CAMS Risk Assessment and Management 3

Question 1

What is the significance of the U.S. National Money Laundering Risk Assessment (NMLRA) for financial institutions?

Accepted Answer

It is the government's assessment of money laundering risks across the U.S. financial system, which institutions use to benchmark and inform their own risk assessments

Answer

It is a mandatory assessment that each institution must complete and submit to FinCEN annually

Answer

It sets the official risk rating for each financial institution based on regulatory findings

Answer

It determines the amount of capital institutions must hold in reserve against AML risks

Question 2

What is 'concentration risk' in AML and why does it matter?

Accepted Answer

The risk that an institution has an unusually high concentration of high-risk customers, products, or geographic exposures that could create systemic AML vulnerabilities

Answer

The risk that AML staff are concentrated in one geographic location

Answer

The risk of concentrating all transaction monitoring in a single system

Answer

The legal risk concentration in the compliance department

Question 3

What role does the board of directors play in AML risk management?

Accepted Answer

The board is responsible for setting risk appetite, approving the AML program, receiving regular AML risk reports, and holding senior management accountable for AML compliance

Answer

The board reviews and approves every SAR before it is filed with FinCEN

Answer

The board's AML role is limited to approving the annual AML training budget

Answer

Board members are individually liable for all AML violations regardless of their knowledge

Question 4

What is 'key risk indicator' (KRI) and how is it used in AML program management?

Accepted Answer

A measurable metric that tracks changes in AML risk levels over time, used to monitor whether risk is increasing, decreasing, or stable

Answer

A regulatory score that FinCEN assigns to each financial institution's AML program

Answer

The dollar threshold used to determine whether a transaction requires enhanced review

Answer

A customer indicator used to identify potential PEPs during account opening

Question 5

What is a 'gap analysis' in the context of AML risk management, and when should one be conducted?

Accepted Answer

A structured comparison of the institution's current AML program against regulatory requirements and best practices to identify deficiencies requiring remediation, typically conducted during risk assessments or after regulatory changes

Answer

An analysis of the gaps in customer information discovered during transaction reviews

Answer

An analysis of the time gap between transaction completion and SAR filing

Answer

A customer portfolio analysis to identify gaps in the institution's product offerings

Question 6

How should an institution handle an AML risk that exceeds its stated risk appetite?

Accepted Answer

Assess whether to strengthen controls to reduce residual risk to an acceptable level, reduce the underlying business activity, or formally accept the elevated risk with senior management and board approval

Answer

Immediately exit all business activities that contribute to the elevated risk

Answer

File a SAR immediately to document the elevated risk exposure

Answer

Wait for regulatory guidance before taking any action on elevated risk

What is the significance of the U.S.National Money Laundering Risk Assessment (NMLRA) for financial institutions?

What is the significance of the U.S.
National Money Laundering Risk Assessment (NMLRA) for financial institutions?