-day cash withdrawals
Explanation:
Human trafficking often involves complex financial activities designed to obscure the flow of illicit funds. Financial institutions are obligated to implement anti-money laundering (AML) protocols to identify suspicious activities that may be indicative of illegal operations such as trafficking.
Among the options provided, Option D presents the most compelling red flag for potential human trafficking. Cash deposits made in cities unconnected to the account holder’s usual activities, followed by rapid same-day withdrawals, is an indication of funnel accounts. This behavior is common in illicit financial activities, where traffickers use such accounts to move money across regions in a manner that is hard to trace. These operations are designed to avoid detection by banking systems that monitor for suspicious transactions. The goal is to distance the funds from any one geographic location, making it difficult for authorities to trace the flow of money.
The same-day withdrawal suggests that the deposits are quickly moved or withdrawn, often to avoid hitting any monitoring thresholds. This rapid movement of funds, combined with cash handling, is a typical sign of efforts to avoid scrutiny and conceal the true source or destination of the money. This behavior raises significant concerns about possible involvement in trafficking or other illicit activities.
In comparison, the other options present less alarming scenarios:
Option A, while it might seem suspicious, lacks the specificity and timing-related behaviors that are more commonly linked to trafficking.
Option B is entirely normal behavior, as cash deposits in cities where a person resides and conducts business are expected and not indicative of illicit activities.
Option C is somewhat suspicious but does not indicate the same urgency as the combination of factors in Option D.
Therefore, Option D represents the clearest red flag that warrants deeper investigation.
Question No 5:
A compliance officer at a private bank is developing a policy for managing interactions with intermediaries. To ensure the policy aligns with the Wolfsberg Anti-Money Laundering (AML) Principles for Private Banking,
Which two key considerations should be prioritized when dealing with intermediaries?
A. If an intermediary introduces clients to the bank, the bank is not required to conduct due diligence on those clients.
B. When an intermediary introduces clients to the bank, the bank must collect the same level of client information as it would if the client had approached the bank directly.
C. If an intermediary holds an account for multiple clients and does not apply equivalent due diligence measures as the bank, the bank must conduct 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 intermediary’s underlying clients.
Correct Answers: B and C
Explanation:
The Wolfsberg Anti-Money Laundering (AML) Principles for Private Banking emphasize the necessity for transparency and rigorous due diligence when interacting with intermediaries. These principles were designed to combat the misuse of private banking services for illegal activities such as money laundering and terrorist financing. Banks must carefully assess risks associated with intermediaries and ensure that their clients are properly vetted.
Option B is correct because the Wolfsberg Principles require that when an intermediary introduces a client to the bank, the bank must still gather the same level of detailed information as it would if the client had approached the bank directly. This ensures that the bank fully understands the identity and risk profile of the client, preventing intermediaries from acting as a "shield" to obscure the true identity of the bank’s clients.
Option C is also correct because, according to the principles, if an intermediary holds an account on behalf of multiple clients (e.g., a pooled or omnibus account), the bank must conduct due diligence on the underlying clients. If the intermediary fails to apply the same level of scrutiny as the bank would, the responsibility shifts to the bank to ensure it is not unknowingly providing services to high-risk or non-compliant clients. This additional layer of scrutiny is essential to prevent money laundering or other illicit financial activities.
Option A is incorrect because the bank is always required to conduct due diligence on clients, regardless of whether they were introduced by an intermediary. Relying solely on the intermediary’s due diligence is not enough.
Option D is also incorrect. If the intermediary is a regulated financial institution, the bank may rely on the intermediary’s due diligence practices, provided the intermediary follows equivalent AML standards and the bank has confidence in their procedures.
In conclusion, the policy should include robust due diligence requirements that ensure the bank fully understands its clients' identities and risk profiles, regardless of the involvement of intermediaries. This is essential to comply with Wolfsberg principles and mitigate the risks associated with illicit activities.
Question No 6:
A foreign financial institution is attempting to establish a correspondent banking relationship with Bank A, a U.S.-based bank.
As part of the due diligence process under the USA PATRIOT Act, which of the following pieces of information must Bank A collect before opening the account?
A. A full list of all clients of the foreign bank
B. Information on the ownership structure of the foreign bank, including the identity and ownership percentages of its owners
C. Detailed information on the foreign bank’s executive and management team
D. Details regarding the foreign bank’s internal anti-money laundering (AML) training policies and procedures
Correct Answer:
B. Information on 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 conduct enhanced due diligence (EDD) when establishing or maintaining correspondent accounts for foreign financial institutions. A critical component of this process is verifying the ownership structure of the foreign bank, including identifying the bank's owners and their ownership stakes.
This requirement ensures that U.S. banks do not inadvertently facilitate illicit activities such as money laundering, terrorist financing, or other illegal financial operations. Understanding the ownership structure of the foreign bank helps the U.S. bank evaluate the risks of the relationship and verify that the foreign institution is not involved in any illicit financial activities. By identifying the beneficial owners—those who ultimately control the bank—the U.S. financial institution can more effectively manage risks associated with the correspondent relationship.
Option A, which suggests obtaining a full list of all the foreign bank’s clients, is not a requirement under the USA PATRIOT Act. While transaction monitoring and client due diligence are crucial for preventing illicit financial activity, the law does not mandate the collection of a comprehensive client list as part of the due diligence process.
Option C, requesting detailed information about the foreign bank’s executive and management team, could be part of a broader risk assessment, but it is not explicitly required under the PATRIOT Act.
Option D refers to the foreign bank’s internal anti-money laundering (AML) policies and training procedures. While these are important for general compliance, Section 312 does not specifically require this information to be obtained before opening a correspondent account.
The primary focus of due diligence under Section 312 is on the ownership structure of the foreign bank, especially to prevent the use of "shell banks", which have no physical presence and may be used for illicit activities. Identifying the ownership structure supports the broader goals of transparency and accountability within the international banking system.
Therefore, the correct and legally required information for Bank A to obtain is the identity of the foreign bank’s owners and their respective ownership percentages, as this is a key factor in assessing the risk of the relationship.
Question No 7:
Which type of insurance product is most vulnerable to exploitation for money laundering purposes due to its investment-like characteristics and ability to manage large sums of money over an extended period?
A. Annuity
B. Casualty Insurance
C. Collateral Insurance
D. Regulated Pension Plan
Correct Answer: A. Annuity
Explanation:
Annuities are particularly susceptible to being exploited for money laundering activities due to their investment-like features and long-term nature. Annuities allow individuals to invest a lump sum or make periodic payments, promising regular disbursements, typically during retirement. The vulnerability lies in the fact that these products function similarly to investment vehicles, making them an attractive option for criminals who wish to "clean" illicit funds.
Money launderers can use illegal funds to purchase an annuity, and over time, they can make withdrawals that appear legitimate. The low level of scrutiny that annuities undergo compared to banking transactions, combined with their long-term payout structure, makes them an appealing option for laundering money. Furthermore, some annuities offer the option of early withdrawal (sometimes with a penalty), allowing launderers to extract significant amounts of the invested funds, which could then be processed in a way that disguises the origin of the money.
On the other hand, products like casualty insurance, collateral insurance, and regulated pension plans are less attractive for money laundering. Casualty and collateral insurances primarily provide protection against loss or damage, and they do not involve significant investment or large financial transactions. Regulated pension plans also have stringent regulations, oversight, and transparency that make them more difficult to misuse for illicit purposes.
As a result, financial institutions and insurance companies are required to implement robust anti-money laundering (AML) practices to combat the risks associated with annuities. These include verifying client identities, monitoring large or unusual transactions, and reporting suspicious activity.
Question No 8:
According to the Basel Committee on Banking Supervision's guidelines in the "Customer Due Diligence for Banks" document, which of the following is considered a fundamental component 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) emphasizes the importance of a well-structured and clearly defined customer acceptance policy (CAP) as part of an effective Know Your Customer (KYC) program. This policy is vital for banks to determine which customers they are willing to serve based on certain risk-based criteria. It helps banks avoid engaging with customers who may expose them to various risks, such as reputational, operational, legal, or concentration risks.
The customer acceptance policy (CAP) is aligned with the Basel Committee’s risk-based approach, which ensures that due diligence is applied in proportion to the risks posed by each customer. This flexibility allows banks to apply appropriate KYC measures, such as verifying the customer's identity and understanding the purpose of the relationship, depending on the customer's type, geographical location, business nature, and risk level.
In contrast, applying uniform KYC standards across all customers (Option C) is not recommended, as it does not allow for differentiation based on the varying risks posed by different customers. While mandatory staff training (Option A) and senior management oversight (Option D) are important for the overall success of a KYC program, they are considered supporting components, not foundational elements.
Therefore, the establishment of a customer acceptance policy is a core aspect of a strong KYC framework and a critical part of managing customer-related risks, as per the Basel Committee's guidelines.
Question No 9:
A foreign financial institution with an offshore banking license seeks to establish a correspondent account with a U.S.-based financial institution. Additionally, the foreign bank plans to offer payable-through account (PTA) services, allowing certain customers to directly access the U.S. correspondent account.
Under the requirements of 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:
The USA PATRIOT Act mandates that U.S. financial institutions perform enhanced due diligence (EDD) when dealing with foreign banks, especially those offering correspondent banking services. A key requirement under this act is the designation of a U.S.-based individual or entity authorized to receive legal process on behalf of the foreign bank. This ensures that U.S. authorities can serve legal documents, such as subpoenas, court orders, or regulatory requests, to the foreign bank, even if it is located outside of U.S. jurisdiction.
The foreign bank must also certify that it does not allow shell banks to use its correspondent account and disclose information about its ownership. Although U.S. banks must understand who is using the payable-through accounts (PTAs), a full list of customers (Option B) is not required unless requested by the U.S. bank. Additionally, while politically exposed persons (PEPs) (Option A) and AML training records (Option D) are part of the broader due diligence process, they are not specifically mandated at the initial stages of setting up a correspondent account.
Thus, Option C is correct because it addresses a legal requirement designed to improve accountability and transparency in cross-border banking relationships, in line with the goals of the USA PATRIOT Act to prevent money laundering and terrorism financing.
Question No 10:
You are an Anti-Money Laundering (AML) compliance officer at a bank, and your team is conducting customer due diligence (CDD) on a new client. The client is a politically exposed person (PEP) who is also associated with several high-risk jurisdictions.
What should be the next step in the due diligence process according to the ACAMS CAMS guidelines?
A) Approve the client and monitor the account on a monthly basis.
B) Immediately close the account and report the client to regulatory authorities.
C) Conduct enhanced due diligence (EDD) to obtain more information on the client’s source of funds and business activities.
D) Approve the client but only with minimal monitoring of transactions.
Correct Answer: C
Explanation:
In this scenario, the client is a politically exposed person (PEP) and is associated with high-risk jurisdictions. According to the ACAMS CAMS (Certified Anti-Money Laundering Specialist) guidelines, such clients pose an elevated risk of potential involvement in money laundering or other illicit financial activities. Therefore, the correct course of action involves conducting enhanced due diligence (EDD). Here’s why:
A) Approve the client and monitor the account on a monthly basis:
Simply approving the client without conducting enhanced due diligence would not be appropriate for a PEP, especially when associated with high-risk jurisdictions. While monitoring is important, EDD is required to assess the higher risks involved with such clients. Regular monitoring on its own is insufficient without further investigation into the client’s background, source of funds, and business activities.B) Immediately close the account and report the client to regulatory authorities:
While it’s important to report suspicious activity to the appropriate authorities, immediate closure of the account without further investigation could violate due diligence protocols. The client is a PEP, and while heightened scrutiny is necessary, a proper risk assessment should be conducted before making a decision to close the account. This option would be an overreaction at the initial stage of the process.C) Conduct enhanced due diligence (EDD) to obtain more information on the client’s source of funds and business activities:
Enhanced due diligence (EDD) is specifically designed for high-risk clients, such as PEPs or those linked to high-risk jurisdictions. EDD involves a deeper investigation into the client’s background, the source of their funds, the nature of their business activities, and other financial relationships that might expose the bank to illicit financial activities. EDD helps to mitigate the risk associated with these clients and ensure compliance with AML regulations. This is the correct answer because it aligns with regulatory best practices for high-risk clients.D) Approve the client but only with minimal monitoring of transactions:
Approving the client with minimal monitoring would be insufficient given the client’s high-risk profile. For PEPs and those associated with high-risk jurisdictions, regular and enhanced monitoring is necessary to detect unusual or suspicious activity. Minimal monitoring would not meet regulatory expectations and could leave the financial institution vulnerable to regulatory penalties or the facilitation of illicit activities.
In summary, Enhanced Due Diligence (EDD) (C) is required when dealing with high-risk clients such as PEPs and those with ties to high-risk jurisdictions. It ensures that financial institutions can accurately assess and mitigate potential risks, in compliance with AML regulations.
