CAMS Question #372: Real Exam Question with Answer & Explanation

The correct answer is B. Weakening financial institutions C. Increase in corruption and organized crime. Money laundering has severe social and economic impacts, including increased crime rates, corruption and erosion of public trust. Money laundering fuels criminal activities by providing the necessary financial resources for criminals to continue their operations. As illicit funds

Question

Which are social/economic consequences of money laundering? (Choose two.)

Options

ACivil war
BWeakening financial institutions
CIncrease in corruption and organized crime
DIncrease in tax revenue
EWeakening of the country's infrastructure

Explanation

Money laundering has severe social and economic impacts, including increased crime rates, corruption and erosion of public trust. Money laundering fuels criminal activities by providing the necessary financial resources for criminals to continue their operations. As illicit funds circulate within the financial system, they enable the growth of criminal organizations and contribute to an increase in crime rates, including organized crime. Money laundering also facilitates corruption and undermines public trust in financial institutions and the wider economy. This erosion of public trust is exacerbated by trade-based money laundering, which involves the manipulation of international trade transactions to disguise the origins of illicit funds. Money laundering also weakens financial institutions by exposing them to reputational, operational, legal and regulatory risks. Money launderers exploit the vulnerabilities of financial systems and compromise their integrity and stability. Money laundering can also distort the allocation of resources, create inflationary pressures, and undermine the effectiveness of monetary policy.

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