CAMS Transaction Monitoring 3 — Questions and Answers
Question 1: Which of the following is a key limitation of purely rules-based transaction monitoring systems?
- They cannot adapt to new or evolving money laundering typologies without manual updates (Correct answer)
- They generate too few alerts to be useful
- They require machine learning expertise to operate
- They cannot monitor wire transfers
Correct answer: They cannot adapt to new or evolving money laundering typologies without manual updates
Rules-based systems are static and can only detect patterns explicitly coded into them, making them ineffective against novel schemes until rules are manually updated.
Question 2: A compliance officer notices that transaction monitoring alerts for trade finance products are disproportionately low compared to the volume processed. This MOST likely indicates:
- Inadequate monitoring scenarios or thresholds for trade finance typologies (Correct answer)
- Trade finance is inherently low risk and requires less monitoring
- The institution has excellent trade finance controls
- Alerts are being closed too quickly by analysts
Correct answer: Inadequate monitoring scenarios or thresholds for trade finance typologies
Abnormally low alert volumes in a high-risk product area suggest the monitoring system lacks adequate scenarios or appropriately calibrated thresholds for those products.
Question 3: Under US BSA requirements, how long must a financial institution retain records related to a SAR filing?
- 5 years from the date of filing (Correct answer)
- 3 years from the date of filing
- 7 years from the date of filing
- Indefinitely
Correct answer: 5 years from the date of filing
31 CFR 1020.320 requires financial institutions to retain SARs and supporting documentation for five years from the date of filing.
Question 4: Which of the following best describes a 'nested account' risk in correspondent banking transaction monitoring?
- When a foreign bank's customers transact through the correspondent account without the correspondent bank knowing their identities (Correct answer)
- When multiple domestic accounts are linked to a single customer
- When transactions are processed after business hours
- When a customer holds accounts at multiple financial institutions
Correct answer: When a foreign bank's customers transact through the correspondent account without the correspondent bank knowing their identities
Nested accounts occur when a foreign bank's clients use the correspondent relationship to access the US financial system, obscuring the true beneficial owners from the correspondent bank.
Question 5: Which transaction monitoring scenario is MOST effective at detecting money laundering through real estate?
- Monitoring for large cash payments or wire transfers associated with property purchases by shell companies (Correct answer)
- Monitoring for frequent small ATM withdrawals
- Monitoring for international wire transfers above $10,000
- Monitoring for check kiting patterns
Correct answer: Monitoring for large cash payments or wire transfers associated with property purchases by shell companies
Real estate money laundering commonly involves cash or wires from shell companies to purchase properties, so monitoring for this combination targets the primary typology.
Question 6: A financial institution operates in a jurisdiction with a high volume of cash-intensive businesses. How should this affect its transaction monitoring thresholds?
- Thresholds should be calibrated to reflect the expected higher cash volumes of that customer segment (Correct answer)
- Default vendor thresholds should be applied regardless of geography
- Cash monitoring should be eliminated for known cash-intensive businesses
- All cash transactions should be automatically reported
Correct answer: Thresholds should be calibrated to reflect the expected higher cash volumes of that customer segment
Monitoring thresholds must be calibrated to the institution's specific customer base and geography to avoid excessive false positives from legitimate business activity.
Question 7: What is 'look-back' analysis in the context of transaction monitoring?
- Reviewing historical transaction data to identify suspicious activity that may have been missed by current monitoring systems (Correct answer)
- Analyzing future transaction projections for risk
- Reviewing competitor institutions' alert rates
- Auditing closed SARs for accuracy
Correct answer: Reviewing historical transaction data to identify suspicious activity that may have been missed by current monitoring systems
Look-back analysis involves retroactively applying new or improved detection scenarios to historical data to identify previously undetected suspicious activity.
CAMS Transaction Monitoring 3
Which of the following is a key limitation of purely rules-based transaction monitoring systems?