Financial Crime Risks and Methods

What money laundering, terrorist financing, sanctions, fraud, bribery and tax evasion are, how they manifest, and where banking products carry the risk.

5 minutes 5 Questions

Within the Certified Anti-Money Laundering Specialist (CAMS) body of knowledge, 'Financial Crime Risks and Methods' is a foundational domain that examines how criminals exploit the financial system and how institutions can recognize and mitigate exposure. Money laundering follows three classic stag…

Concepts covered
Delivery Channel Risk and Non-Face-to-Face BusinessStructuring and Cash-Intensive BusinessesNon-Resident, Offshore and High-Net-Worth CustomersConsequences of Violating AFC RegulationsPrivate Banking and Wealth Management RisksCorrespondent Banking and Payable-Through AccountsRetail Banking Products and Account-Based LaunderingPolitically Exposed Persons: Identification and RiskPredicate Offences: Fraud, Cyber and Environmental CrimeEconomic and Social Consequences of Money LaunderingTrade-Based Money LaunderingSanctions: Types, Targets and EvasionRisk Manifestation Through Products and ServicesShell Companies, Front Companies and Complex StructuresTrade Finance and Lending Product RisksBribery, Corruption and the Proceeds of CorruptionTerrorist Financing Versus Money LaunderingMoney Laundering: Placement, Layering and IntegrationTax Evasion as a Predicate OffenceFraud and Its Relationship to Money LaunderingJurisdiction and Geographic RiskBanking High-Risk Sectors: MSBs, Casinos and CannabisPredicate Offences: Trafficking and Organised CrimeCustomer-Type Risk Indicators
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CAMS - Financial Crime Risks and Methods Example Questions

Test your knowledge of Financial Crime Risks and Methods

Question 1

Which statement best distinguishes human trafficking from migrant smuggling as designated categories of predicate offences for money laundering?

Correct Answer: Trafficking exploits people by coercion; smuggling sells an illegal border crossing

Human trafficking exploits victims through force, fraud or coercion for profit from labour or sexual exploitation, while migrant smuggling is a paid service in which the smuggler profits by facilitating a consensual illegal border crossing.
The statement assigning coercion to smuggling and border entry to trafficking simply reverses the two definitions. Trafficking does not require a border crossing and can occur entirely within one country, whereas smuggling is by definition transnational. Smuggling is not merely an immigration breach, because FATF lists both trafficking in human beings and migrant smuggling as designated categories of predicate offences.
Key concept: exploitation of the person versus a paid service of illegal border facilitation.

Question 2

A customer buys casino chips with cash, gambles minimally, then redeems the chips for a casino cheque. What does this money laundering typology primarily achieve for the launderer?

Correct Answer: Recasting illicit cash as funds that look like gaming winnings

Buying chips with cash, gambling minimally, and cashing out for a casino cheque turns criminal proceeds into a casino-issued instrument that appears to represent legitimate gaming winnings, giving the funds a plausible source and making them easier to deposit at a bank.
Splitting cash to stay below reporting levels describes structuring, not chip conversion. Moving value abroad through front money accounts involves cross-border transfers within casino networks, which this scenario does not describe. Rapid chip transfers between players are a different layering method, and here the chips are simply redeemed by the same customer.
Key concept: casino chip conversion (refining) used to legitimize illicit cash.

Question 3

A customer's foreign ministerial post ended several years ago, and the bank's policy permits PEP declassification once a set period after leaving office has passed. Screening and adverse media now show the customer serves as treasurer of the governing political party, and the account receives funds from party-linked entities. A KYC analyst proposes declassification at the periodic review. Which conclusion is BEST?

Correct Answer: Keep the PEP status, as a senior party office is itself a PEP role

FATF defines PEPs to include important political party officials, so the customer's current role as treasurer of the governing party is a new, active PEP trigger. The time-based declassification rule only applies to the expired ministerial role, and the party-linked funds reinforce the need for enhanced due diligence.
Declassifying on the elapsed period ignores the current function. FATF does not impose lifetime PEP status; it uses a risk-based approach to former PEPs. Close associate status fits someone linked to a PEP, not someone who holds a prominent function personally.
Key concept: PEP status follows current prominent functions, including senior party office, and overrides time-based declassification.

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