CAMS KYC and Customer Due Diligence

Question 1

What are the three levels of customer due diligence recognized in AML frameworks?

Accepted Answer

Simplified, standard, enhanced

Answer

Customer due diligence is typically stratified into simplified (low-risk), standard (normal), and enhanced (high-risk) levels, with the depth of scrutiny increasing with the customer's risk rating.

Question 2

Under FinCEN's Customer Due Diligence (CDD) Rule, which category of beneficial owner must be identified for legal entities?

Accepted Answer

Each individual owning 25% or more of the entity and one control person

Answer

FinCEN's CDD Rule requires identifying each individual who owns 25% or more of a legal entity (ownership prong) plus one individual who controls the entity (control prong).

Question 3

What is the primary purpose of Enhanced Due Diligence (EDD)?

Accepted Answer

To gather additional information on high-risk customers to better understand and mitigate risk

Answer

EDD involves collecting additional information about high-risk customers — such as source of funds, source of wealth, and business purpose — to better assess and manage elevated money laundering risk.

Question 4

Which of the following is a valid document for verifying individual customer identity under a U.S. Customer Identification Program (CIP)?

Accepted Answer

Unexpired government-issued photo ID such as a passport or driver's license

Answer

CIP requirements specify that for individuals, institutions must collect and verify name, date of birth, address, and identification number using documentary or non-documentary methods; an unexpired government-issued photo ID satisfies documentary verification.

Question 5

What does 'ongoing customer due diligence' require financial institutions to do?

Accepted Answer

Continuously monitor customer transactions and update customer information to ensure profiles remain current and accurate

Answer

Ongoing CDD requires continuously monitoring customer transactions for activity inconsistent with the customer's profile and periodically refreshing customer information to ensure risk ratings remain accurate.

CAMS - Certified Anti-Money Laundering Specialist Certification Practice Test

CAMS - Certified Anti-Money Laundering Specialist Certification Practice Test

CAMS KYC and Customer Due Diligence