Free CAMS Practice Test Questions and Answers (2026) | Cert Empire Practice Questions

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

Financial Intelligence Units (FIUs)serve as national centers for collecting, analyzing, and

disseminating AML/CFT information.

Option B (Correct):FIUs analyze SARs and STRs to detect money laundering and terrorist financing

risks.

Option D (Correct):FIUs disseminate financial intelligence to local and international law enforcement

agencies and other FIUs.

Option E (Correct):FIUs receive SARs/STRs from financial institutions, which form the basis for their

analysis.

Why Other Options Are Incorrect:

Option A (Incorrect):FIUs do not prosecute cases; they refer findings to law enforcement agencies.

Option C (Incorrect):FIUs share intelligence, but prosecution is handled by judicial authorities, not

FIUs.

Best Practices for FIUs:

Enhance data-sharing agreements with domestic and international agencies.

Use AI and analytics tools to detect suspicious financial patterns.

Ensure secure handling of sensitive AML/CFT data.

Reference:

FATF Recommendation 29 (FIU Role & Responsibilities)

Egmont Group Guidelines on FIU Information Sharing

EU 6th AML Directive (6AMLD) on Financial Intelligence Functions

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the institution should

develop a system to monitor all the activity of the customer’s accounts to mitigate the risk

associated with these accounts. This is because the customer’s behavior and profile may indicate

some red flags of money laundering, such as:

Operating an import-export business, which is a common sector for trade-based money laundering,

where trade transactions are used to disguise the movement of illicit funds, either by over- or under-

invoicing, misrepresenting the quantity or quality of goods, or falsifying documents1.

Receiving funds from a jurisdiction perceived as highly corrupt, which may increase the risk of the

funds being derived from bribery, embezzlement, fraud, or other predicate offences2. Transparency

International is a global civil society organization that publishes an annual CorruptionPerceptions

Index, which ranks countries by their perceived levels of public sector corruption based on expert

assessments and surveys3.

Making frequent transfers among the accounts, which may indicate a layering technique, where

funds are moved through multiple accounts, institutions, or jurisdictions to obscure the audit trail

and the source and ownership of the funds4.

Preferring to manage the accounts separately, which may indicate a lack of transparency or an

attempt to avoid detection or reporting by the institution.

By developing a system to monitor all the activity of the customer’s accounts, the institution can:

Identify and verify the identity and beneficial ownership of the customer and the parties involved in

the transactions.

Obtain and verify information on the nature and purpose of the business relationship and the source

and destination of the funds.

Conduct a risk assessment of the customer and the transactions based on the customer’s profile,

behavior, and geographic locations.

Apply enhanced due diligence and ongoing monitoring measures for higher-risk customers and

transactions, such as obtaining additional information, documentation, or approval, or conducting

more frequent or in-depth reviews.

Detect and report any suspicious or unusual transactions or activities to the relevant authorities.

The other three options are incorrect because:

File a suspicious transaction report is not the best answer, as it is a reactive measure that should be

taken after the institution has identified or suspected money laundering or terrorist financing

activity, not before. The institution should first conduct due diligence and monitoring of the customer

and the transactions, and then file a report if there are reasonable grounds to believe that the

activity is suspicious or unusual.

Diminish the importance of the subjective Transparency International rating is not the best answer,

as it is a complacent and irresponsible attitude that may expose the institution to legal, regulatory,

reputational, or operational risks. The Transparency International rating is not subjective, but based

on credible sources and methodologies, and it is widely used as a reference by governments,

businesses, civil society, and the public to assess the level of corruption in different countries3. The

institution should not ignore or downplay the rating, but rather use it as one of the factors to

evaluate the risk of the customer and the transactions.

Conduct a trade-price manipulation analysis is not the best answer, as it is a specific and technical

measure that may not be sufficient or appropriate to mitigate the risk associated with these

accounts. A trade-price manipulation analysis is a method of detecting trade-based money

laundering by comparing the prices of goods or services in a transaction with the market prices or

other benchmarks, and identifying any significant discrepancies or anomalies. However, this measure

may not be feasible or effective if the institution does not have access to reliable and comparable

data, or if the goods or services are not standardized or homogeneous. Moreover, this measure may

not address other aspects of the risk, such as the identity, ownership, or behavior of the customer

and the parties involved in the transactions.

1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 108 2: ACAMS, CAMS Study Guide, 6th

Edition, Chapter 5, p. 107 3: Transparency International, Corruption Perceptions Index, 3 4: ACAMS,

CAMS Study Guide, 6th Edition, Chapter 5, p. 106 : ACAMS, CAMS Study Guide, 6th Edition, Chapter

5, p. 103 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 103 : ACAMS, CAMS Study Guide,

6th Edition, Chapter 5, p. 104 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 105 : ACAMS,

CAMS Study Guide, 6th Edition, Chapter 5, p. 105 : ACAMS, CAMS Study Guide, 6th Edition, Chapter

5, p. 109

United Nations (UN) sanctionsarebindingon allUN member states, but their effectiveness depends

onswift adoption and enforcement by national governments.

Option B (Correct):For UN sanctions to be effective, they must be enforced by all member

statesthroughstrong domestic legal mechanisms.

Option A (Incorrect):UN sanctions are not necessarily implemented faster than unilateral sanctions

(e.g., U.S. OFAC sanctions).

Option C (Incorrect):While UN sanctions apply internationally, enforcement depends on national

governments, making implementation inconsistent.

Option D (Incorrect):Clarity of sanction measures is important, but enforcement is the primary factor

determining effectiveness.

Key Features of UN Sanctions:

Mandated by the UN Security Council under Chapter VII of the UN Charter.

Binding on all 193 UN member states.

May include asset freezes, travel bans, and trade embargoes.

Best Practices for UN Sanctions Compliance:

Ensure national enforcement aligns with UN Security Council resolutions.

Monitor sanctioned individuals/entities through real-time screening tools.

Cooperate with international organizations to prevent sanctions evasion.

Reference:

FATF Recommendation 6 (Targeted Financial Sanctions)

United Nations Security Council (UNSC) Sanctions Guidelines

EU & OFAC Guidance on Sanctions Implementation

The decision of whether or not to file a suspicious transaction report (also known as a suspicious

activity report or SAR in the United States) often involves weighing the aggravating and mitigating

factors arising from the research conducted during the investigative process. The final decision

should be documented and supported by the reasoning that was used to make the determination.

The transaction has already been investigated which led to the requesting of the document. The

document checked out and the question did not specify the document was suspicious, therefore we

can conclude an STR does not need to be completed and thus should move to document the reason

why an STR wasn't completed.

The correct answer is C. Wires received in large, even dollar amounts are a suspicious behavior, as

they may indicate an attempt to avoid reporting thresholds or to conceal the source of funds. Large

and round numbers are often used by money launderers to simplify calculations or to avoid arousing

suspicion12. The other options are not necessarily suspicious, as they may reflect the normal

business operations of a wholesale auto business that ships vehicles internationally. The dock

shipping receipts match the vehicles (A), vehicles are regularly shipped internationally (B), and

account debits are payable to transport companies (D) are all plausible and legitimate activities for

such a business.

ACAMS CAMS Certification Video Training Course3, Module 3: Risks and Methods of Money

Laundering and Terrorism Financing, Lesson 2: Methods of Money Laundering

ACAMS CAMS Certification Study Guide1, Chapter 3: Risks and Methods of Money Laundering and

Terrorism Financing, Section 3.2: Methods of Money Laundering, pp. 79-80

AML audit findings must beanalyzed and addressed through remedial actions based on root cause

analysis.

Option D (Correct):Root cause analysis helps develop effective corrective measures to prevent

recurring AML deficiencies.

Option A (Incorrect):Retesting controls may be useful, but addressing deficiencies is more critical.

Option B (Incorrect):While the board oversees compliance, the responsibility for implementing fixes

lies with AML teams.

Option C (Incorrect):Audit teams provide findings but do not execute corrective actions.

Best Practices for Addressing AML Audit Findings:

Identify the root cause of AML control failures.

Develop risk-based remediation plans.

Implement and monitor corrective actions.

Reference:

FATF Recommendation 18 (AML Internal Controls & Audit)

Basel Committee’s Guidelines on AML Audits

Wolfsberg Group Principles for AML Risk Management

Final Thoughts:

Suspicious stock price movements can indicate market manipulation linked to money laundering.

EU AML and GDPR regulations enforce strict data minimization and AI compliance requirements.

Bearer shares, nominee directors, and tax-haven corporations increase money laundering risks.

AML audit findings should be addressed through root cause analysis and corrective actions.

Screening customers at onboarding and quarterly thereafter is not sufficient to ensure compliance

with economic sanctions, as sanctions lists may change frequently and the financial institution may

not be aware of the latest updates. Screening should occur promptly after list updates to ensure that

the financial institution is not dealing with a sanctioned individual or entity, or facilitating a

prohibited transaction. This is recommended by the international guidance from the Financial Action

Task Force (FATF) and the Wolfsberg Group12. Screening and performing enhanced due diligence on

new relationships is also important, but not the only step to ensure compliance.

CAMS Certification Package - 6th Edition | ACAMS, Chapter 3: Sanctions, page 86

The Wolfsberg Group Correspondent Banking Due Diligence Questionnaire 2014, Section 5: Sanctions

Policy, page 12

ACAMS CAMS Certification Video Training Course - Exam-Labs, Video 3.1: Sanctions

Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition),

Money launderers preferlarge-denomination billsbecause theyfacilitate bulk cash smuggling and

placement.

Option A (Correct):Increased demand for large-denomination banknotesis a knownmoney

laundering red flag.

Option B (Incorrect):Increased digital service adoption isnormal banking behavior.

Option C (Incorrect):Faster settlement times may reflecttechnology upgrades, not financial crime.

Option D (Incorrect):Maintaining a log of monetary instruments isa compliance best practice, not a

red flag.

Reference:FATF Red Flags on Cash Transactions, Wolfsberg Group AML Guidance for Banks.

These options involve transferring funds to another country, which could indicate cross-border

movement of illicit funds, and cashing out winnings in checks under 10,000 USD, which could

indicate structuring to avoid reporting thresholds. The other options do not seem as suspicious or

relevant to money laundering.

According to the CAMS Study Guide, page 173, “If an independent investigation provides grounds to

interview the employee, the employee can be interviewed and, if necessary, terminated, but not

advised that he or she is under investigation by law enforcement.” This is because informing the

employee of the law enforcement investigation could compromise the integrity of the case and

potentially expose the institution to legal liability. Therefore, option B is the correct answer.

CAMS Study Guide, page 1731

CAMS Exam Questions and Free Practice Test,