Newbrand - Acams Cams6 VC - 2 - Slides For Student Use v5.0 11jun2020

CAMS Virtual Classroom
Series
Session 2
Money Laundering Risks in Non-Bank Financial Institutions
and Non-Financial Institutions and Businesses
ACAMS CAMS6 VC - 2 - Student PDF v5.0
What we will cover today

Introduction:
1. Non-Bank Financial Institutions
a. Credit Card Industry
Introduction b. MSBs
c. Insurance companies, Securities
Broker-Dealers
2. Non-Financial Businesses and Professions
a. Casinos, Precious metals
b. Gatekeepers, trust and company
ML in non-banks
service providers, real estate Agenda
c. Import/export and BMPE
d. New payment methods
e. Misuse of corporate vehicles
3. Terrorist financing
Wrap Up
Practice Questions and Q&A
© 2020 ACAMS. All Rights Reserved. 2
1
Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
TF or CFT
MSB ML
Terrorist Financing or Counter
Money Services Business Money Laundering
Financing of Terrorism
TBML
Acronyms used BMPE
Trade-Based Money in this session Black Market Peso Exchange
Laundering
FI FATF MT
Financial Institution Financial Action Task Force Money Transmitter
2
Credit Cards
Definition: A plastic card with a credit limit used to
o purchase goods and services and
o to obtain cash advances on credit.
The cardholder is subsequently billed by the issuer for repayment of the credit extended.
Credit cards may be used to launder money when payments of the amounts owed on the card are
made with criminal money.
Not likely (but possible) to be used in the placement stage of ML (more likely: layering, integration).
Other risk: Prepaying credit card using illicit funds already in the financial system  creating a Credit
balance.  credit card refund  use to purchase items.
Credit Balance
Credits: Added to your account each time you make a payment (or when you return something you
bought with your credit card.)
If the total of credits exceeds the amount you owe, statement will show a credit balance. This is money
the card issuer owes you.
3
Normal situation
for a credit card
holder: Closing
balance is
negative
Source Image:
Suzy spent Precision Computer
more than Methods
her
payments –
No “credit
balance”. She owes $1000 on the card
Closing Balance is
positive
$3,010
Suzy made
more more
payments
$3,010
than she
spent: Credit
balance $2,000 Now the credit card company owes Suzy
4
Credit Balance
Suzy can spend the amount of the credit balance without owing anything to the card issuer.
OR: She can call her card issuer and arrange to have a check sent to her in the amount of the credit
balance.
(Name of Credit Card Company)
Suzy Student 2,000

Two thousand dollars and 0/100
Homework Exercise: GAO and Credit Cards
Submit your answers via the poll questions on the right.
10
5
Third Party Payment Processors (TPPPs)
o Bank customers that provide payment-processing services to merchants and other business entities.
o Use their commercial bank accounts to conduct payment processing for their merchant clients.
o Usually not subject to any AML/CFT requirements.
o Service a variety of domestic and international merchants.
11
Risks with TPPPs
o Financial institution maintains a relationship with the TPPP and not the underlying merchant.
o Difficult for the financial institution to know on whose behalf it is processing a transaction.
o Multiple financial institution relationships.
o Money laundering.
o High return rates from unauthorized transactions.
12
6
Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
13
Money Services Businesses (MSB)
o Dealer in Foreign Exchange
o Check Casher
o Issuer of Traveler’s Checks or Money Orders
o Money Transmitter
o Provider and Seller of Prepaid Access
14
7
Benefits of MSBs
o Attractive to underserved or un-banked.
o Extended hours of operation.
o May serve geographic locations with limited or unreliable banking services.
o International money transfers.
o Operate online and brick-and-mortar.
o Cost effective.
o Customers may not need an account to execute a transaction.
15
Large and Small MSB
Large sophisticated chains (Principal MSB) with interstate operations facilities that provide a range of
financial services such as check cashing and money transmission to small one-owner storefront
operations (Agent) that provide a few financial services, (e.g. check cashing as an auxiliary service to its
primary retail store operations).
Risk profile of an MSB can vary based on the size and complexity of the MSB.
16
8
Example – Small MSB w/Physical Location
Supervisor/Manager: Reviews Director/Owner: Oversees entire
teller work and reconciliations. operation. May approve the largest
Approves medium-size currency transactions, and may also
transactions, often receives be responsible for maintaining
Director/Owner
shipments of currency to and internal controls and records of
from correspondent bank or operations.
other currency supplier. Ensures
transaction information Compliance Officer: Responsible for
required by recordkeeping Store implementing and monitoring the
Compliance Officer
requirements is obtained. Manager/Supervisor day-to-day AML compliance and
internal controls.
Teller Teller Teller
Front line employee/Teller: Conducts all transactions and reconciling the total currency transactions to the teller’s beginning
and ending cash balances. Will have the lowest authorization for conducting currency transactions. Should be aware
enough of AML regulations to perform duties such as securing information from individuals conducting transactions that will
trigger recordkeeping or currency transaction reporting requirements.
17
MSBs and Relationship with Agents

Example U.S.:
o Principal MSB is responsible for BSA/AML
o Agent is also responsible for BSA/AML 2 Models:

o Agent looks to MSB licensee (e.g., money
transmitter) for support but agent remains Some MSB chains may centralize the
obligated to comply with BSA/AML laws compliance and reporting function (so the
central office will file all suspicious activity and
o Four pillars
currency transaction reports).
o Policy and procedures –risk-
based Other MSBs with agent relationships prefer
o BSA officer -- competency each agent to comply with its own
o Training – activity specific recordkeeping and reporting obligations.
o Audit – yearly and independent
o Reporting unusual or suspicious
activity
o CTR Filings
18
9
Money Transfer Service
o Financial service that accepts cash, checks other monetary instruments that can store value in one
location and pay a corresponding sum in cash or other form to a beneficiary in another location by
means of a communication, message, transfer or through a clearing network to which the money/
value transfer service belongs.
o Can involve one or more intermediaries and a third-party final payment.
o May be provided by persons (natural or legal) formally through the regulated financial system (for
example, bank accounts), informally through non-bank financial institutions and business entities or
outside of the regulated system.
o In some jurisdictions, informal systems are referred to as alternative remittance services or

underground (or parallel) banking systems – Hawala.
19
Money Flow in Money Transmitter (MT) Transaction with

Agent
MT pays recipient (B) before
Bank receiving bank credit for the
5:00 PM account sender’s (A) funds
Bank
10:00 AM account 2:00 PM
MT (Principal
Branch or Agent
of MT (XYZ “Paying” Agent Person B:
MSB)
Person A: Sender
Grocery Store) in in Mexico City Receiver
Dallas
20
10
Check Cashers
o A person engaged in the business of cashing
checks.
o Is an MSB.
o In many cases, the check casher acts as an

agent of a money transmitter (or several
money transmitters for different services, e.g.,
remittances, bill paying, and sale of money
orders) to complement check cashing
services.
21
Money Orders
o Monetary instrument usually purchased with
cash in small denominations (generally under
$500).
o Commonly used by people without checking

accounts to pay bills or to pay for purchases in
which the vendor will not accept a personal
check.
o Not unusual for businesses with bank accounts

to buy money orders and use them to
purchase wholesale merchandise.
Risk: Represent an instrument drawn on the issuing

institution rather than on an individual’s account.
Can be bought with cash and used
internationally.
Red flag: Sequentially numbered money orders.
22
11
Prepaid Access
Open Loop
o Purchased at any merchant that accepts cards

issued on the payment network associated with
the card.
Closed Loop
o Limited to buying goods or services from the

merchant issuing the card.
23
Examples of Red Flags MSBs
o Unusual use of money orders, traveler’s checks or funds transfers.
o Two or more persons working together in transactions.
o Transaction altered to avoid filing a Currency Transaction Report (CTR).
o Customer comes in frequently to purchase less than $3,000 in instruments each time (or the local
threshold).
o Transaction altered to avoid completion of record of funds transfer, money order or traveler’s checks
of $3,000 or more (or the local threshold).
o Same person uses multiple locations in a short time period.
o Two or more persons use the same identification.
o One person uses multiple identification documents.
o Refining: Exchanging small bills for large bills (in money exchange).
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12
Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
25
Insurance Companies
Vulnerabilities
o Insurance products with investment/cash aspects:

Life insurance, annuities.
o Lack of oversight/controls over intermediaries:

Insurance brokers have a great deal of control and freedom regarding policies.
o Sales-driven objectives:
Focus of brokers is selling the insurance products and they can overlook signs of money laundering,
such as a lack of explanation for wealth or unusual methods for paying insurance premiums.
26
13
Insurance Products
Examples of how money can be laundered
o Over-fund the policy and move funds in and out of the policy.
o Early redemption while paying early withdrawal penalties.
o Free-look period:
o Feature that allows investors for a short period of time after the policy is signed and the premium
paid to back out of a policy without penalty.
o Refunds requested during a policy’s “legal cancellation period.”
27
Securities Broker-Dealers
Aspects that increase the industry’s exposure to ML:
Easy of
Routine use of Commission
International Speed of conversion of Use of nominees/
wire transfers driven
nature transactions holdings to cash trustees
environment
28
14
Examples of Red Flags Broker-Dealer
o Customer appears to be acting as an agent for an undisclosed principal, but declines or is reluctant,
without legitimate commercial reasons, to provide information, or is otherwise evasive regarding that
person or entity.
o Multiple accounts under a single name or multiple names, with a large number of inter-account or
third-party transfers.
o Account has unexplained or sudden extensive wire activity, especially in accounts that had little or no
previous activity.
o Funds deposit for the purpose of purchasing a long-term investment followed shortly thereafter by a
request to liquidate the position and transfer the proceeds from the account.
o Transactions involving certain types of securities, such as penny stocks, Regulation “S” stocks, and
bearer bonds.
o Account shows an unexplained high level of activity with very low levels of securities transactions.
29

Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
30
15
Casinos / Gambling Businesses
o Regulatory environment varies by jurisdiction.
o May require AML/CFT programs.
o Various forms:
o Physical locations such as Las Vegas, Macau, etc.
o Online platforms such as PokerStars.com
o Track betting such as horse-racing or dog tracks
o Cash-intensive for physical sites.
o Online gambling use credit card networks, online payment systems, etc.
31
Casinos
o Patrons may attempt to evade AML reporting
or recordkeeping requirements.
Use the cage solely for its banking-like financial
services.
o Minimal gaming activity without a reasonable

explanation.
o Unusual gaming and transaction patterns

specific to the industry:
o Example: Betting both “red and black” or

“odd and even” on roulette
32
16
Gold and other Precious Metals
Attractive to money launderers because of
o Gold has high intrinsic value in a relatively

compact easy to transport form.
o Can be bought and sold easily.
o Often with anonymity for currency in most

areas of the world.
o More readily accepted than precious stones,

especially since it can be melted down into
many different forms.
o Holds its value regardless of the form it takes
o Sought after as a way of facilitating the transfer

of wealth.
33

Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
34
17
Gatekeepers
o Professionals such as lawyers, notaries
accountants, investment advisors, and trust
and company service providers who assist in
transactions involving the movement of
money, and are deemed to have a particular
role in identifying, preventing and reporting
money laundering.
o Their role is important because they can block

or facilitate the entry of illicit money into the
financial system.
35
Gatekeepers
o Most vulnerable to money laundering when
providing the following functions:
o Creating corporate vehicles or complex

legal arrangements.
o Buying or selling property.
o Performing financial transactions for client.
o Providing financial and tax advice.
o Providing introductions to financial

institutions.
o Undertaking litigation.
o Setting up and managing a charity.
36
18
Trust and Company Service Providers
o Persons and entities that, on a professional basis, participate in the creation, administration or
management of corporate vehicles.
o Services include:
o Acting as a formation agent of legal persons.
o Acting as (or arranging for another person to act as) a director or secretary of a company, a
partner of a partnership, or a similar position.
o Providing a registered office, business address or correspondence for any legal person or
arrangement.
o Acting as (or arranging for another person to act as) a trustee of an express trust.
o Acting as (or arranging for another person to act as) a nominee shareholder.
37
Trust and Company Service Providers (cont.)
o Services often provided by lawyers and other professionals.
o Although the vast majority of companies and trusts are used for legitimate purposes, legal entities
formed by these professionals remain common to money laundering schemes.
o Viewpoint from Transparency International:
o Focus on service providers, rather than the company or trust. The latter are merely the tools
through which the launderers operate. Service providers can, through diligence, reduce the risk
of abusing the vehicles with which they have a relationship. Countries should regulate service
providers for AML purposes.
38
19
Real Estate
Real estate is an attractive channel for laundering illicit funds because:
o Purchased with cash or an ‘all cash’ transaction, i.e. there is no lending involved from a financial
institution.
o The ultimate beneficial ownership can be disguised through shell companies.
o It is a relatively stable and reliable investment.
o Value may be increased through renovations and improvements.
o Can be utilized as an alternative to stock market investments for flight capital.
o Utilize gatekeepers to facilitate the purchase and sale transaction.
39
New York Times – Towers of Secrecy

7-part series by Louise Story and Stephanie Saul
February 7, 2015
• Time Warner Center: Symbol of the Boom
• The Mysterious Malaysian Financer
• The Besieged Indian Builder
• The Mexican Power Brokers
• The Russian Minister and Friends
• The Brooklyn Deed Thieves
• A Mansion, a Shell Company and Resentment in

Bel Air
40
20
Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
41
Trade-Based Money Laundering
International Trade System can be used to move money and goods with limited scrutiny by government
authorities.
The process of disguising the

proceeds of crime and
moving value through the
use of trade transactions in
an attempt to legitimize their
illicit origin.
42
21
Under-Invoiced Exports: Selling Something for Nothing
Move $1,000,000 from US to Foreign Firm
Through US Export at Low Price
1. US Firm has $1 million to move to Foreign Firm
2. US Firm buys 200 gold watches at $5,000 each (pay $1,000,000)
3. Sell/Export 200 watches to Foreign Firm at $5 each
Export 200 gold watches
US Firm Foreign Firm

Invoice for $1,000
4. The Foreign Firm: Sells 200 gold watches at $5,000 each = $1,000,000
43
Over-Invoiced Imports: Buying Nothing for Something
Move $1,000,000 from US to Foreign Firm
Through US Import at High Price
1. US Firm has $1 million to move to Foreign Firm
2. Foreign Firm buys 10,000 pencils at 10 cents each ($1,000) locally
3. Foreign Firm sells 10,000 pencils to US Firm at $100 each
Import 1,000 pencils
US Firm Foreign Firm

Invoice for $1,000
4. US Firm pays $1,000,000 to Foreign Firm
44
22
Money Laundering Out of the United States
Undervalued U.S. Exports

Product Country U.S.C.D. Price
Bulldozers (New) Venez. Norfolk $387.73/unit
Rocket / Grenade Launchers Venez. Miami $59.50/unit
Prefabricated Buildings Haiti Miami $2.12/unit
Forklift Trucks Haiti Miami $555.73/unit
New Tires Russia Seattle $3.97/unit
Color Video Monitors Russia New York $28.99/unit
45
Money Laundering Out of the United States
Overvalued U.S. Exports

Product Country U.S.C.D. Price
Spark Plugs Venez. Norfolk $313/unit
Used Clothing Venez. Miami $724/Kg
6 Volt Batteries Haiti Miami $5,236/unit
Dot Matrix Printers Haiti Miami $36,193/ unit
Inflatable Toy Balls Russia New York $4,770/unit
Smoke Detector - Battery Russia New York $5,595/unit
46
23
Black Market Peso Exchange (BMPE)
o Process by which money in the US (or Europe) derived from illegal activity is purchased by
Colombian (or Mexican, etc.) “peso brokers” and deposited into US bank accounts that the brokers
have established.
o The brokers sell checks and wire transfers drawn on those accounts to legitimate Colombian
businesses, which use them to purchase goods and services from US companies.
47
BMPE Example
3 4
Broker takes cartel’s dollars in
exchange for Colombian pesos
Brokers US employees place
dollars in US banking system
Cartel launders US dollars through 5 Broker exchanges dollars to

Colombian importer in
1 intermediary called a peso broker
exchange for pesos
Colombian cartel sells drugs to

US market for dollars
6
Importer uses the drug dollars to buy US
goods, which are shipped to Colombia
Source: U.S. Department of Homeland Security

48
24
Funnel Accounts
o An individual or business account in one geographic area that receives multiple cash
deposits, often in amounts below the cash reporting threshold, and from which the funds
are withdrawn in a different geographic area with little time elapsing between the
deposits and withdrawals
o Example:
o $5,000 cash deposited into a bank account in NYC
o 10 $500 ATM withdrawals from various ATMs in Miami, FL during the next 2 weeks
o $1,000 cash deposited into the same bank account in NYC
o 2 $500 ATM withdrawals from 2 ATMs in San Diego, CA during the subsequent 2 days
49

Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
50
25
New Payment Methods
o Inherent risks with new payment methods such as online or mobile payment systems, prepaid cards,
e-money:
o Non face-to-face relationships and anonymity
o Geographical reach
o Methods of funding
o Access to cash
o Segmentation of services
o Methods to mitigate:
o Customer due diligence
o Loading, value and geographical limits
o Source of funding
o Recordkeeping, transaction monitoring and reporting
51
Virtual Currency
o A medium of exchange that operates in the digital space.
o Can be converted into either a fiat (e.g., a government-issued currency) or it can be a substitute for
real currency.
o Convertible vs. non-convertible VCs:
o Convertible (i.e., Bitcoin and WebMoney) that have an equivalent value and can be exchanged
in real currency
o Non-convertible VCs (i.e., Q Coins and World of Warcraft Gold) that are intended to be specific
to a particular domain
o Virtual currencies allow value to be transmitted anywhere in the world without the requirement of a
centralized bank or institutional authority.
52
26
Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
53
Misuse of Corporate Vehicles:

Public Companies vs. Private Companies
o Public companies, shares are freely available and traded publicly, there is usually no limit to the
number of shareholders, information on ownership and its board of directors is publicly available, and
the companies are subject to significant regulation.
o Private limited companies are not publicly traded, restrictive in the number of shares, ownership can
be one or many, and are subject to minimal regulatory oversight.
54
27
LLCs, IBCs, and PICs
o Limited Liability Companies (LLC):
o Attractive vehicle because can be owned or managed anonymously.
o Virtually anyone can own or manage an LLC, including foreign persons and other business entities.
o Example: XYZ Software Distribution LLC located in New York
o International Business Corporations (IBC):
o Formed outside of a person or businesses’ country of residence, typically in offshore jurisdictions.
o Used for confidentially or asset protection purposes.
o Example: HeyDay Sunset Ltd. Cayman Islands, which is owned by Sam Xavier, a wealthy heir to
meatpacking business in Buenos Aires, Argentina and resides in Buenos Aires.
o Private Investment Companies (PIC):
o Established and used in a similar manner as IBC; however, they are typically limited to holding
investment assets in tax-neutral offshore financial jurisdictions.
o Example: ITC Trading Ltd. BVI, owned by Sam Xavier, but is solely limited to maintain a portfolio of
investments in Euros, USD, and Yen.
55
Shelf Company vs. Shell Company
o Shelf company: A corporation that has had no activity. It has been created and put on the shelf. This
corporation is then later sold to someone who prefers a previously registered corporation over a new
one.
o Shell company/corporation: A company that at the time of incorporation has no significant assets or
operations.
o Four reasons to establish a shell company for money laundering purposes:
o Converting the cash proceeds of crime into alternative assets.
o Create the perception that illicit funds have been generated from a legitimate source.
o Legitimate and/or bogus business transactions can be used to further the laundering
process.
o Conceal criminal ownership.
56
28
Using Trusts To Hide Beneficial Ownership
o Clients transfer the ownership and management of their assets to a trustee.
o Trustee holds legal title of the assets transferred by the client.
o Trustee acts pursuant to the trust instrument/deed.
57

Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
58
29
Terrorist Financing
Both terrorists and money launderers use the same methods to move their money in ways to avoid
detection, such as structuring payments to avoid reporting and underground banking, such as the
ancient system of hawala.
Differences:
o TF: smaller amounts involved.
o TF: Source of funds is not always illegal.
59
Money Laundering and Terrorist Financing
Money Laundering Terrorist Financing

Can be criminal proceeds, or legitimate
Source of funds (DIFFERENCE) Criminal proceeds
donations
Amounts involved
Large amounts Smaller amounts
(DIFFERENCE)
Laundering methods
Structuring, wire transfers, hawala, etc Structuring, wire transfers, hawala, etc.
(SIMILARITY)
60
30
Hawala
o Also called Hundi, underground banking.
o Alternative remittance systems (ARS) or informal value transfer systems (IVTS) that are often
associated with ethnic groups from Africa, Asia and the Middle East, and commonly involved with the
international transfer of value outside the legitimate banking system.
o Often based on trust.
o Used to transfer both clean and dirty money.
o Attractive to launderer because it leaves little or no paper trail.
o Can be used at any phase of the laundering cycle.
o Also attractive to terrorist financiers.
61
Hawala Transaction Example
Moving money without

moving cash
62
31
Charities & Non Profit Organizations
o Knowingly or not, charitable organizations have served as vehicles for raising and laundering funds
destined for terrorism
o Risks:
o Enjoying the public trust
o Having access to considerable sources of funds
o Cash intensive
o Global presence, including areas that are exposed to terrorist activity
o Often being subject to little/no regulation and/or having few obstacles to their creation
FATF recommends that non-profit organizations:
o Main and be able to present full program budgets that account for all expenses
o Conduct independent internal audits and external field audits
63
Homework Exercise: Terrorist Financing
Submit your answers via the poll questions on the right.
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32
Exercise 2 – Terrorist Financing
Question 1:
From a technical perspective, the laundering methods used by terrorists and other criminal
organizations are:
A. similar
B. different
C. an issue from the past
65
Question 2:
Although it would seem logical that funding from legitimate sources does not need to be
laundered, there is a need for the terrorist group to:
A. capture
B. disguise
C. proceed
______________the link between it and its legitimate funding sources.
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33
Question 3:
In doing so, the terrorists use: cash smuggling, structuring, purchase of ________ instruments,
wire transfers, and use of debit or credit cards.
67
Question 4:
The ancient _________ system has also played a role in moving terrorist related funds.
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34
Question 5:
In addition, money raised for terrorist groups is also used for:
A. mundane
B. PEP
C. nesting
______________expenses like food and rent, and is not always strictly used for just the terrorist
acts themselves
69

1- Money Laundering 2- Terrorist Financing
A. Profit A. Profit
2.6) Purpose of underlying crime
B. To scare population B. To scare population
A. Small A. Small
2.7) Amounts involved
B. Large B. Large
A. Dirty money A. Dirty money

2.8) Origin of the funding/financing B. Clean money B. Clean money
C. Mix C. Mix
A. Linear A. Linear
9) Money trail
B. Circular B. Circular
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35
A. Profit A. Profit
A. Small A. Small
B. Large B. Large

C. Mix C. Mix
A. Linear A. Linear
9) Money trail
71

A. Profit A. Profit
A. Small A. Small
B. Large B. Large

C. Mix C. Mix
A. Linear A. Linear
9) Money trail
72
36
A. Profit A. Profit
A. Small A. Small
B. Large B. Large

C. Mix C. Mix
A. Linear A. Linear
9) Money trail
73

Introduction:
Broker-Dealers
ML in non-banks
Wrap Up
74
37
CAMS Virtual Classroom
Series - Practice
Questions
Session 2
75
75
Question 1
Which statement is true?

A. Monetary instruments are vulnerable to money laundering because it allows small banks
to open correspondent accounts with larger financial institutions.
B. Hawalas are used to move money internationally with very little evidence.
C. Terrorist financing is different than money laundering because it generally involves larger
amounts than traditional laundering of criminal proceeds.
D. E-cash is not attractive to the money launderer because it cannot be completely

anonymous and does not allow for large amounts to be “transported” quickly and easily.
76
38
Question 2
Which statement is true?

A. A bearer share is a negotiable instrument that accords ownership in sequentially
numbered bank accounts
B. An indicator of money laundering is when an insurance policy holder is more interested in
the cancellation terms of a policy than the benefits of the policy
C. An indicator of money laundering in the trust sector is “wash trading” or offsetting

securities transactions, creating the illusion of trust.
D. Commodity trading advisors do not have direct contact with their clients and therefore
are less vulnerable to money laundering than gatekeepers.
77
Question 3
What is a futures commission merchant? A person or company that

A. Solicits or accepts orders on futures contracts and commodity options and accepts funds
for their execution.
B. Solicits and accepts commodity futures orders from customers but does not accept funds.
C. Provides advice on securities and investments and manages client assets.

D. D. Draws commodity checks on custodial arrangements that allows him to remain
anonymous to the broker.
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39
Question 4
What is a red flag of money laundering through casinos?

A. Prepaying a casino token or chip by using funds that are already in the casino system,
creating a debit balance.
B. Extensive gambling via multiple games throughout the casino.
C. Using casino commodity brokers to access multiple future chips.
D. Asking for winners’ checks to be made out in the name of third persons.
79
Question 5
A foreign individual seeks to open a company in an offshore jurisdiction for the sole purpose
of managing personal investments. What type of corporate vehicle would the individual
open?
A. Publicly traded company.
B. Shelf company.
C. International business corporation.
D. Private investment company.
80
40
Question 6
ABC Bank maintains an AML policy that states “For all legal entities, ABC Bank requires more
than 90% ownership of the entity to be identified to individuals.” Mr. Jammer seeks to open
an account at ABC Bank for his company Golden Shippers LLC, which is owned as follows:
51% Jay Jammer, 29% Golden Shipping LLC, 16% Hank Ford, and 4% Liam Nesan.
A compliance analyst is reviewing the documentation to determine whether to approve the
account opening based on the ownership structure. How should the analyst proceed?
A. Permit the account to be opened as the documentation identifies 100% of the owners.
B. Open the account because Golden Shippers and Golden Shipping are similar entities.
C. Request Mr. Jammer to provide ownership information of Golden Shipping LLC to further
evaluate whether the ownership meets the requirements.
D. None of the above.
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Question 7
The KYC information for JVT Networks LLC states it is in the business of “providing
telecommunications equipment to small and medium businesses” and it expected to receive
monthly incoming wire transfers from companies in the US and to execute monthly outgoing
wire transfers to China, Hong Kong, and Singapore. JVT is 100% owned by Sammie Mavis Jr.
and maintains no employees. A transaction monitoring review revealed numerous incoming
wire transfers from companies in Panama, outgoing wires to companies in Singapore, and
outgoing checks to numerous individuals in the US. There is no additional activity in the
account and the address for JVT Networks is mailbox rental business. The activity in the
account of JVT Networks appears indicative of a?
A. Shelf company.
B. Shell company.
C. International business corporation.
D. Offshore company.
82
41
Question 8
Which of the following is considered a weakness in free trade zones?

A. Minimal oversight by foreign governments and inadequate AML/CFT safeguards.
B. Strong procedures to inspect goods and legal entities.
C. Lack of cooperation between free trade zones and foreign customs authorities.
D. Minimal oversight by local authorities and inadequate AML/CFT safeguards.
83
Question 9
What are open loop prepaid cards?

A. Credit cards that can be used at any merchant at anytime.
B. Network-branded cards that can be spent anywhere on the payment network.
C. Store-branded cards that can be spent anywhere at anytime at any merchant.
D. Store-branded cards that can be spent at any store location of the issuing store.
84
42
Question 10
What are examples of alternate remittance systems?

A. Hawala, Hundi and BMPE.
B. BLPE, Hawala and Chiti.
C. Hundali, Handi and BMPE.
D. PTA, Hundi and BMPEP.
85
Thank you
86
43

Newbrand - Acams Cams6 VC - 2 - Slides For Student Use v5.0 11jun2020

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CAMS Virtual Classroom

What we will cover today

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Definition: A plastic card with a credit limit used to

o purchase goods and services and

o to obtain cash advances on credit.

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(Name of Credit Card Company)

Suzy Student 2,000

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Homework Exercise: GAO and Credit Cards

Submit your answers via the poll questions on the right.

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o Usually not subject to any AML/CFT requirements.

o Service a variety of domestic and international merchants.

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Risks with TPPPs

o Multiple financial institution relationships.

o High return rates from unauthorized transactions.

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Money Services Businesses (MSB)

o Dealer in Foreign Exchange

o Issuer of Traveler’s Checks or Money Orders

o Provider and Seller of Prepaid Access

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o Attractive to underserved or un-banked.

o Extended hours of operation.

o May serve geographic locations with limited or unreliable banking services.

o International money transfers.

o Operate online and brick-and-mortar.

o Customers may not need an account to execute a transaction.

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Large and Small MSB

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Teller Teller Teller

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MSBs and Relationship with Agents

o Principal MSB is responsible for BSA/AML

o Agent is also responsible for BSA/AML 2 Models:

o Can involve one or more intermediaries and a third-party final payment.

o In some jurisdictions, informal systems are referred to as alternative remittance services or

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Money Flow in Money Transmitter (MT) Transaction with

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o In many cases, the check casher acts as an

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o Commonly used by people without checking

o Not unusual for businesses with bank accounts

Risk: Represent an instrument drawn on the issuing

Red flag: Sequentially numbered money orders.

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o Purchased at any merchant that accepts cards

o Limited to buying goods or services from the

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Examples of Red Flags MSBs

o Unusual use of money orders, traveler’s checks or funds transfers.