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Module 1 (Part 1) Flashcards

1
Q

What are the 4 Parts of the CAMS Examination

A
  1. Risks and Methods of Money Laundering and Terrorist Financing
  2. Compliance Standards for Anti-Money Laundering and Combating the Financing of Terrorism
  3. AML/CFT Compliance Programs
  4. Conducting and Responding to Investigations
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2
Q

What is money laundering

A

involves taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities

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3
Q

what is it simply put?

A

the process of making dirty money look clean

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4
Q

what is the Palermo Convention known as

A

The united Nations 2000 Convention Against Transnational Organized Crime

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5
Q

What does the organization define money laundering as

A

The conversion or transfer of property knowing it is derived from a criminal offense, for the purpose of concealing or disguising its illicit origin or of assisting any person who is involved in the commission of the crime to evade the legal consequences of his or her actions

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6
Q

What is the second part of the definition

A

The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that it is derived from a criminal offense

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7
Q

What is the third part of the definition

A

The acquisition, possession or use of property, knowing at the time of its receipt that it was derived from a criminal offense or from participation in a crime

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8
Q

What are the 7 listed criminal activities that can lead to money laundering

A
  1. Illegal arms sales
  2. Narcotics Trafficking
  3. Contraband Smuggling and other activities related to organized crime
  4. Embezzlement
  5. Insider Trading
  6. Bribery
  7. Computer Fraud Schemes
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9
Q

What are the three stages of Money Laundering

A
  1. Placement
  2. Layering
  3. Integration
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10
Q

What is Placement

A

The physical disposal of cash or other assets derived from criminal activity

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11
Q

what happens during this phase

A

The money laundering introduces the illicit proceeds into the financial system

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12
Q

how is this often accomplished

A

placing the funds into circulation through formal financial institutions, casinos, and other legitimate businesses, both domestic and international

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13
Q

What is layering

A

The separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds

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14
Q

What does this second stage involve

A

converting the proceeds of the crime into another form and creating complex layers of financial transactions to muddy/confuse the source and ownership of funds

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15
Q

What is the definition of integration

A

Supplying apparent legitimacy to illicit wealth through the re-entry of the funds into the economy in what appears to be normal business or personal transactions

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16
Q

what does this stage entail

A

using laundering proceeds in seemingly normal transactions to create the perception of legitimacy

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17
Q

What examples are given

A

purchase of luxury assets, financial investments, industrial/commercial investments

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18
Q

What is consequence 1 of money laundering

A

Increased exposure to organized crime and corruption

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19
Q

what does successful money laundering enhance

A

the profitable aspects of criminal activity

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20
Q

what is consequence 2 of money laundering

A

undermining the legitimate private sector

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21
Q

what is consequence 3

A

weakening financial institutions

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22
Q

what is consequence 4

A

dampening effect on foreign investments

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23
Q

what is consequence 5

A

loss of control of, or mistakes in, decisions regarding economic policy

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24
Q

what is consequence 6

A

economic distortion and instability

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25
consequence 7
loss of tax revenue (tax evasion)
26
consequence 8
risks to privatization efforts
27
what does this mean
money laundering threatens the efforts of many states trying to introduce reforms into their economies through the privatization of state owned properties such as land, resources, or enterprises
28
What are the 4 risks of money laundering to financial institutions
1. Reputational 2. Operational 3. Legal 4. Concentration Risk
29
what is reputational risk
the potential that adverse publicity regarding an organization's business practices and associations, whether accurate or not, will cause a loss of public confidence in the integrity of the organization
30
What is operational risk
The potential for loss resulting from inadequate internal processes, personal or systems, or from external events
31
what is legal risk
the potential for lawsuits, adverse judgments, unenforceable contracts, fines and penalties generating losses, increased expenses for an organization, or even the closure of the organization
32
What are the two different types of channels listed in which illicit money can move through numerous different channels
Commercial products Financial Intermediaries
33
What are the 5 commercial products listed
1. Checking Accounts 2. Savings accounts 3. Brokerage accounts 4. Loans 5. Wire Transfers
34
What are the 5 Financial Intermediaries
1. Trusts 2. Company Service Providers 3. Securities Dealers 4. Banks 5. Money Services Businesses
35
What are the 5 areas listed for money laundering through banks
1. Electronic Fund Transfers 2. Correspondent Banking 3. Private Banking 4. Politically Expose Persons 5. Structuring
36
What is an electronic fund transfer
any transfer of funds that is initiated by electronic means
37
such as what
Automated Clearing House (ACH) ATM Electronic terminals Mobile telephones telephones or magnetic tapes
38
why are electronic funds transfers effective
illicit fund transfers can be easily hidden among the millions of legitimate transfers that occur each day
39
what can money launderers also use electronic transfers for
to move the funds from one account to another, from one bank to another, and from one jurisdiction to another
40
what does this do
it layers the transactions
41
how does it make it more difficult for law enforcement and investigative agencies
they cannot trace the origin of funds as easily due to the layering
42
What is the second area of money laundering through banks
Correspondent banking
43
What is correspondent banking
the provision of banking services by one bank (the correspondent bank) to another bank (the respondent bank)
44
What is the benefit of correspondent banking for banks
by establishing multiple correspondent relationships globally, banks can undertake international financial transactions for themselves and for their customers in jurisdictions where they have no physical presence
45
what do large international banks typically act as
correspondents for thousands f other banks around the world
46
What is the first main reason correspondent banking is vulnerable to money laundering
By their nature, correspondent banking relationships create a situation in which a financial institution carries out financial transactions on behalf of customers of another institution
47
what is the second reason
the amount of money that flows through correspondent accounts can pose a significant threat to financial institutions as they process large volumes of transactions for their customers' customers
48
What is the example of Correspondent Banking
ABC Corp (Country A) USD Bank 1 (Country A) Correspondent Bank (Country B) Changes from USD to Euros Respondent Bank (country B) XYZ Corp (Country B) Euro
49
What is the third area of money laundering through banks
Private banking
50
What private banking
it provides highly personalized and confidential products and services to wealthy clients at fees that are often based on "assets under management."
51
What is significant about offshore or international financial centers
private banking customers are often "non-residents"
52
what does this mean
they conduct their banking in a country outside the one in which they reside
53
how may their assets move
overseas where they are held in the name of corporate vehicles like private investment companies
54
where can these private investment companies be established
in secrecy havens
55
wat are private investments companies
corporations established by individual bank customers and others in offshore jurisdictions to hold assets
56
What is the fourth area of money laundering through banks
PEPs
57
What are the two types of PEPs
Foreign Domestic
58
what are Foreign PEPs
individuals who are or have been entrusted with prominent public functons by a foreign country
59
what are the 6 examples listed
1. heads of state or of government 2. senior politicians 3. senior government 4. Judicial or military officials 5. Senior executives of state owned corporations 6. important political party officials
60
What are domestic PEPs
Individuals who are or have been entrusted domestically with prominent public functions
61
What are the 6 examples listed
1. heads of state or of government 2. senior politicians 3. senior government 4. Judicial or military officials 5. Senior executives of state owned corporations 6. important political party officials
62
What is the Fifth and final area of money laundering through banks
Structuring
63
What is structuring
Designing a transaction to evade triggering a reporting or recordkeeping requirement by the financial institution
64
True or false, Structuring is possibly the most commonly known money laundering method
True
65
Since it is a crime in many countries what must a financial institution do
report the activity by filing a SAR

CAMS (19 decks)

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