Transaction Monitoring Flashcards
7 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 7 Transaction Monitoring flashcards as text
Which of the following BEST describes 'model validation' as applied to a transaction monitoring system?
Answer: An independent review assessing whether the model performs as intended and produces reliable outputs
Model validation is an independent, systematic assessment of a transaction monitoring model's conceptual soundness, data integrity, and performance outcomes.
A correspondent bank notices that a respondent bank consistently sends high volumes of transactions to a jurisdiction on the FATF blacklist. What is the correspondent bank's MOST appropriate initial action?
Answer: Conduct enhanced due diligence on the respondent bank and its transaction flows
Enhanced due diligence is the appropriate first step to understand the nature and legitimacy of the flows before taking more drastic action like termination.
Which of the following transaction patterns is MOST consistent with the 'integration' stage of money laundering?
Answer: Using commingled funds from a shell company to purchase luxury goods that are resold legitimately
Integration involves reintroducing laundered funds into the legitimate economy, such as purchasing and reselling assets through seemingly lawful transactions.
A transaction monitoring analyst determines after investigation that an alert does not represent suspicious activity. What must the analyst document?
Answer: The rationale and evidence supporting the decision to close the alert without filing a SAR
Regulators require that alert dispositions—especially closures without SAR filing—be supported by documented rationale and evidence so the decision can be audited.
Which of the following is the BEST indicator that a financial institution's transaction monitoring program has adequate coverage?
Answer: Scenarios are mapped to identified money laundering typologies relevant to the institution's products and customer base
Effective coverage means monitoring scenarios are directly tied to real-world typologies specific to the institution's risk profile, not simply high alert volumes.
A financial institution discovers that its transaction monitoring system failed to generate alerts on a customer later found to be running a Ponzi scheme. This failure is BEST categorized as:
Answer: A detection gap requiring scenario review and system recalibration
A failure to detect a known typology indicates the monitoring system lacked appropriate scenarios or thresholds, requiring a gap analysis and recalibration.
Which of the following BEST explains why cryptocurrency transactions present unique challenges for traditional transaction monitoring systems?
Answer: Pseudonymous addresses, cross-chain swaps, and mixing services obscure the link between senders and recipients
The pseudonymous nature of blockchain addresses combined with obfuscation tools like mixers and chain-hopping makes it difficult to attribute transactions to real-world identities using traditional monitoring logic.