CAMS KYC and Customer Due Diligence 3

Question 1

Which of the following is an example of a high-risk business type that typically warrants Enhanced Due Diligence?

Accepted Answer

A cash-intensive business such as a currency exchange or casino

Answer

A publicly listed grocery chain

Answer

A government-owned utility company

Answer

A federally regulated mutual fund

Question 2

What is a 'customer risk rating' and what is its purpose in an AML program?

Accepted Answer

A risk score assigned to customers based on their AML risk factors to calibrate the level of due diligence and monitoring applied

Answer

A credit score used to determine loan eligibility

Answer

A rating assigned by regulators based on past violations

Answer

A score measuring customer profitability for the institution

Question 3

What action should a financial institution take when a customer refuses to provide information required for CDD/EDD?

Accepted Answer

Consider declining or exiting the relationship and filing a SAR if suspicion warrants it

Answer

Proceed with the account opening and flag it for monitoring

Answer

File a SAR immediately based on the refusal alone

Answer

Escalate to law enforcement before taking any action

Question 4

What is a 'high-risk country' in AML due diligence and how does it affect customer risk ratings?

Accepted Answer

A jurisdiction identified by FATF, OFAC, or national authorities as having significant AML/CFT deficiencies or sanctions concerns, which elevates the risk rating of connected customers

Answer

Any country with a population over 100 million people

Answer

Any country that is not a member of the FATF

Answer

Countries with GDP below a certain threshold

Question 5

How does 'correspondent banking' create unique AML challenges?

Accepted Answer

The respondent bank's customers are often unknown to the correspondent bank, creating nested relationship risks and limited visibility into underlying transactions

Answer

Correspondent banks are not subject to any AML regulations

Answer

Correspondent banking only involves domestic transactions with low risk

Answer

Correspondent banks are prohibited from serving high-risk customers

Question 6

What distinguishes 'source of funds' from 'source of wealth' in EDD?

Accepted Answer

Source of funds refers to the origin of money in a specific transaction; source of wealth refers to the broader origins of a customer's overall net worth

Answer

They are interchangeable terms meaning the same thing

Answer

Source of wealth applies only to corporate customers; source of funds applies only to individuals

Answer

Source of funds is required by law; source of wealth is optional