CAMS Risk Assessment and Management 2

Question 1

What is a 'Money Services Business' (MSB) and why does it represent elevated AML risk?

Accepted Answer

A business that provides financial services like currency exchange, money transmission, or check cashing — elevated risk because they handle large volumes of cash and may serve customers with limited banking access

Answer

A traditional bank that offers money market accounts

Answer

Any business that accepts payments for services rendered

Answer

A financial advisor firm that manages client money

Question 2

What is 'geographic risk' in an AML context and how should it factor into customer risk ratings?

Accepted Answer

The elevated AML risk associated with customers, transactions, or counterparties connected to jurisdictions with weak AML controls, high corruption, or active sanctions programs

Answer

The risk of physical crime near the institution's branches

Answer

The risk that geographic expansion will dilute the institution's AML program quality

Answer

Currency exchange rate risk in international transactions

Question 3

What is a 'risk-based monitoring' approach to transaction surveillance?

Accepted Answer

Calibrating transaction monitoring alert thresholds and rules based on the customer's risk profile, applying more sensitive monitoring to high-risk customers

Answer

Monitoring all transactions with the same level of scrutiny to ensure equal treatment

Answer

Only monitoring transactions above a fixed dollar threshold regardless of risk profile

Answer

Delegating transaction monitoring responsibility to high-risk customers themselves

Question 4

What is the 'three lines of defense' model in AML risk management?

Accepted Answer

Business units (1st line), compliance/risk management (2nd line), and internal audit (3rd line) as three internal layers of AML control and oversight

Answer

Law enforcement, regulators, and financial institutions as three external barriers against money laundering

Answer

Transaction monitoring, SAR filing, and law enforcement as three sequential steps in AML response

Answer

Customer onboarding, transaction monitoring, and account closure as three preventive measures

Question 5

What is a 'typology' in AML, and how is it used in risk management?

Accepted Answer

A documented description of a money laundering method or scheme, used to inform risk assessments, monitoring rules, and staff training

Answer

A system for classifying customer types for CDD purposes

Answer

A regulatory categorization of financial institutions by risk level

Answer

The type of documentation required for different transaction sizes

Question 6

How does 'product risk' factor into an institution's overall AML risk assessment?

Accepted Answer

Different financial products and services carry different AML risk levels based on factors like anonymity, ease of use for money laundering, cross-border capabilities, and cash handling features

Answer

Product risk only applies to financial products sold to high-net-worth clients

Answer

Product risk is only relevant for derivatives and other complex financial instruments

Answer

All financial products carry equal AML risk regardless of their features