AML/CFT Risk Assessment Flashcards
6 cards from real ACAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AML/CFT Risk Assessment flashcards as text
In the FATF risk-based approach, what are the three primary risk categories that institutions must assess?
Answer: Country/geographic risk, customer risk, and product/service/transaction risk
The FATF risk-based approach requires financial institutions to assess three primary AML risk categories: country/geographic risk (jurisdictions with higher ML/TF risk), customer risk (types of customers and their risk profiles), and product/service/transaction risk (financial services that may be more vulnerable to abuse).
Which document provides the most authoritative assessment of a country's AML/CFT regime for use in geographic risk assessments?
Answer: FATF Mutual Evaluation Reports (MERs)
FATF Mutual Evaluation Reports provide the most comprehensive, authoritative assessment of a country's AML/CFT legal framework, institutional effectiveness, and compliance with FATF standards.
What is 'residual risk' in the context of an AML risk assessment?
Answer: The risk that remains after applying AML controls
Residual risk is the level of risk that remains after the institution's AML controls and mitigating measures have been applied to the inherent risk. It represents the actual exposure the institution faces.
Which of the following customer types typically carries the HIGHEST inherent AML risk?
Answer: A non-resident alien operating a cash-intensive business with no explained source of wealth
Non-resident aliens operating cash-intensive businesses with unexplained wealth combine multiple high-risk indicators: foreign status, cash-intensive industry, and lack of transparent financial history — all of which elevate inherent AML risk significantly.
In a risk-based approach, when is Enhanced Due Diligence (EDD) required?
Answer: For customers identified as high-risk, such as PEPs, correspondent banks, or those from high-risk jurisdictions
EDD is required for high-risk customers identified through the risk assessment process, including politically exposed persons, correspondent banking relationships, customers from high-risk jurisdictions, and others presenting elevated money laundering risk.
What is the purpose of a 'risk appetite statement' in an institution's AML program?
Answer: To define the level and type of AML/CFT risk the institution is willing to accept in pursuing its business objectives
A risk appetite statement defines the boundaries of acceptable AML/CFT risk for the institution, guiding decisions about which customers, products, and geographies are within acceptable risk tolerance.