CAMS Emerging Trends 2 — Questions and Answers
Question 1: Which emerging payment method poses AML risk due to its use of 'mixers' or 'tumblers' to obscure transaction trails?
- Mobile peer-to-peer payments
- Cryptocurrency (Correct answer)
- Prepaid debit cards
- Wire transfers
Correct answer: Cryptocurrency
Cryptocurrency mixers/tumblers pool and redistribute coins to break the blockchain transaction trail, making it a key AML concern.
Question 2: What is 'smurfing' in the context of emerging AML trends involving digital payments?
- Using malware to steal banking credentials
- Structuring large transactions into many small ones below reporting thresholds (Correct answer)
- Creating fake digital identities for account opening
- Exploiting cryptocurrency exchange vulnerabilities
Correct answer: Structuring large transactions into many small ones below reporting thresholds
Smurfing (structuring) involves breaking large sums into smaller deposits to evade Currency Transaction Report thresholds.
Question 3: Decentralized Finance (DeFi) platforms present a unique AML challenge primarily because they:
- Charge higher transaction fees than traditional banks
- Often lack a central intermediary to apply KYC/AML controls (Correct answer)
- Are regulated more strictly than traditional exchanges
- Only support small transaction volumes
Correct answer: Often lack a central intermediary to apply KYC/AML controls
DeFi protocols operate via smart contracts without a central entity, making it difficult to enforce traditional KYC/AML requirements.
Question 4: Which FATF recommendation was updated to specifically address virtual asset service providers (VASPs)?
- Recommendation 10
- Recommendation 15 (Correct answer)
- Recommendation 20
- Recommendation 26
Correct answer: Recommendation 15
FATF Recommendation 15 was updated to bring VASPs under AML/CFT obligations equivalent to those applied to financial institutions.
Question 5: The 'Travel Rule' as applied to virtual assets requires that:
- Crypto users report international travel when carrying hardware wallets
- VASPs pass originator and beneficiary information with transfers above a threshold (Correct answer)
- Exchanges suspend accounts when users travel to high-risk countries
- Blockchain analytics firms share data across borders
Correct answer: VASPs pass originator and beneficiary information with transfers above a threshold
The FATF Travel Rule requires VASPs to collect and transmit originator and beneficiary information for virtual asset transfers at or above $1,000/€1,000.
Question 6: Non-Fungible Tokens (NFTs) raise AML concerns primarily because they can be used to:
- Bypass import/export controls on physical goods
- Facilitate trade-based money laundering through subjective valuation (Correct answer)
- Anonymize cryptocurrency wallet addresses
- Create synthetic financial instruments outside regulatory reach
Correct answer: Facilitate trade-based money laundering through subjective valuation
NFTs can be bought and sold at manipulated prices, allowing bad actors to transfer illicit value under the guise of art or collectible transactions.
Question 7: Which typology involves criminals using online gaming platforms to launder money by purchasing in-game currency or assets?
- Layering via real estate
- Virtual economy laundering (Correct answer)
- Shell company structuring
- Correspondent banking exploitation
Correct answer: Virtual economy laundering
Criminals convert illicit cash into in-game assets, trade or sell them within the game economy, and then cash out through legitimate channels.
CAMS Emerging Trends 2
Which emerging payment method poses AML risk due to its use of 'mixers' or 'tumblers' to obscure transaction trails?