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ACAMS CAMS Practice Test Questions, Exam Dumps

ACAMS CAMS Certified Anti-Money Laundering Specialist (the 6th edition) exam dumps vce, practice test questions, study guide & video training course to study and pass quickly and easily. ACAMS CAMS Certified Anti-Money Laundering Specialist (the 6th edition) exam dumps & practice test questions and answers. You need avanset vce exam simulator in order to study the ACAMS CAMS certification exam dumps & ACAMS CAMS practice test questions in vce format.

CHAPTER 2: INTERNATIONAL AML/CFT STANDARDS

1. Chapter 2: Part 1

There is good news and bad news for you. If you receive a question from this chapter, you will usually receive a one-liner question like "Is this provision mentioned in EU Directive One or Two?" So there will be no confusion in answering the question. But the bad news is that you have to do a lot of memorization. Don't worry; I will tell you what you need to focus on in this chapter. Financial Action Tasks Force as you know,FATF is an international standard setting bodyon money laundering and terrorism financing. You should be well versed in its objectives, mutual evaluation procedures, FATF recommendation, FATF membership process, noncooperative countries, and other provisions. I know it is a lot to take in. However, you need to understand that FATF is the gold standard on Amazaft. So it is very important. This is the reason why I asked you at the beginning of this training tutorial that, before you even start studying the Camps Study Guide, it is the utmost requirement that you go through this FA TF recommendation. However, if you are short on time, Shuri Consultancy has developed this Shari Camp preparation kit where you can download all the reference materials for this exam, including a stack of FFTF recommendations and other reference materials, so that you don't need to go through the full text of these reference materials. In addition to this, if you want to know more about the mutual evaluation process of the FATF, you can read this article about mutual evaluation. So, this article is written in the context of Nepal, please. Mutual Evaluation However, there are certain concepts that are still important for you. So for example, what is the methodology for mutual evaluation? As you can see, effective methodology requires two components for mutual evaluation. Technical compliance assessment and effective assessment So it is explained in quite some detail in this article. Then you have a FATF recommendation. Here you can see that this article includes all those 40 FFTF recommendations. And the other thing that you can read in this article is how the mutual evaluation is done, what the technical assessment is, and how the ratings of different countries are done. And also, it includes how the countries are classified as high-risk jurisdictions based on this mutual evaluation. Okay, what is the process for that and what are the consequences if the country is categorised as a high-risk jurisdiction? So anyway, this is a very important article that you may want to go over at your leisure. Let's talk about noncooperative countries. FF is now no longer calling countries with serious ML deficiencies "blacklist countries," but they are calling them "non-cooperative countries." And furthermore, there are only two countries that are sanctioned. The first one is North Korea, and the second one is Iran. The Basel Committee (Bessel Committee) was developed to promote good supervisory standards through banks and financial institutions worldwide. In line with this, it has issued standards on email safety that need to be adopted by every bank. So these are some of the major standardsthat you need to remember for your campsite. Gem: The first one is Code Principles Methodology. This principle or standard states that banks should have adequate policies, procedures, and practises regarding "know your customer" as well as other ethical standards regarding due diligence for customers. So it provides precise guidance to the bank on KYC standards and their implementation. So these elements are customer identification, risk management, and customer acceptance. The third one is consolidated KYC risk management. So these standards consist of different provisions like risk management, customer acceptance, and identification policies. Ongoing monitoring of high-risk accounts The fourth one is "Sound Management of Risk Related to Money Laundering and Financing of Terrorism" and its revised General Guide to Account. Opening this standard is important because it focuses on the It explains three lines of defense. The first line of defence includes frontline staff like Taylor, who are customer-destructive relationship managers and have direct contact with customers. Therefore, qualified employees should be hired in this position. The second line of defence is the MLCompliance Function, which develops policies and procedures that are implemented by these frontline stops. The third line of defence is auditing. An audit reviews the ML Safety risk management process and identifies its effectiveness. Customer due diligence mechanisms for transactions are also reviewed by audit. Monitoring Methods management Information System for MS Safety European Union Directives on Money Laundering I don't think European Union terms are alien to you. Its laws and regulations are binding for all 27 countries. These countries have to amend their national laws to incorporate U.S. laws to prevent their financial system from being used for money laundering. The European Union has issued four directives on money laundering. You need to know all these directives and how they differ from each other. Some of the silent features of these directives are given in the table below. As a result, the first Directive limited the predicate offence of money laundering to only drop trafficking. However, the second Directive expanded the scope beyond drug trafficking by including corruption and fraud. It also provided precise definitions of money laundering. Third Directive. This directive defined money laundering and terrorism financing as separate crimes. It extended customer due diligence and suspicious transaction reporting to trust and company service providers as well as life insurance intermediaries. It also defined a beneficial owner as a natural person who wants 25% of a legal entity or person. The fourth directive repealed the third directive and its predecessor. It also provided a threshold for the entities obliged to report suspicious transactions from Europe Zero to Europe. It also required that customer due diligence be applied to the transfer of funds exceeding 1,000 euros. European Union directives are highly testable in your exam. These are only some of the key features. For the rest, you need to read through the study guide. You may want to also scan through the whole U.S. Fourth Directive text Regional bodies in the FATF mould There are nine FATF-style regional bodies that provide input to FATF when FATF is about to set standards. Thus, FATF is only a standard-setting body, and these regional bodies implement the standard developed by FA TF.These member bodies perform mutual evaluations of their memory states while talking about Nepal. Nepal is a member of the Asia Pacific Group on money laundering. So our mutual evaluation is usually done by—or is always done by—the Asia-Pacific Group. So these are your nine FATF-style regional bodies. You have to go through all these regional bodies' major provisions. It might be confusing at times, as they all stand for the same thing. So they all have almost similar features. So the main point is to focus on their unique features. For example, Moni Valve Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and Financing of Terrorism Their provisions are to be implemented by its members as a matter of mandatory law. Similarly, the CFATF Caribbean Financial Action Task Force It allows forfeited assets, such as money and learnings, to be shared among cooperative nations that assisted in apprehending the criminal. While these nine regional style bodies share provisions, such as mutual evaluations of their member states, they also foster coordination and communication among themselves. So one helpful tip I can give you is to make a note regarding the key features of these regional bodies.

2. Chapter 2: Final Part

Eggmont group of financial intelligence units As the name suggests, Egmont Group is a group of financial intelligence units. By 2015, there were 151 Egmont FAI members and 19 observer organizations. You need to know that Eggman Group provides all these members of the Financial Intelligence Unit better and more secure communication through Eggman Secure Web. They also assist these FIUs in developing a ML safety program. I also suggest you go through FIU's in Action 100 Sanitized Case, published by Egmont Group. They contain real-life money laundering cases, which will be helpful in your exam for scenario-based questions and also in your daily job. Ul spoke for the group. My life changed after I heard the Ulspoke group. I don't know how many times Ul Spokeprincipal has saved me from a tight spot. This group has produced so many principles that are useful to you in your professional life as well as in your exam. We will talk briefly about some principles that are important for an exam, but I suggest that you download these principles and read them carefully again from our sponsor. If you want, you can purchase the Fury Camps Preparation Kit, and this kit includes a copy of the principles that are important for your exams, and the important components are highlighted in these principles. So it will save you time while going through those principles. Okay, now let's talk about the first-principle principle for private banking. Private banking is for high-net-worth clients. As a result, you must always conduct enhanced due diligence on these customers, examining the legitimacy of their source of wealth and identifying the true beneficial owner—the suppression of terrorism financing. So, this principle advocates having a screening system that includes a list of suspected terrorists and which should be used by organisations at the time of onboarding customers. Third, anti-money laundering principles for correspondent banking This is an important principle as itguides different financial institutions on what informationshould be collected while performing customer duediligence of correspondent banking. For example, what are their money laundering controls and the products and services they provide? What is their ownership and management structure? First is the monitoring, screening, and searching part of the boost statement. So this principle guides the development and implementation of a transition monitoring system to identify suspicious activity. the World Bank and the International Monetary Fund. They have also issued reports, guidelines, and whitepapers to ensure that their member countries follow them to combat money laundering and terrorism financing. So these are the two major reports issued by them. The first one is a report on observations of standards and quotes. They work together with FA TF to develop a single global methodology for the assessment of compliance with FA TF's 40 recommendations and publish the result in this report. Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism So, this report provides practical steps for countries implementing ML safety designs by following international standards. The Patriot Act The first time I ever heard about the US Patriot Act was in a movie. The line was, "Thank God for the Patriot Act." Later, I found what the meaning was. The US Patriot Act lets law enforcement monitor all the electronic communication of any US citizen based on a warrant. So how is this important? I just wanted to point out that how powerfulUSA Patriot Act is born after 911 terrorist attack. This is the most powerful act of ours. So if you are working in a US bank or your bank has a corresponding relationship with a US bank, then the following provisions are important for you, not to mention for your exam. See also Section 311 Special Measures for Primary Money Laundering Concerns. This section gives the US Treasury Department the power to halt any financial dealing with a foreign financial institution if it thinks that this institution may be involved in money laundering. Section Three: One, Two, Correspondent, and Private bankingAccounts It requires proper customer due diligence to be performed on foreign correspondent accounts and by non-US persons for private banking. Other significant provisions include enhanced due diligence for a correspondent bank with an officer banking license. Section 3: One-third prohibition on correspondent accounts for foreign sale banks It prohibits US banks and securities brokers and dealers from maintaining correspondent accounts for foreign, unregulated cell banks. It requires foreign banks to certify at least once every three years that they are not themselves selling banks and that they do not permit cell banks to assess the US correspondent account through a nested correspondent relationship. If you remember the US Patriot certification, then that requirement is mentioned in this section. Sections three one-four A and three one-four B I'm not going to even try to read this. It is self explanatory.However, let's look at its major provision. Section Three, One, Four A: This section enables the US federal, state, local, foreign, and European Union law enforcement agencies through Finsen to reach out to more than 430 points of contact at more than 22,000 financial institutions to locate accounts and transactions of persons that may be involved in terrorism or money laundering. Section 3-1-B provides financial institutions with the ability to share information under a safe harbour that offers protection from liability to better identify and report potential money laundering or terrorist activities. Section 31984 of the US Correspondent Account Act permits the US government to seize funds in the same amount from a US correspondent bank account that has been maintained by a foreign bank in a situation where the funds have been deposited with a foreign bank. Section Three and One Nine B Records Related to Correspondent Accounts for Foreign Banks It allows the appropriate federal banking agency to require a financial institution to produce within 120 hours or five days records or information related to the institution's email compliance, customers, or any account open, maintained, administered, or managed in the US by that financial institution. So now let's talk about the scope of money laundering law in the US we talked earlier about the first moneylaundering act that was developed in the US. It has a very wide reach; the law reaches foreign individuals and foreign financial institutions if the money laundering financial transaction occurs in whole or in part in the United States or if a foreign financial institution maintains a bank account at a US financial institution. This means that you can freeze or seize those funds at the Office of Foreign Access Control or Affecting facts may not be new to most of you. Its main aim is to enforce economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorist international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. It requires the blocking of assets of persons and organisations that appear on one of the sections of the list that affects checks issued periodically. I usually ask questions such as who is affected. It applies to all US persons, US citizens, and permanent aliens regardless of where they are located, all portions and entities within the United States, and all US incorporated entities and their foreign branches. So you can safely ignore OFAC if you don't deal with US citizens and entities. However, in today's commercial environment, this is not possible for most of the countries. So, to be safe, proceed with caution. So with this, we have completed Chapter Two. Some of you may be worried about the vast content. One golden rule about memorization is repetition The more you reread the content, the clearer it becomes and the more you can remember. Thank you all. We'll meet at the next presentation of Chapter 3.

CHAPTER 3: ANTI-MONEY LAUNDERING/COUNTER-TERRORIST FINANCING COMPLIANCE PROGRAMS

1. Chapter 3: Part 1

Antimony Laundering and Counter-Terrorist Financing Compliance Program This is an important chapter for your exam. I don't think you have attended any MSA training that doesn't talk about MSA reassessment. You've never heard of it? Then you need to ask for your money back. risk-based approach. So what is the risk? Risk is the high possibility that something bad will happen to your business. For example, when you accept customers without proper screening, there are good chances that some of them may be pips who may use your organisation to channel their corruption fund. The risk here is that later on, if the paper is cut and investigated, law enforcement will find out that your organisation transferred those corruption forms to Officer Joel Addiction. Your organisation will be fine, and in extreme cases, its licence to operate will be revoked. This will also lead to reputation loss. Therefore, you need to identify the financial risk of money laundering and terrorism that your organisation is facing. And on that basis, you need to apply different control measures to mitigate those risks. Risk versus business This is not included in the study guide. This is my view only. Most of us are involved in an organisation that has a profit motive. I mean banking and financial institutions. You should never think that risk and business are distinct from each other. The primary aim of business is to make profit, and your job as Ms. Safety Manager is to ensure that business continues. Make the profit by reducing MS safety risks that are affecting business objectives. Therefore, when you suggest an AMS safety mitigation solution, always perform a cost-benefit analysis. The benefits should be greater than the cost. The mitigation measure will bring friction to business performance. So you have to make sure that this mitigation measure does not affect your business performance negatively. Therefore, striking such a beautiful balance needs a lot of experience, passion, and analytical skills. I have heard from my colleagues that management never listens to them or takes their issues seriously. I never had this issue as I always got support from the top management. The major reason for that is that whenever I have to implement something, the first sentence of my proposal would be, "Dear Sir and Madam, I have a solution that will save the business from this kind of risk, which will boost our profit earning capability." If I have to summarise all this, I will say risk and business should go hand in hand. But the main objective of organizationis to make profit and safety. Risk management is here to support that goal. ML Safety Risk Categories We'll talk about the risk factors later in the chapter. For now, when you identify the risk, it needs to be classified into different categories like prohibited, high risk, medium risk, and low risk. Each category determines how much control you need to implement to mitigate that risk. For example, your organisation will not deal with a person belonging to a terrorist organization; it is prohibited for high-risk customers. Say, for a PEP customer, you need to perform enhanced customer due diligence. That is, you will personally verify the physical address of that customer, ask for the identification documents of his or her family members, and other documents relating to the source of income. For low risk, you may choose not to do anything. Am I safety risk scoring. Many organisations are moving towards automated risk trading, which is based on certain variables to perform automated risk grading of the customer. These variables can befor instance transaction profile. So if any customer carries out a transaction above a certain threshold over a certain period of time, then the customer will be automatically classified as a high-risk MLCFT risk Mlcft risk identification.In this section, we will examine the various factors that contribute to the risk of money laundering and terrorism financing in the organization. The first one is your customer type. Customers can be individuals or legal entities. Some of them are high-risk or low risk.So proper customer screenings should be done to categorise the appropriate risk of those customers' geographic location. Countries in which your customers are located also present money laundering and tourism financing risks. If your customers belong to FTF noncooperative countries, high-corruption countries as identified in the Corruption Perception Index, countries with high drug trafficking, or sanctioned countries, there may be chances that they may be involved in any kind of predicate offense. The screening software with terrorism and sanction lists is used as a prevention tool in this case. Products and Services Some products are risky by nature, like new payment products and services. Prepaid cards and credit cards are two examples because they provide users with significant levels of anonymity while transmitting all payments to third parties. Another example is correspondent banking, which enables large volumes of transactions to occur across borders quickly. The best prevention method is that the business team should sit down with Ms. Safety's team before developing any products so that any money laundering and terrorism financing risk can be discussed and mitigated. Most of you may think that the customer is the greatest risk factor, but actually it is products and services. Your customers are attracted to your organisation because of the products and services that you offer them. If your product and services are low-risk, say you are offering a savings account where customers can deposit and withdraw only below a certain threshold amount only.Also, no international transfers are permitted. This product is a low-risk product. This product cannot be used for any risky transactions, regardless of the type of customer who purchases it. Rather than focusing solely on customer risk factors, try to reduce the email security risk in that product or service. Some of you may be wondering if there is a risk assessment article by sharing consultancy. You guessed it right, we have exactly the article for that. So this article explains what it means to define risk as the product of likelihood and impact. So it discusses the risk matrices score as well as how the control assessment is performed and registeral risk is calculated similarly. You can also watch this video This video demonstrates how to use Microsoft Power Bi to assess risk. See, this whole Seric website is compiled in such a way that it will help you develop a better image. Safety Risk Manager, there are many useful articles you may want to visit in your free time. Also, there is a section of news on this site that you may want to visit in your free time. It contains news about money laundering, fraud, and other financial-related crimes that might be helpful while preparing for your camp exam.

2. Chapter 3: Part 2

Miss Safety Program The risk-based approach requires performing risk assessment first, which helps identify the current money laundering and terrorism financing risks affecting the organisation and then different countries. All measures are to be taken to reduce those risks. This is where Ms. Safety's programme comes into the picture. To have an MS safety program, there should be four essential elements in that programme internalpolicies and Procedures Control policies are the high-level statements that need to be approved by the board of directors or executive management. It explains what the responsibilities of key stakeholders are and what measures are to be implemented to mitigate MS safety risks. The major components of policies should be policy and violations. If the staff violated the policy, this is what should happen. Procedures are the checklists or instructions that are developed based on the policies, so they are more detailed than the policies and they should be implemented by frontline staff. Procedures should be reviewed and updated regularly. The technology or tools available in the organisation to detect or prevent money laundering and terrorism financing risk are referred to as controls. For example, the organisation may have an automated transaction monitoring system that will generate alerts if the transaction exceeds a certain threshold, and care should be taken. All these measures should match the organization's size and the level of risk as determined by the risk assessment process. designated compliance officer. Your organisation has developed a ML safety program. Now the question arises, who is going to implement the program? For that, you need to have a designated ML Safety compliance officer who makes necessary changes and updates to that programme as well as conducts training for the organisation so that organisation will remain compliant with ML Safety laws and regulations. Therefore, to carry out these roles and responsibilities, compliance officers should be skilled and should have sufficient authority in their organization. In Nepal, there is a legal requirement that the AMLCFT compliance officer should be at least of managerial level, and they should report to the board-level committee. This is not an advertisement from our sponsor. Look at the picture, what can you find out? It clearly says that for €1, you can purchase one water bottle. You may have seen them around the airport. There are usually no guards or even CCTV to monitor. So, if whole bottles of water are sold within that distance, what percentage of total sales will be in that box? Or as a matter of fact, will that box be there at the end of the day or not? I will give you a minute. The researchers have found that 92% of total sales money is usually collected. Further research found that 2% of people were just writing an apple. They will take the bottle without paying any money. The other six people do rationalization; they don't want to take water bottles without paying because they know they would be stealing. This repulsion is known as cognitive dissonance. However, to sway their moral compass, they rationalize, like the flight was very expensive, the air hostess spoke to them rudely, and so on. Therefore, they will take water bottles without paying because they think that they deserve it. This is an interesting analogy that says why we need training in our organization: 92% of employees are genuine. They do what they are told. They will follow policies and procedures as circulated by the organization. 2% don't want to follow them. So the only way to control them is to have a penalty and violation clause in the policy so they know if they misbehave, they will be punished. The remaining 6% will justify not following policies and procedures by claiming that they are overburdened and that the company does not pay them to do so. I know the customer very well, and so the training is given. to change the behaviour of these 6% of staff. You have to conduct training in such a way that when they rationalize, They will think first about the awful consequences of not following the policy rather than other things. You have to consider different things while providing training to the staff, like who to train. what to train on. how to train. when to train. Where to train requires you to analyse various things while providing the training, like who will be your target audiences for your training. The training module should be tailored to the audience; for example, you would not give the same training to top-level management that you would to junior employees. You should decide when it is the right time to provide training. Freshers or new staff should be given training within 15 days of the appointment. You should take care of how you are going to deliver your training. In the current Kobe situation, physical or classroom training is not possible, so you need to provide virtual training. Most of you are aware of the advantages and disadvantages of this type of training. You can reach many people through this training, but the drawback is that you cannot be sure whether they have understood the content or not. So you must perform training assessments after each training, like conducting an online exam or a paper-based exam. If your staff is performing poorly, maybe it is time to hire an external trainer. Also, we have an excellent article on training that you would like to read through. I know some of you may be thinking, "Man, do they have any articles on any topic for the camps?" Sadly, no Shurik website has a lot of materials that will help you nail this exam. So in this article, you can find out why training is so important. OK? It will also explain what the consequences are of not providing training and all the things that we just discussed earlier. This article goes into detail about who to train and what to train. So, therefore, you don't want to miss this article. So please refer to this article when you have free time. Training versus awareness There is a subtle difference between training and awareness, but it is important that the awareness be the same for all the stuff that is. Every staff member should know basic AMS safety concepts like KYC and CD, HDR filing, and general money laundering and terrorism financing issues. while AML safety training is given to train the staff to apply certain AML safety procedures. For example, you will train customer-facing Dex staff on how to collect KYC documents properly or identify beneficial owners for the remediance staff you'll train. How should they screen applicants? Beneficial training is provided to increase the skills of staff, while awareness is given to change staff behavior. Evaluating an Aims Safety Program This is the last element of creating an effective MS safety program. You should know whether a MS safety programme that you have established is effective or not. Therefore, you need an independent third party like an internal auditor or an external auditor to assess your program. They will verify whether the staff is complying with email safety policies, procedures, and processes. Culture of Compliance This is related to safety governance maladministration. If you have a good governance, then your MLsafety posture of the organisation will be good. I think this is the first thing you should ensure before you even create MS's safety program. If the compliance counsellor is bad, meaning that they don't prioritise MS safety issues, how much effort do you put into creating a good MS safety program? It will never get implemented. Finsen has provided six guidelines for maintaining a good culture of compliance. Leadership must actively support and understand compliance reports. Boards of directors and senior managers should prioritise MS safety issues. They should take any corrective actions as suggested by auditors. Revenue interests must not compromise efforts to manage and mitigate email safety deficiencies and risk. Business and risk should go hand in hand. Malware safety issues should not be ignored while promoting business growth. Relevant information from the various departments within the organisation must be shared with compliance staff to further MSHA's safety efforts. There should be proper coordination between Ms. Safety's department and other departments. I don't think Ms safety department can run in the silo. They have to be in coordination with other departments. Therefore, Ms. Safety Manager should have good internal personal skills. Fourth, the organisation must afford adequate resources to its compliance function. The email safety department should have a great workforce, and whenever they want to invest in any new technology to reduce the risk of the bank, they should be properly financed. The compliance programme must be effective. We have already talked about this. There should be an effective ML Safety Program. Leadership and staff must understand the purpose of MSSA efforts and how its HDR reporting is used. This is usually a problem in most financial institutions. The malfeasance safety department usually identifies STR, and the number of STR is very low. However, the actual SDR should come from the front-line staff since they know the customers very well and can identify suspicious trends, but if they really report, training can help. But the most effective method is to tie HTR to their performance appraisal; the more qualitative SDR they file, the higher they will be ranked in the performance appraisal. What do you think?

3. Chapter 3: Final Part

Know your customer and the customer's due Diligence in anti-money laundering has two pillars. One is KYC, and another is transition monitoring. Customer due diligence includes both KYC and transaction monitoring. Customer due diligence should be done before establishing any business relationship with the customer to know their identity, source of income, categorization of the risk, and ongoing monitoring of the transaction. The key element of customer due diligence is customer identification. You need to get full identification of the customer, including the source of income. You should also keep the information about customers up to date. Many customers are moving towards perpetual KYC, where they have an automated system that will trigger a lot of updates to the customer information. If there is a certain change in KYC information, say if the transaction turnover does not match with the source of income of the customer profile, you can think of the customer profile as customer buyer data. After you have gotten customer KYC information, you can estimate the nature and transaction volume of the customer. This will help in monitoring the transaction to identify any suspicious transactions. Three customer acceptance procedures. This may be generalised or can be customised as per the customer's nature, the products and services they want, and their geographical location. I've seen common guidelines for accepting customers, such as we don't accept any customer whose KYC is incomplete or who is on a terrorist sanctioned list. Risk Trading You need to categorise the risk of a customer based on his or her nature, the products and services he or she chooses, and the geographic location to which she or he belongs. The major reason for rating risk is to monitor customer transactions. Remember, we talk about two pillars of MS Safety: KYC and transaction monitoring. They both complement each other's monitoring. It deals with monitoring customer transactions as per the customer risk profile. KYC and transaction monitoring do not operate in a separate silo. For example, if the customer stated that his annual account turnover is $1 million, but you discovered that his account turnover is $10 million during transaction monitoring, This may not be suspicious, but you need to ask the customer why there are such discrepancies. He may tell you that he has switched his business from retailer to wholesaler. Now you have to update his KYC investigation. This is related to investigations and examinations of unusual customer or account activity. The output of this investigation is a suspicious transaction report, which you will file with the Financial Intelligence Unit. There you have it. The key ingredients for preparing customer due diligence For the exam, focus on customer due diligence provisions mentioned in FA, TF, Bezel, and others. Improve customer due diligence There are two types of customer due diligence: simple and standard. The second one is your enhanced customer due diligence. For standard customer due diligence, you may ask the customer for their identification documents, fill up the account opening form, and obtain information regarding their family members and their source of income. but not more than that, but with enhancement. You want to know more about your customer, so you will move one step further. You may want to physically visit the customer's place of residence or business. Ask for the supporting documents for their source of income. Obtain the identification documents of their family members. It is better to develop a separate checklist for enhanced customer due diligence. Remember, enhanced customer due diligence is always carried out for high-risk customers. Since a high-risk customer can expose your bank to more MS safety risk, you should therefore collect more than adequate information about the customer. Sanction Let me welcome you to the stage of international politics. Here, few are puppeteers. Most of our puppets and others like us are audiences. Sorry for that dramatic introduction. The funny thing about sanctions is that you don't know who is right or wrong. Let's say if the Russia was supreme powerof the world, we would be sanctioning USA. This could be a good topic of debate, but let's focus on the tasks at hand. Economic Sanctions. The primary aim of economic sanctions is to financially isolate a target instead of using military force as an instrument of foreign policy. These sanctions are imposed by the United Nations and the European Union. We can classify economic sanctions into various categories, like targeted sanctions. These sanctions are imposed on specifically named individuals, such as key leaders in the country or territory, named terrorists, significant narcotics traffickers, and those responsible for the proliferation of weapons of mass destruction. These sanctions often include the freezing of assets and travel. Banks sectoral Sanctions like these are aimed at the key sectors of an economy to prohibit a very specific subset of financial dealings within those sectors to impede future growth. The Comprehensive Sanctions regime forbids all direct and indirect import, export, trading, brokering, financing, or facilitating of most goods, technologies, and services. These sanctions are aimed at regimes responsible for gross human rights violations and nuclear proliferation. Sanctions are a very complicated and sensitive topic. It is complicated because there are so many times that it is very difficult to wrap your head around. And it is sensitive because if there are any lapses, the penalties are huge. So what financial institutions normally do is use some kind of sanction screening software. Then they perform customer screening with that software. For now, this is the safe bet. Again, it does not mean that if an entity is found on the sanction list, you should stop dealing with them at once. You have to do some research. I had one experience. There is a bank called SabarBank, which is incorporated in Russia. In the affect list, this bank was flanked on both sides. This transaction was related to a LC letter of credit. Solar Bank was the beneficiary bank. My best guess is that other financial institutions would have rejected this LLC or asked the applicant to use another bank. This is where email security knowledge comes in handy. So what we did was look at what type of sanction it was. It was a sectoral sanction Sourb bank was not permitted to conduct capital-related transactions, but it was permitted to conduct trade-related transactions. We did not have any issue with that, and the transaction went smoothly. So the only method to deal with sanction-related issues is to study them, and an automated sanction screening system is a must. The sanction lists are developed by the UN, EU, HMT, OPAC, and other countries. So the question arises about which list you should follow. The rule of thumb is as per the direction of your regulatory body in your jurisdiction, and the other is in which country your bank has financial dealings. For instance, if you have a corresponding bank relationship with European countries, then you must follow the EU Sanction List. You may employ sanction screening software to monitor wire transfer messages. If the term "sanctioning software" is new to you, it is the automated solution that is used to screen wire transfer messages or Swift messages. This software screens the applicant's name, address, bank, beneficiary name, and beneficiary address, as well as their bank, against the different sanctions lists involving the list of terrorists, modern laundry, and other bad guys. Politically exposed persons are screened. We have already defined PIPS. It is difficult to identify pips. So the best option is to use a local database developed by certain reputable organisations or government bodies that contains the list of all PEP data. Nowadays, databases are available for sale by different international organisations that collect the data using web scraping. This is a kind of tool that searches all online websites to collect information about a person. It can be very handy. There is another problem with Pip. They vividly recall bank promises to open an account and prefer to conduct transactions through someone else. This has also increased the significance of the identification of the beneficial owner. Therefore, proper CGD is much more important than ongoing transaction monitoring, which can reveal if the customer is doing a transaction on his behalf or someone else's. Know your employee proper background screening, including checkingpolice records, credit records, reference checking is mostfor any employee who is being hired. This ensures only genuine employees are allowed in any organization. This reduces employee fraud and reduces employee turnover. In my previous bank, we used to get police records from the staff before hiring them. After we purchased the customer screening system, we asked the HR department to use that system for candidate screening. Later, that system identified some stories as adverse news.also on the blacklist. The letter's employment was cancelled after the concerned staff was questioned. The background screening should be done again when the staff is promoted or the job role is changed. This helps to ensure that the right person is appointed for the right job. automated email safety solution. Let's talk about transaction monitoring first. It is very difficult to maintain transaction monitoring software. You need to be in close contact with vendor for this. For example, we had developed different scenarios, and those scenarios generated a lot of alerts, sometimes even more than 1000, and most of them were false positives. So we had to change the logic of those scenarios. To reduce the number of alerts further, you need to continuously update your scenarios, add them, or modify them as per the new threat or MS safety risk that is occurring in an internal or external environment. I remember there being adverse news regarding point of sale merchants involved in cashing out money through clone cards. So we developed a transaction monitoring scenario that generated alerts if anyone did post transactions above a threshold of 5000 between 12:00 p.m. and 5:00 p.m. In this way, you also need to manage your transition monitoring software. Now other automated email CFT solution areautomated customer verification was least filtering automationof regulatory reporting, case management audit trial. It is common knowledge that it is not possible to manually perform safety activities. For example, you need to have a transition monitoring software that should include different scenarios to monitor different types of transactions like Swift card deposits, withdrawals, and remittances done by different customers. This scenario will generate alerts when transactions are matched with the logic of that scenario. You should also have a customer screening system to name-screen the customer against the defence sanction list before onboarding them. Similarly, some organisations have Swift sanction monitoring systems to monitor the details of Swift messages against the sanctioned list. We also have GOMEL for automatic reporting of threshold transactions and suspicious transactions. Some software provides a workflow mechanism in which you can start suspicious transition reporting for any transition monitoring alerts that you have found suspicious further up in the chain. The authorizer will review those alerts and strikegenerated and will be filed to FIU. So there are lots of technology which canbe used in the realm of MSF. Now we are moving towards machine learning, which will use different supervised and unsupervised learning algorithms like KMeans clustering and deep learning to identify the pattern in the data. This is now mostly used to identify suspicious transactions based on the various alerts generated by different scenarios in the transition monitoring system. But there are key things that you need to consider, which are also highlighted by Finchen. Besides that, I think vendor selection is the key here. Among all other factors, this happened to me. It was a time when anti-money laundering efforts in financial institutions were just getting started. There are many vendors who came to our bank to sell their products. Their demo was good. Most banks selected the vendor based on the demo without understanding their own requirements. They relied on the vendor completely. I mean there were features in thesoftware which were not fully developed. The only factor that influenced the overriding decision to select the vendor was cost. Later we found that the software was immature, and while fixing one issue, it created another. So after a very long period of time, the software became stable. My best advice to you is that whenever you select your vendor, you need to know what your requirements are. These requirements will be based on your ML Safety Program. You have to make sure that these requirements can be met by the vendor. You should also look at their customer base. If they have, say, 1000 customers in more than 20 to 30 countries, then you can consider them. Regarding costs, I always say to the vendor that if I am buying a rocket, I will not give a second thought to its mileage. Therefore, cost would not be a dominant reason for selecting any vendor. Financial investigation into suspicious or unusual transition monitoring and reporting This is tougher than transition monitoring. You have to investigate those alerts to identify whether they were for a suspicious transition report or not. Regulators, on the other hand, are those creatures who are never satisfied with any organisation in terms of ML CFT. They want more stress from you, and they want it to be qualitative in nature. Hence, you have to spend a lot of time collecting data, analysing it, and preparing a comprehensive report in the prescribed format of STR to be sent to the Financial Intelligence Unit. Different indicators will help you to determine if the transition is related to money laundering or terrorism financing. There was an incident where one customer always used to go to this particular tailor for his transaction, even though other counters were not occupied. He preferred only that tailor; also, he always used to come to the bank when the tailors were in Ross. That was just before lunchtime. One day, a supervisor noticed this and reviewed his transaction. She discovered some suspicious activity, and he preferred that tailor because, unlike other tailors, he did not inquire about the source of the transaction. This led to the filing of a claim against that customer. So there are different types of red flags that you need to watch out for. All of these red flags are mentioned in your study guide. You have to go through them. However, the best tip I can give you is that there will be only a few red flags that may be unique to you. You can focus only on those. Also, in the history notes of this chapter that come with Sharika's examination prep kit, you'll find selected red flags out of all those red flags mentioned in the study guide, which are unique and require your attention to pass this exam. So with that, we have completed our presentation for Chapter Three of the Study Guide. I will see you soon in the presentation of chapter four of the Campus Study Guide.

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