CAMS Emerging Trends 3 — Questions and Answers
Question 1: What is the primary AML concern with peer-to-peer (P2P) cryptocurrency exchanges compared to centralized exchanges?
- Higher transaction fees reduce profitability for launderers
- P2P platforms often lack robust KYC verification of users (Correct answer)
- P2P exchanges are typically licensed as money service businesses
- Blockchain transparency makes P2P transactions easier to trace
Correct answer: P2P platforms often lack robust KYC verification of users
P2P exchanges frequently allow users to trade directly without identity verification, creating gaps in AML oversight.
Question 2: Regultech solutions in AML compliance primarily leverage which technology to reduce false positives in transaction monitoring?
- Blockchain distributed ledgers
- Machine learning and artificial intelligence (Correct answer)
- Quantum encryption
- Biometric authentication
Correct answer: Machine learning and artificial intelligence
AI/ML-based RegTech tools analyze behavioral patterns and context to distinguish suspicious activity from legitimate transactions more accurately.
Question 3: Which emerging threat involves criminals using social media platforms and influencers to recruit unwitting 'money mules'?
- Synthetic identity fraud
- Finsta recruitment schemes
- Romance scam layering
- Money mule social engineering (Correct answer)
Correct answer: Money mule social engineering
Criminals post fake job offers on social media promising easy income, recruiting individuals who unknowingly transfer illicit funds through their accounts.
Question 4: How does 'layering' manifest in the context of cryptocurrency transactions?
- Converting cash to crypto at a single exchange
- Moving funds through multiple wallets, chains, and mixing services to obscure origin (Correct answer)
- Depositing crypto proceeds directly into a bank account
- Using crypto to purchase goods from a single merchant
Correct answer: Moving funds through multiple wallets, chains, and mixing services to obscure origin
Layering in crypto involves chain-hopping, using privacy coins, and mixers to create complex transaction trails that are difficult to trace.
Question 5: The concept of 'de-risking' by financial institutions refers to:
- Implementing advanced AI to reduce AML risk
- Terminating relationships with entire customer categories deemed high risk (Correct answer)
- Diversifying investment portfolios to minimize market exposure
- Encrypting customer data to prevent identity theft
Correct answer: Terminating relationships with entire customer categories deemed high risk
De-risking occurs when banks exit entire markets or customer segments (e.g., MSBs, correspondent banks) rather than managing individual customer risks.
Question 6: Which emerging trend involves criminals exploiting the speed of instant payment systems to move funds before detection?
- Real-time payment layering (Correct answer)
- Structured wire transfers
- ACH kiting
- Nostro account exploitation
Correct answer: Real-time payment layering
Instant payment rails like Zelle or FedNow allow nearly immediate fund movement, reducing the window for financial institutions to detect and intervene.
Question 7: Which geographic region has been identified by FATF as increasingly used as a conduit for laundering proceeds through trade-based methods?
- Scandinavian free trade zones
- Free trade zones with lax oversight globally (Correct answer)
- European Union member states
- G7 financial centers
Correct answer: Free trade zones with lax oversight globally
Free trade zones worldwide often have reduced customs and financial oversight, making them attractive for trade-based money laundering schemes.
CAMS Emerging Trends 3
What is the primary AML concern with peer-to-peer (P2P) cryptocurrency exchanges compared to centralized exchanges?