CAMS Money Laundering Typologies and Methods 2 — Questions and Answers
Question 1: What is a 'loan-back' scheme in money laundering?
- A scheme where criminals obtain bank loans using stolen identities
- A scheme where criminals 'lend' themselves their own illicit funds and repay the loan with seemingly legitimate funds (Correct answer)
- A government program designed to compensate money laundering victims
- A method of transferring funds through international syndicated banking facilities
Correct answer: A scheme where criminals 'lend' themselves their own illicit funds and repay the loan with seemingly legitimate funds
In a loan-back scheme, the launderer deposits illicit funds offshore, then borrows against those funds, creating a paper trail that makes repayments appear to be legitimate loan obligations.
Question 2: Cuckoo smurfing is best described as:
- Using multiple couriers to physically transport bulk cash across international borders
- Substituting criminal funds for legitimate funds expected in international transfers without the recipient's knowledge (Correct answer)
- Converting cash proceeds into stablecoins via peer-to-peer exchanges
- Using shell companies registered in multiple offshore jurisdictions simultaneously
Correct answer: Substituting criminal funds for legitimate funds expected in international transfers without the recipient's knowledge
In cuckoo smurfing, a criminal's funds are deposited into an account of a person expecting a legitimate international transfer, replacing those funds — the account holder is unaware their account is being used.
Question 3: Which of the following is the clearest example of the 'placement' stage of money laundering?
- Purchasing luxury goods and art with previously laundered funds
- Creating multiple layers of nominee-owned shell companies in offshore jurisdictions
- Depositing cash proceeds from narcotics sales at multiple bank branches below CTR thresholds (Correct answer)
- Investing clean money into publicly traded stock market securities
Correct answer: Depositing cash proceeds from narcotics sales at multiple bank branches below CTR thresholds
Depositing drug sales proceeds at banks constitutes placement — the first, most risky stage where cash enters the formal financial system.
Question 4: What does the 'layering' stage of money laundering primarily aim to achieve?
- To introduce illicit cash into the regulated financial system for the first time
- To obscure the audit trail and distance the funds from their criminal origin through complex transactions (Correct answer)
- To integrate laundered funds back into the legitimate economy as apparent lawful income
- To report suspicious transactions voluntarily to financial intelligence authorities
Correct answer: To obscure the audit trail and distance the funds from their criminal origin through complex transactions
Layering uses multiple, complex transactions — wire transfers, currency conversions, shell company movements — to create confusion and distance funds from their source.
Question 5: The Hawala system of value transfer is best described as:
- An international wire transfer network regulated and overseen by SWIFT messaging standards
- An informal value transfer system based on trust and a network of brokers without physical movement of funds (Correct answer)
- A regulated cryptocurrency exchange network operating across the Middle East and South Asia
- A government-sanctioned foreign currency exchange system used for remittances
Correct answer: An informal value transfer system based on trust and a network of brokers without physical movement of funds
Hawala operates through brokers (hawaladars) who settle debts through trust and offsetting credits rather than actual fund transfers, making it difficult to trace and regulate.
Question 6: In trade-based money laundering, 'over-invoicing' refers to:
- An importer charging less than market value to transfer value to an exporter
- An exporter charging more than market value to transfer excess value from the importing country to the exporting country (Correct answer)
- Submitting invoices without accompanying shipping documentation
- Creating entirely fictitious shipping documents for goods that never existed
Correct answer: An exporter charging more than market value to transfer excess value from the importing country to the exporting country
Over-invoicing allows value to be transferred from the importer (who overpays) to the exporter, enabling movement of funds across borders disguised as legitimate trade payments.
Question 7: Which typology involves moving illicit funds through a series of foreign correspondent banking relationships to obscure their origin?
- Real estate layering through nominee purchasers
- Structuring deposits across multiple domestic retail banks
- Correspondent banking layering through nested accounts (Correct answer)
- Casino chip laundering and cash-out schemes
Correct answer: Correspondent banking layering through nested accounts
Correspondent banking layering exploits nested or downstream respondent relationships to move funds through multiple jurisdictions, each hop adding complexity and obscuring the original source.
CAMS Money Laundering Typologies and Methods 2
What is a 'loan-back' scheme in money laundering?