CAMS Question #385: Real Exam Question with Answer & Explanation

Question

Options

• AThe policy holder overpays the policy and moves the funds out of the policy despite paying early
• BThe policy holder enters a sibling as a beneficiary of the insurance policy rather than themselves.
• CThe policy holder purchases a bond and redeems it at a discount prior to its full term.
• DThe policy holder uses an offshore company to pay the insurance installments.
• EThe policy holder is strongly interested in how many costs are incurred when taking out an

Explanation

The methods that are typically used to launder money using insurance companies are: The policy holder overpays the policy and moves the funds out of the policy despite paying early withdrawal penalties. This method involves placing large amounts of illicit funds into an insurance policy, usually a life insurance or an annuity, and then requesting a refund or a surrender of the policy. The policy holder may incur some fees or penalties for the early withdrawal, but they will receive a check or a wire transfer from the insurance company that appears to be a legitimate source of income. This method allows the launderer to layer and integrate the funds into the financial system. The policy holder uses an offshore company to pay the insurance installments. This method involves setting up a shell company or a trust in a jurisdiction with low or no tax and weak or no anti-money laundering regulations. The launderer then uses the offshore entity to purchase an insurance policy or a bond from a reputable insurance company. The offshore entity pays the premiums or the installments using the illicit funds, and the launderer can claim the benefits or the returns from the policy or the bond as clean money. This method allows the launderer to hide the true ownership and origin of the funds.

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