CAMS Question #412: Real Exam Question with Answer & Explanation

Question

Options

• AShell company
• BHuman trafficker
• CPolitically exposed person
• DMoney laundering through real estate

Explanation

Money laundering through real estate is a common method of disguising the source and ownership of illicit funds. Real estate transactions often involve large amounts of money, complex legal structures, and cross-border transfers, which can obscure the true nature and origin of the funds. The new business customer in this scenario raises several red flags that warrant enhanced due diligence, such as: The business was established five years ago but has a vague website and no physical presence in the state where it is registered. One of the principals has an international phone number and lives abroad, which could indicate a foreign shell company or a politically exposed person. The other principal works out of a recreational vehicle, which could suggest a lack of legitimate business activity or income. The business claims to be a real estate business, but does not provide any details about its projects, clients, or partners. These factors suggest that the business may be involved in money laundering through real estate, either by purchasing properties with illicit funds, using properties to generate illegal income, or selling properties to launder money. Therefore, the financial institution should conduct enhanced due diligence to verify the identity, background, and source of funds of the business and its principals, as well as the purpose and nature of the account relationship.

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