CAMS Risk Assessment and Management

Question 1

What are the primary components typically assessed in a financial institution's AML risk assessment?

Accepted Answer

Customer/product/service risk, geographic risk, and channel/delivery risk

Answer

Customer credit risk, market risk, and operational risk

Answer

Reputational risk, legal risk, and strategic risk only

Answer

Employee misconduct risk and third-party vendor risk exclusively

Question 2

What is an 'inherent risk' in the context of an AML risk assessment?

Accepted Answer

The level of risk present before any AML controls or mitigating measures are applied

Answer

Risks that cannot be mitigated under any circumstances

Answer

Risks that are inherent to the financial services industry but not specific to the institution

Answer

The residual risk remaining after controls are applied

Question 3

What is 'residual risk' in an AML risk assessment?

Accepted Answer

The risk that remains after all AML controls have been applied and any remaining risk must be accepted or transferred

Answer

The portion of risk that is too small to be worth controlling

Answer

The risk from accounts closed due to suspicious activity

Answer

The leftover risk from prior regulatory examinations that wasn't remediated

Question 4

Which risk factor would most significantly INCREASE a customer's AML risk rating?

Accepted Answer

The customer is a cash-intensive business in a high-risk industry located in an FATF grey-listed jurisdiction

Answer

The customer is a publicly listed company with SEC filings available

Answer

The customer is a long-established local business with a predictable transaction pattern

Answer

The customer is a government employee with a fixed salary deposited monthly

Question 5

What is the purpose of a 'risk appetite statement' in AML compliance?

Accepted Answer

A formal statement of the level and types of AML risk the institution is willing to accept in pursuing its business objectives

Answer

A statement of how aggressively the institution intends to pursue new high-risk customers

Answer

An appetite for risk reduction targets expressed as percentage decreases in SAR filings

Answer

A regulatory-required statement of what risks the institution will not accept under any circumstances

Question 6

How frequently should a financial institution update its AML risk assessment?

Accepted Answer

At least annually, and whenever there are material changes to the institution's products, services, customers, or geographies

Answer

Only when required by a regulatory examination finding

Answer

Every five years as part of a strategic planning cycle

Answer

Only when the institution experiences a money laundering incident