A ​ Distinguishing General and Specific Licenses: A general license permits predefined categories of transactions without individual approval. A specific license is issued for unique transactions based on a written application evaluated on a case-by-case basis. ​ OFAC Guidance: Auditors should verify that transactions routed through sanctioned countries align with the licenses and confirm appropriate documentation for compliance​​.

A ​ Recommended Action: Re-screening ensures compliance with sanctions and identifies potential violations retrospectively. This is a critical regulatory requirement for addressing gaps in screening coverage​​. ​ FATF and Basel Guidelines: Emphasize retrospective reviews in cases of system lapses to maintain the integrity of the sanctions compliance program​​.

C ​ Outsourced Training Oversight Requirements: CAMS-Audit emphasizes that institutions must ensure outsourced providers deliver training aligned with internal policies and regulatory standards​​. ​ Control Mechanisms for Outsourced AML Providers: The bank must have controls in place to: Review the content of training sessions. Validate trainer qualifications. Assess the effectiveness of training through feedback or testing. ​ Deficiencies in the Current Approach: Failure to implement verification mechanisms for outsourced training compromises the consistency and quality of the AML education program. ​ Regulatory Requirements: FATF and Basel guidelines mandate oversight of third-party service providers, especially for critical functions like AML compliance training​​.

D ​ Nature of Discussion: Root cause analysis is required to identify underlying reasons for the failure to perform the control, particularly resource constraints​. ​ Key Compliance Justification: Addressing the root cause aligns with Basel Committee guidelines on improving control environments and addressing systemic issues in AML compliance​​.

C, D ​ Evaluating the Management of Risk: Internal auditors assess the effectiveness of risk management strategies to ensure alignment with organizational goals and regulatory expectations. ​ Acting as a Catalyst for Improvement: Auditors provide insights and recommendations to enhance controls and improve overall risk management practices. ​ CAMS-Audit Emphasis: CAMS-Audit outlines the dual role of internal auditors in evaluating and facilitating risk management improvements​​.

B ​ Reporting to the Head Office Board Committee: Independent testing reports must be submitted to the highest governance body to ensure proper oversight and alignment with global AML/CFT policies. This ensures that findings are addressed at the appropriate organizational level. ​ CAMS-Audit and FATF Guidelines: Governance frameworks outlined in CAMS-Audit and FATF recommendations emphasize the importance of board-level oversight for critical compliance functions​​

A ​ Key Roles and Responsibilities: Identifying compliance coordinators helps auditors understand the operational framework and ensure clear accountability in managing day-to-day AML compliance activities. ​ Initial Review Focus: This step provides a foundational understanding of the institution's compliance structure, enabling targeted assessments of other program components. ​ Advanced CAMS-Audit Reference: CAMS-Audit emphasizes that the effectiveness of an AML program hinges on having designated individuals who oversee compliance processes​​.

D ​ Understanding Below-the-Line Testing: Below-the-line testing evaluates scenarios where alerts were not generated but could have been if the thresholds were set differently. This testing method focuses on identifying potential gaps in the detection model that might lead to missed alerts for suspicious activities. ​ Significance in AML/CFT Compliance: This type of test ensures the system's thresholds are not too restrictive, which could result in legitimate suspicious activities being overlooked. It provides insight into whether the system needs re-calibration to balance false positives and missed detections. ​ Process of Below-the-Line Testing: Data Sampling: Analyze transactions that fall just below the alert generation threshold. Scenario Analysis: Identify whether these transactions exhibit patterns consistent with suspicious activities. Model Adjustment: Adjust thresholds to optimize the trade-off between sensitivity and specificity. ​ Advanced CAMS-Audit Reference: CAMS-Audit guidelines detail below-the-line testing as an integral part of tuning and validating monitoring models. It ensures that monitoring systems align with risk appetite and operational realities​​. FATF guidance on dynamic model validation highlights the importance of continuous review and adaptation of thresholds to evolving typologies and risks​​. ​ Case Example and Regulatory Perspective: Advanced CAMS-Audit recommends below-the-line tests especially in high-risk sectors, ensuring robust detection mechanisms. Regulatory expectations, as per FATF and Basel guidelines, require proactive measures to address model gaps that below-the-line testing can identify​​.

C ​ Understanding the Vertical Approach: A vertical audit focuses on reviewing the entire process or function within a single area or department, such as testing KYC files for compliance and effectiveness in a specific customer group or business line. ​ Application in AML Examinations: Vertical audits are particularly useful for examining KYC processes as they allow auditors to trace the end-to-end workflow, from customer onboarding to risk assessment and ongoing monitoring​​. ​ Alignment with Advanced CAMS-Audit Guidelines: The vertical approach provides detailed insights into compliance gaps within the KYC function, helping auditors identify root causes and systemic issues, which is emphasized in CAMS-Audit training​​.

C ​ Importance of Coverage Assessment: Coverage assessment ensures that the TM scenarios address the full spectrum of identified money laundering (ML) and terrorist financing (TF) risks relevant to the organization. This aligns with FATF Recommendations on risk-based approaches and the effectiveness of transaction monitoring systems​​. ​ Key Reference Justification: Basel Committee guidelines stress that financial institutions must regularly review their transaction monitoring coverage to ensure alignment with the risk landscape​​.