According to the Wolfsberg Principles on Private Banking, the bank should apply additional diligence

to customers who present a higher risk of money laundering or other financial crimes. Some of the

indicators for defining such customers are:

Persons residing in or having funds from countries with inadequate AML standards, sanctions,

embargoes, or other measures that indicate a higher risk of money laundering or terrorist

financing12.

Persons engaged in business activities known to be susceptible to money laundering, such as cash-

intensive businesses, gambling, arms trade, precious metals and stones, art and antiquities, etc13.

Persons determined to be Politically Exposed Persons (PEPs), who are individuals who hold or have

held positions of public trust or influence, or their family members or close associates, and who may

pose a higher risk of corruption, bribery, or abuse of power14.

Persons who receive funds from a correspondent banking relationship are not necessarily required

additional diligence, unless they fall under any of the above categories or other risk

factors. Correspondent banking is a service provided by one bank to another bank to facilitate cross-

border transactions, and it is subject to its own set of AML standards and due diligence measures5.

Wolfsberg Anti-Money Laundering Principles for Private Banking (2012) 1

FATF High-Risk and Other Monitored Jurisdictions

FATF Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals

FATF Guidance on Politically Exposed Persons (Recommendations 12 and 22)

FATF Guidance on Correspondent Banking Services

Transaction monitoring alerts requirefurther analysisto determine whether they indicategenuine

suspicious activity or a false positive.

Option C (Correct):Requesting information from the relationship manager helps gather customer

background details, past transaction patterns, and business rationale.

Option A (Incorrect):Below-the-line testing assesses system effectiveness but does not resolve an

immediate AML alert.

Option B (Incorrect):Directly contacting a counterparty bank may violate privacy regulations and

should only be done if escalation is required.

Option D (Incorrect):Restricting access without due diligence may lead to regulatory and reputational

risks.

Best Practices for Investigating AML Alerts:

Review transaction history and customer risk profile.

Engage the relationship manager for business context.

Escalate to AML compliance teams if red flags persist.

Reference:

FATF Recommendation 10 (Customer Due Diligence & Monitoring)

Wolfsberg Group Guidance on Transaction Monitoring & Alert Handling

6th EU AML Directive (6AMLD) on Suspicious Transaction Investigations

C: “The system must be adequate and proportionate to the bank’s size, activities, complexity, and

risk profile. A one-size-fits-all solution is not appropriate.”

D: “Effective monitoring systems should support the detection of unusual trends and business

relationships, facilitating meaningful analysis and alerts.”

(CAMS 6th Edition, Transaction Monitoring System Requirements)

Incorrect:

A: Vendor internal controls are important, but not a top selection criterion for AML system

effectiveness.

B: Permissions should be appropriate for the bank’s structure, not just compared to other banks.

Reference:

CAMS 6th Edition, Selecting and Implementing Monitoring Systems

TheAML supervisory authorityis responsible for overseeing financial institutions' compliance with

AML/CFT regulations.

Option D (Correct):AML supervisory authorities, such as theFinancial Conduct Authority (FCA) in the

UK,FinCEN in the US, orEuropean Central Bank (ECB) for EU institutions, conduct inspections, issue

reports, and enforce penalties when AML deficiencies are found.

Option A (Incorrect):Self-regulatory bodies provide guidelines butdo not have legal authorityto

withdraw banking licenses.

Option B (Incorrect):Law enforcement may investigate criminal conduct, butregulatory compliance

issuesfall under AML supervisory authorities.

Option C (Incorrect):FATF provides guidance and assessments but doesnot directly

enforcecompliance at individual financial institutions.

Reference:FATF Recommendation 26 (Regulation and Supervision of Financial Institutions), EU AMLD

Directives, FinCEN, FCA Regulatory Guidance.

According to the Anti-Money Laundering Specialist (the 6th edition) study guide, one of the best

practices for conducting an internal investigation is to request formal company authorization to

conduct the investigation. Such authorization should be granted, if possible, by the board of directors

or audit committee, as this will help to establish the independence and legitimacy of the

investigation, as well as the protection of the attorney-client privilege and the work product

doctrine1. The other options are incorrect because:

B . Refusing to provide any records or documents to law enforcement may be seen as obstructing

justice or violating regulatory obligations, and may also result in the loss of the privilege or the

imposition of sanctions or penalties23.

C . Letting the bank hire any and all contract investigators may compromise the quality and integrity

of the investigation, as well as the protection of the privilege or the work product doctrine, as the

investigators may not be properly supervised or instructed by legal counsel, or may not be covered

by the Kovel doctrine45.

D . Not marking files or documents with privileged and confidential: attorney-client privilege and/or

work-product may undermine the claim of the privilege or the work product doctrine, as it may

indicate that the materials were not prepared for the purpose of seeking or providing legal advice or

in anticipation of litigation, or that they were not intended to be kept confidential67.

1: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

2: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 151

3: Perkins Coie, Protecting Internal Investigation Materials From Disclosure, Updates, August 10,

2020

4: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

5: Eversheds Sutherland, Legal privilege of corporate internal investigations under US law - 2019

caselaw update, JDSupra, December 20, 2019

6: ACAMS, CAMS Certification Package - 6th Edition, Chapter 5, page 150

7: Norton Rose Fulbright, Internal investigations: when does privilege apply?, Global law firm,

September 11, 2018

Cross-borderAML investigationsrequire cooperation throughofficial channels, such as theEgmont

Group.

Option D (Correct):TheEgmont Groupis an international network ofFIUs that facilitates secure

information exchangein financial crime investigations.

Option A (Incorrect):While sovereignty applies,formal international cooperation mechanisms exist.

Option B (Incorrect):AML cooperation is allowed under legal frameworks(e.g.,MLATs, Egmont Secure

Web).

Option C (Incorrect):Information-sharing is restrictedtoauthorized government agencies, not all

organizations.

Reference:Egmont Group of FIUs, FATF Recommendation 40 (International Cooperation), Mutual

Legal Assistance Treaties (MLATs).

Asset management companies handlelarge amounts of funds, making themprime targets for money

launderers.

Option A (Correct):Negative news (adverse media) screeningis essential for identifyingpotential

financial crime risks.

Option D (Correct):Understanding thesource and origin of assetsensures that fundscome from

legitimate sources.

Option B (Incorrect):PEPs should not be automatically rejected, butenhanced due diligence (EDD)is

required.

Option C (Incorrect):While onboarding interviews help,they are not a mandatory AML measure.

Option E (Incorrect):Financial stability reportsare useful, butnot directly linked to AML compliance.

AML Risks in Asset Management:

High-value transactions that may mask illicit wealth.

Layering through investment portfolios to hide the origin of funds.

Use of offshore structures to evade regulatory scrutiny.

Best Practices for AML in Asset Management:

Conduct enhanced due diligence (EDD) on high-net-worth clients.

Monitor large and unusual transactions.

Screen customers against PEP, sanction, and adverse media databases.

Reference:

FATF Recommendation 22 (AML for Asset Management)

6th EU Anti-Money Laundering Directive (6AMLD)

Wolfsberg Group Asset Management AML Framework

ARisk Appetite Statement (RAS)helps financial institutions defineacceptable risk levelsand align them

withregulatory compliance and business strategy.

Option A (Correct):Incorporating risk appetite adherence into internal reporting ensures consistent

enforcementandaccountabilityacross business functions.

Option D (Correct):Embedding risk appetite into daily processes ensures that compliance is built into

the organization’s culture and operations.

Option E (Correct):Training employees on risk appetite awareness helps them understand

compliance limits and risk management principles.

Why Other Options Are Incorrect:

Option B (Incorrect):Whiletraining managers on "good" risk-takingis valuable,it does not directly

enhance risk appetite awareness for compliance.

Option C (Incorrect):Describing risk controls is useful but insufficientfor embedding risk appetite into

an organization’s structure.

Best Practices for Implementing Risk Appetite Awareness:

Ensure risk appetite is a key part of regulatory and operational reporting.

Train employees at all levels on risk tolerance boundaries.

Integrate risk appetite considerations into product development and customer onboarding

processes.

Reference:

Basel Committee’s Principles for Risk Management

FATF Recommendation 1 (Risk-Based Approach to AML)

Wolfsberg Group Guidance on Risk Appetite in Compliance

On-line banking offers a significant money laundering risk to a financial institution because:

The nature of on-line banking can make it difficult to establish who is controlling the account. On-line

banking allows customers to access their accounts remotely, without face-to-face contact with the

financial institution. This can pose challenges for verifying the identity and legitimacy of the account

holder, especially if the account is opened on-line or through a third-party intermediary. On-line

banking can also facilitate the use of anonymous or fictitious identities, or the use of proxies or

nominees to hide the true beneficial owner of the account.

The ease of access through the internet enables cross border movement of funds. On-line banking

allows customers to transfer funds quickly and easily across different jurisdictions, without physical

movement of cash or other instruments. This can increase the risk of money laundering, as funds can

be moved to or from high-risk countries or regions, or through multiple accounts or financial

institutions, to obscure the origin, destination, or purpose of the funds. On-line banking can also

enable customers to access or use alternative payment systems or virtual currencies, which may

have lower regulatory oversight or transparency standards than traditional banking systems.

The speed of electronic transaction enables execution of multiple complex transactions within short

time frame. On-line banking allows customers to conduct transactions in real time, with minimal or

no human intervention or verification. This can increase the risk of money laundering, as customers

can execute multiple transactions in a short period of time, or use complex transaction structures or

patterns, to avoid detection or reporting thresholds, or to conceal the source, nature, or ownership

of the funds. On-line banking can also enable customers to use automated or algorithmic trading

systems, which may generate large volumes of transactions that are difficult to monitor or analyze.

CAMS Study Guide - 6th Edition, Chapter 5, pages 139-140

CAMS Certification Exam Outline, Domain 2, Task 2.1, Skill 2.1.1

Online Banking and Money Laundering, ACAMS Today, September 2012

According to the risk-based approach, financial institutions should apply enhanced due diligence and

ongoing monitoring to higher-risk clients, and take appropriate measures to mitigate the risks of

money laundering and terrorist financing. If the client exceeds the criteria of an acceptable risk

model created by the institution, the institution shouldcommunicate the issues to the client and

request remedial actions, such as providing additional information, documentation, or evidence of

compliance. If the client does not cooperate or comply with the institution’s requirements, the

institution should consider terminating the relationship with the client, as the risk may outweigh the

benefits of continuing the business relationship.

ACAMS CAMS Certification Package - 6th Edition, Chapter 2: Risk Assessments, pp. 51-521

ACAMS CAMS Certification Package - 6th Edition, Chapter 4: Customer Due Diligence, pp. 97-981

ACAMS CAMS Certification Video Training Course, Module 2: Risk Assessments, Lesson 2.3: Risk-

Based Approach2

ACAMS CAMS Certification Video Training Course, Module 4: Customer Due Diligence, Lesson 4.3:

Enhanced Due Diligence

Reference: http://www.fatf-gafi.org/media/fatf/documents/reports/Risk-Based-Approach-BankingSector.pdf