Risk Assessment and Management Flashcards
6 cards from real CAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Risk Assessment and Management flashcards as text
What is the significance of the U.S. National Money Laundering Risk Assessment (NMLRA) for financial institutions?
Answer: It is the government's assessment of money laundering risks across the U.S. financial system, which institutions use to benchmark and inform their own risk assessments
The NMLRA, published by the U.S. Treasury, provides the government's assessment of money laundering risks across sectors, geographic areas, and methods — financial institutions use this to understand systemic risks and inform their own risk assessments.
What is 'concentration risk' in AML and why does it matter?
Answer: The risk that an institution has an unusually high concentration of high-risk customers, products, or geographic exposures that could create systemic AML vulnerabilities
Concentration risk occurs when too large a portion of the institution's customer base, transaction volume, or revenue is tied to high-risk categories — if something goes wrong (enforcement action, reputational harm), the impact is amplified.
What role does the board of directors play in AML risk management?
Answer: The board is responsible for setting risk appetite, approving the AML program, receiving regular AML risk reports, and holding senior management accountable for AML compliance
The board bears ultimate accountability for the institution's AML program — they must set the risk appetite, approve the written AML policy, receive regular compliance reporting, and ensure adequate resources are allocated to the compliance function.
What is 'key risk indicator' (KRI) and how is it used in AML program management?
Answer: A measurable metric that tracks changes in AML risk levels over time, used to monitor whether risk is increasing, decreasing, or stable
KRIs are quantitative metrics (e.g., volume of SARs filed, percentage of high-risk customers, alert closure rates) that help AML management monitor whether risks are trending in a favorable or unfavorable direction and trigger action when thresholds are breached.
What is a 'gap analysis' in the context of AML risk management, and when should one be conducted?
Answer: A structured comparison of the institution's current AML program against regulatory requirements and best practices to identify deficiencies requiring remediation, typically conducted during risk assessments or after regulatory changes
An AML gap analysis systematically compares the institution's existing controls, policies, and procedures against applicable regulatory requirements and industry standards, identifying specific deficiencies that require remediation.
How should an institution handle an AML risk that exceeds its stated risk appetite?
Answer: Assess whether to strengthen controls to reduce residual risk to an acceptable level, reduce the underlying business activity, or formally accept the elevated risk with senior management and board approval
When risk exceeds appetite, the institution has three options: enhance controls to reduce residual risk, reduce the business activity driving the risk, or formally accept elevated risk with appropriate governance approval and documentation.