CAMS Exam Dumps : Certified Anti-Money Laundering Specialist (the 6th edition)

Shell companies are business entities that exist only on paper, with no physical presence, no employees, and no operations. They are often used for legitimate purposes, such as facilitating mergers and acquisitions, protecting assets, or managing investments. However, they are also frequently exploited for illegal activities, such as tax evasion and money laundering, due to their ability to obscure ownership and financial transactions12. Money launderers can use shell companies to disguise the origin of illicit funds, evade sanctions, and avoid the anti-money laundering (AML) measures that financial institutions use to detect suspicious activity23. The process typically involves setting up a shell company in a jurisdiction known for strict privacy laws, such as a tax haven, and then using it to move and hide illicit funds while hiding the identity of the ultimate beneficiaries13.

In this scenario, the fact that the company has been a client for many years does not rule out the possibility of money laundering. The company could have changed its ownership, activities, or risk profile over time, or it could have been involved in money laundering all along without being detected. The fact that the company has added several new subsidiaries that are recently created shell companies is a red flag that indicates potential money laundering. The company could be using the shell companies to hide the source and destination of its funds, or to conceal the identity of its beneficial owners. The institution should perform enhanced due diligence on the company and its subsidiaries, and report any suspicious transactions or activities to the relevant authorities.

 An automated transaction monitoring system is a tool that analyzes transactions and customer behavior for signs of money laundering or other financial crimes, and generates alerts when suspicious or unusual activity is detected. The system relies on a set of rules and parameters that define what constitutes normal and abnormal transactions, based on the risk profile and business nature of the financial institution or business. These rules and parameters need to be periodically reviewed and updated to ensure that they are effective and compliant with the latest regulations and best practices.

One of the factors that would most likely result in a change in the monitoring system parameters is when the national Financial intelligence Unit (FIU) issues new risk indicators. The FIU is a central authority that collects, analyzes, and disseminates financial intelligence related to money laundering, terrorist financing, and other financial crimes. The FIU also provides guidance and feedback to financial institutions and businesses on how to comply with their anti-money laundering (AML) obligations and improve their transaction monitoring systems. The FIU may issue new risk indicators based on its analysis of emerging trends, typologies, and threats in the financial sector, or based on international standards and recommendations. These risk indicators are intended to help financial institutions and businesses identify and report suspicious transactions more effectively and efficiently.

Therefore, when the FIU issues new risk indicators, the financial institution or business should review its existing monitoring system parameters and adjust them accordingly to reflect the new risks and scenarios. For example, the FIU may issue new risk indicators related to the use of cryptocurrencies, virtual assets, or online platforms for money laundering or terrorist financing. In that case, the financial institution or business should update its monitoring system parameters to include new rules, thresholds, or patterns that capture these activities and generate alerts for further investigation.

Financial institutions (FIs) are required to cooperate with law enforcement agencies (LEAs) in their investigations of money laundering, terrorist financing, and other financial crimes. However, sometimes LEAs may submit requests for information or documents that are overly broad, unduly intrusive, or unreasonable in scope or volume. Such requests may pose challenges or risks for FIs, such as violating customer privacy, compromising data security, disrupting business operations, or incurring excessive costs.

The most appropriate response for an FI in such a situation is to narrow the request through a prompt response to the LEA. This means that the FI should communicate with the LEA as soon as possible to clarify the purpose, scope, and relevance of the request, and to negotiate a more reasonable and proportionate request that meets the LEA’s needs and the FI’s capabilities. The FI should also explain the potential difficulties or consequences of complying with the original request, and propose alternative or additional sources of information that may be more useful or accessible. The FI should document the communication and the agreed terms of the request, and comply with the request in a timely and accurate manner.

By narrowing the request through a prompt response, the FI can demonstrate its good faith and willingness to cooperate with the LEA, while also protecting its own interests and obligations. This can help avoid or resolve any conflicts or misunderstandings between the FI and the LEA, and facilitate a more efficient and effective investigation.