CAMS Emerging Trends 5 — Questions and Answers
Question 1: Central Bank Digital Currencies (CBDCs) introduce which key AML design consideration for governments?
- Whether to allow anonymous small-value transactions versus requiring full identification for all transfers (Correct answer)
- How to integrate CBDCs with existing cryptocurrency exchanges
- Whether to price CBDCs at par with physical currency
- How to prevent CBDCs from being used for international trade
Correct answer: Whether to allow anonymous small-value transactions versus requiring full identification for all transfers
CBDC designers must balance financial inclusion (allowing some anonymity for small payments) against AML requirements (full traceability of all transactions).
Question 2: What is 'ransomware' in the AML context, and why does it matter for compliance officers?
- A type of phishing email targeting bank compliance staff
- Malware that encrypts victim data, with ransom payments often made in cryptocurrency requiring laundering (Correct answer)
- Software used by criminals to automate structured deposits
- A method of intercepting wire transfers mid-transmission
Correct answer: Malware that encrypts victim data, with ransom payments often made in cryptocurrency requiring laundering
Ransomware payments—typically demanded in cryptocurrency—generate illicit proceeds that subsequently flow through exchanges and mixers, creating transaction monitoring obligations.
Question 3: Which emerging AML risk involves criminals establishing shell companies to acquire real estate in cash or through mortgage fraud to launder funds?
- Commercial real estate flipping
- Beneficial owner obfuscation through real estate (Correct answer)
- Lease-back money laundering
- Mortgage-backed securities fraud
Correct answer: Beneficial owner obfuscation through real estate
Shell companies are used to purchase real estate while concealing the true beneficial owner, integrating illicit funds as seemingly legitimate property investments.
Question 4: How does 'pig butchering' (sha zhu pan) fraud connect to AML obligations for financial institutions?
- Victims are persuaded to invest in fraudulent crypto platforms, and their deposits constitute fraud proceeds requiring reporting (Correct answer)
- Criminal networks slaughter livestock purchased with illicit funds to generate cash
- Fraudsters exploit agricultural commodity markets to hide illicit profits
- Criminals use social engineering to compromise bank employee credentials
Correct answer: Victims are persuaded to invest in fraudulent crypto platforms, and their deposits constitute fraud proceeds requiring reporting
Pig butchering scams convince victims to deposit funds into fake investment platforms controlled by criminals, generating fraud proceeds that flow through global banking systems.
Question 5: The emergence of 'super-correspondent' banks in global payment networks raises AML concerns because:
- They charge higher fees that incentivize smaller banks to bypass compliance
- Concentration of global payments through a few institutions creates systemic risk if one is compromised (Correct answer)
- Super-correspondents are exempt from FATF Recommendation 13 requirements
- They operate exclusively in jurisdictions with weak AML frameworks
Correct answer: Concentration of global payments through a few institutions creates systemic risk if one is compromised
Concentration of global correspondent banking in a small number of institutions means a single compliance failure or exploitation could affect a vast network of downstream banks.
Question 6: Which behavioral indicator is most associated with money mule activity in retail banking accounts?
- Regular salary deposits with consistent spending patterns
- Receiving large deposits immediately followed by outbound transfers leaving near-zero balances (Correct answer)
- Gradual accumulation of savings with periodic withdrawals
- Multiple small purchases from online retailers across different countries
Correct answer: Receiving large deposits immediately followed by outbound transfers leaving near-zero balances
Money mule accounts typically receive funds and rapidly forward them onward, functioning as pass-through accounts with no apparent personal economic purpose.
Question 7: What does the term 'financial inclusion' have to do with AML risk in emerging markets?
- Greater financial inclusion always increases overall AML risk proportionally
- Bringing unbanked populations into formal financial systems can reduce reliance on unmonitored informal value transfer systems (Correct answer)
- FATF requires that financial inclusion programs be exempt from AML reporting
- Microfinance institutions are excluded from FATF AML obligations
Correct answer: Bringing unbanked populations into formal financial systems can reduce reliance on unmonitored informal value transfer systems
When unbanked populations gain access to formal financial services, transactions shift from unmonitored hawala or cash networks into regulated, traceable channels.
CAMS Emerging Trends 5
Central Bank Digital Currencies (CBDCs) introduce which key AML design consideration for governments?