CAMS Question #376: Real Exam Question with Answer & Explanation

Question

Options

• AFunds supporting and proceeding from crime or terrorism are prevented from entering the
• BLegal persons are prevented from misuse for money laundering or terrorist financing.
• CSupervisors appropriately supervise, monitor, and regulate financial institutions (Fls).
• DFIs adequately apply preventive measures.

Explanation

The FATF is an inter-governmental body that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. The FATF conducts mutual evaluations of its members and other jurisdictions to assess their compliance with the FATF Recommendations and the effectiveness of their AML/CFT regimes. The FATF defines effectiveness as "the extent to which a country's AML/CFT regime is achieving the defined outcomes of an effective regime that allows them to mitigate their risks and threats of ML/TF". The FATF assesses effectiveness based on 11 immediate outcomes, which are grouped into three thematic goals: financial system integrity, legal system and operational issues, and international cooperation. One of the immediate outcomes under the financial system integrity goal is that "FIs adequately apply preventive measures commensurate with their risks, and report suspicious transactions" (IO.4). This outcome measures how well FIs implement the FATF Recommendations on customer due diligence, record-keeping, internal controls, risk assessment, and suspicious transaction reporting. These preventive measures are essential for FIs to identify and mitigate the risks of being misused for money laundering or terrorist financing, and to provide useful information to the authorities for investigation and prosecution. Therefore, the correct answer is D. FIs adequately apply preventive measures, as this is one of the FATF characteristics used to assess a country's effectiveness of its AML regime.

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