Pearson CAMS New Attempt

 The compliance officer should provide a high level summary of the activity and the interactions with law enforcement to the board of directors, as this would be the most appropriate way to escalate the information without compromising the confidentiality of the STR or the ongoing investigation. Providing a copy of the STR or the letter from law enforcement could expose the bank to legal risks or jeopardize the investigation. Informing the regulator to bring it up with the board would not be sufficient, as the compliance officer has the responsibility to report directly to the board on significant compliance issues.

ACAMS CAMS Certification Video Training Course, Module 5: Risk Management, Lesson 5.3: Reporting to Senior Management and the Board1

ACAMS CAMS Certification Study Guide, 6th Edition, Chapter 5: Risk Management, Section 5.3:Reporting to Senior Management and the Board2

 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.

1: The Complete Guide to Transaction Monitoring: Everything to Know

2: AML Scenarios: Transaction Monitoring Challenges

3: Setting AML Transaction Monitoring Thresholds

4: Automated Transaction Monitoring – Considerations for System Implementation

5: ACAMS (2020). CAMS Certification Package (6th Edition)

TheWolfsberg Group’s Principles on Private Bankingfocus onrisk management, transparency, and financial crime prevention.

Option C (Correct):Thecore principleis that banks shouldonly accept clients whose source of funds and beneficial ownership are well understoodto mitigateAML risks.

Option A (Incorrect):Whilemanaging reputational riskis important, thepriority is AML compliance, not just protecting client privacy.

Option B (Incorrect):The Wolfsberg Group encouragesenhanced due diligence (EDD) for PEPsbut doesnot establish specific rulesfor private bankers.

Option D (Incorrect):The focus is onAML compliance, not assisting banks innavigating high data privacy jurisdictions.

Thethird line of defense (internal audit)providesindependent oversightof an institution’sAML/CFT compliance framework.

Option B (Correct):The internal audit function should report to the board’s audit committeeto maintainindependence and objectivity.

Option A (Incorrect):While frequent audits are essential, AML audits should be risk-based rather than mandated at a strict 12-month interval.

Option C (Incorrect):Internal audit must assess remediation plansto ensure they adequatelyaddress AML deficiencies.

Option D (Incorrect):The third line of defense should not be involved in daily AML operationstoavoid conflicts of interest.

Three Lines of Defense in AML Risk Management:

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Best Practices for AML Audit Function:

Ensure complete independence from AML operations.

Conduct risk-based audits tailored to emerging threats.

Report audit findings to the board for effective oversight.