Money Laundering and Terrorist Financing Risks
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Questions and Answers

What is one potential consequence of reputational risk for a financial organization?

  • Increase in profitable loans
  • Reduction in funding costs
  • Loss of public confidence (correct)
  • Enhanced growth in deposits

    • Which of the following is classified as an operational risk?

  • Increased borrowing costs (correct)
  • Loss of market value
  • Fraudulent activities by customers
  • Asset seizures

    • What legal risk might a financial organization face due to money laundering?

  • Fines and penalties (correct)
  • Increased customer trust
  • Broadened customer base
  • Higher stock prices

    • What is one potential operational risk associated with losing correspondent banking services?

    <p>Higher transaction fees</p> Signup and view all the answers

    Which consequence is directly linked to the reputational risk of an organization?

    <p>Withdrawal of deposits</p> Signup and view all the answers

    What adverse consequence could lead to liquidity problems for a financial organization?

    <p>Investigation costs</p> Signup and view all the answers

    Which drawback is associated with asset seizures as a result of money laundering?

    <p>Loss of valuable resources</p> Signup and view all the answers

    What can be a direct effect of money laundering on the stock value of financial organizations?

    <p>Reduction in stock value</p> Signup and view all the answers

    What is one of the primary missions of ACAMS?

    <p>To promote standards for detecting and preventing money laundering</p> Signup and view all the answers

    Which of the following best describes the CAMS designation?

    <p>A globally recognized credential for AML specialists</p> Signup and view all the answers

    How does ACAMS assist AML professionals in their careers?

    <p>By providing a forum for collaboration and education</p> Signup and view all the answers

    What does ACAMS aim to uphold among practitioners?

    <p>Proven and sound AML practices and procedures</p> Signup and view all the answers

    What is a significant benefit of obtaining the CAMS designation for AML professionals?

    <p>Recognition as experts in the AML field</p> Signup and view all the answers

    Which of the following is NOT a function of ACAMS?

    <p>Enforcing global AML laws</p> Signup and view all the answers

    What characteristic does ACAMS emphasize about the professionals in the AML field?

    <p>Specialized knowledge in preventing financial crime</p> Signup and view all the answers

    Why is the CAMS credential considered valuable in the AML field?

    <p>It is a testament to recognized expertise in AML practices</p> Signup and view all the answers

    What is the primary purpose of sanctions imposed by governing bodies?

    <p>To protect the financial system from money laundering and terrorist financing</p> Signup and view all the answers

    Which body administers and enforces economic and trade sanctions in the United States?

    <p>Office of Foreign Assets Control (OFAC)</p> Signup and view all the answers

    What are comprehensive sanctions?

    <p>Sanctions that prohibit virtually all transactions with a specific country</p> Signup and view all the answers

    What is a potential consequence of failing to comply with sanctions?

    <p>Involvement in criminal and civil penalties</p> Signup and view all the answers

    What type of sanctions focus on specific industries or individuals?

    <p>Targeted sanctions</p> Signup and view all the answers

    How does money laundering impact government finances?

    <p>It drives up government expenses due to increased enforcement costs</p> Signup and view all the answers

    What does FATF call for in relation to high-risk jurisdictions?

    <p>Implementation of countermeasures like enhanced due diligence</p> Signup and view all the answers

    What challenges do financial organizations face that rely on proceeds from crime?

    <p>Attracting legitimate clients and managing operations</p> Signup and view all the answers

    What is a potential consequence of unchecked money laundering related to the financial sector?

    <p>Weakening of financial organizations</p> Signup and view all the answers

    How does unchecked money laundering impact the legitimate private sector?

    <p>It undermines the legitimate private sector</p> Signup and view all the answers

    Which of the following aspects is directly linked to money laundering and corruption?

    <p>Increased penetration of organized crime groups</p> Signup and view all the answers

    What is a likely effect of money laundering on a country's reputation?

    <p>Reputation risk for the country</p> Signup and view all the answers

    How does money laundering typically affect economic policy decisions?

    <p>It leads to loss of control over economic policy decisions</p> Signup and view all the answers

    What is a common characteristic of jurisdictions that are havens for money laundering?

    <p>Limited regulatory capacity to monitor compliance</p> Signup and view all the answers

    What effect does money laundering have on foreign investments?

    <p>It dampens effect on foreign investments</p> Signup and view all the answers

    Which risk is NOT commonly associated with the consequences of money laundering?

    <p>Environmental risk</p> Signup and view all the answers

    What does the practice of nesting involve in correspondent banking?

    <p>A correspondent acting for another bank without appropriate oversight</p> Signup and view all the answers

    Which event resulted in Deutsche Bank facing a significant penalty in July 2020?

    <p>Compliance failures in its relationship with Jeffrey Epstein</p> Signup and view all the answers

    What was one of the main reasons Deutsche Bank failed to monitor its clients effectively?

    <p>Failure to recognize high-risk patterns in transactions</p> Signup and view all the answers

    What action did Deutsche Bank take after the Financial Crimes Enforcement Network mandated it?

    <p>Exited relationships with non-compliant banks</p> Signup and view all the answers

    What is a significant risk associated with nested accounts in correspondent banking?

    <p>Reduced compliance with anti-money laundering regulations</p> Signup and view all the answers

    How many suspicious transactions related to FBME Bank were flagged by Deutsche Bank after it identified the bank as high risk?

    <p>826 suspicious transactions</p> Signup and view all the answers

    What recurring issue was highlighted regarding Danske Estonia in relation to Deutsche Bank?

    <p>AML issues concerning nonresident accounts</p> Signup and view all the answers

    What was the consequence for Deutsche Bank related to its dealings with Danske Bank Estonia?

    <p>Significant penalties due to money laundering connections</p> Signup and view all the answers

    What are the three stages of the money laundering cycle?

    <p>Placement, Layering, Integration</p> Signup and view all the answers

    Which method is NOT typically associated with money laundering?

    <p>Training funds</p> Signup and view all the answers

    Which financial institution is commonly associated with money laundering through electronic transfers?

    <p>Banks</p> Signup and view all the answers

    What is a 'Politically Exposed Person' (PEP)?

    <p>An individual holding a political office</p> Signup and view all the answers

    What does 'AML/CFT' stand for?

    <p>Anti-Money Laundering/Countering the Financing of Terrorism</p> Signup and view all the answers

    Which organization is primarily responsible for setting international AML standards?

    <p>Financial Action Task Force (FATF)</p> Signup and view all the answers

    Which of the following is a key component of a strong AML compliance program?

    <p>Report Monitoring</p> Signup and view all the answers

    What is the primary reason for assessing AML/CFT risk?

    <p>To identify potential money laundering activities</p> Signup and view all the answers

    Which method is commonly used for detecting terrorist financing?

    <p>Monitoring social media activities</p> Signup and view all the answers

    Which case involves illicit finance through informal money transfer systems?

    <p>NPOs and Terrorist Financing</p> Signup and view all the answers

    What type of accounts are often misused for money laundering in banking?

    <p>Payable-Through Accounts</p> Signup and view all the answers

    Which payment product poses a significant risk for money laundering?

    <p>Mobile Payment Services</p> Signup and view all the answers

    What is the primary function of 'shell companies' in illicit finance?

    <p>To obscure true ownership and financial activities</p> Signup and view all the answers

    Study Notes

    Money Laundering and Terrorist Financing Risks

    • Money laundering undermines legitimate businesses, weakens financial institutions, and deters foreign investment.
    • It leads to economic distortion, loss of tax revenue, and risks of international sanctions.
    • Social costs include increased crime, corruption, and government expense.
    • Countries with weak money laundering laws and enforcement attract criminals.
    • Corruption often triggers money laundering, corrupting various sectors.
    • International sanctions can be imposed for failure to comply with AML/CFT standards.

    Risks Associated with Money Laundering

    • Reputational risk: Damage to an organization's image from money laundering scandals.
    • Operational risk: Losses from inadequate processes, personnel, or systems; reduced/terminated banking services.
    • Legal risk: Lawsuits, penalties, unenforceable contracts, and fines.
    • Concentration risk: The risk that the concentration of financial activity could be misused.

    Case Study: Correspondent Banking and Money Laundering

    • In 2020, Deutsche Bank received a US$150 million penalty for AML violations.
    • Concerns regarding Deutsche Bank’s relationships with Danske Bank Estonia and FBME Bank and their high-risk ratings were ignored.
    • Numerous suspicious transactions, including those associated with Russian oligarchs, were processed through Deutsche Bank's accounts.
    • Internal compliance controls raised red flags, but no immediate action was taken.
    • Deutsche Bank eventually ceased relationships with FBME after FinCEN mandated such action.
    • Deutsche Bank was alerted to AML issues related to non-resident accounts at Danske Bank, but the risk was not adequately addressed.

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    Related Documents

    CAMS Study Guide PDF 2024

    Description

    Explore the significant risks associated with money laundering and terrorist financing. Understand how these practices affect businesses, economies, and legal frameworks. This quiz will cover the implications, types of risks, and the consequences for countries with lax regulations.

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