What conclusion should the auditor make regarding AML training for outsourced AML providers?
A. The approach outlined by the Dank is deficient, as the service providers are not pan of the Dank s
AML training during its staff onboarding.
B. The approach outlined by the Dank is appropriate as the Dank can rely on a professional service
provider to deliver the AML training program for the Dank s staff.
C. The approach outlined by the Dank is deficient, as it does not provide controls for the Dank to
verify training delivered by outsourced providers to the bank's staff is appropriate.
D. The approach outlined by the bank Is appropriate as it considers practical issues such as time zone
differences and availability of both classroom and online sessions.
C
CAMS-Audit emphasizes that institutions must ensure outsourced providers deliver training aligned
with internal policies and regulatory standards.
Review the content of training sessions.
Validate trainer qualifications.
Assess the effectiveness of training through feedback or testing.
Failure to implement verification mechanisms for outsourced training compromises the consistency
and quality of the AML education program.
FATF and Basel guidelines mandate oversight of third-party service providers, especially for critical
functions like AML compliance training.
The auditor finds that the customer risk assessment (CRA) is completed at initial onboarding and is
repealed for each customer every other year. The auditor’s observations should Include that the CRA
should:
A. be updated more often given the risk of the entity.
B. include an assessment of jurisdiction where the customer currently resides as this may have
changed.
C. allow for sales oy third patties other than advisors since most of the customers are local residents.
D. include a qualitative overlay that 95% of the products offered are subject to regulatory
exemptions.
B
A comprehensive CRA should incorporate jurisdictional risks, as customer location changes could
introduce new risks, such as exposure to high-risk or non-compliant jurisdictions.
Periodic updates to the CRA, including changes in customer location, align with FATF’s risk-based
approach and Recommendation 10.
Omission of jurisdictional assessments could result in undetected risks, undermining the integrity of
the AML program.
The company has automated the completion of the customer risk assessment (CRA) into its main
customer relationship management (CRM) system The CRM has needs recording the overall risk level
assessed (Standard. Enhanced), the ID number of the staff member who completed the assessment,
and me date of the last assessment Which additional fields should the auditor recommend to
document the CRA process? (Select Three.)
A. Age (Years)
B. Risk factors (Y/N. if Y please specify)
C. Type of customer (Trust. Company Individual)
D. Annual premium (S)
E. Residence (Country)
F. Photo ID taken (Passport Driver’s License. Other)
B, C, E
Identify and document specific risk indicators for transparency and consistent
assessment. This ensures alignment with the risk-based approach advocated by FATF.
Differentiating customer types (trust, company, individual) is critical for tailoring
due diligence measures to the unique risks associated with each type.
Tracking customer jurisdiction ensures risk assessments reflect geopolitical and
regulatory changes, fulfilling FATF compliance expectations.
These fields enhance traceability, accountability, and risk profiling, ensuring the CRA process is
comprehensive and meets regulatory standards.
Documentation must be detailed and periodically reviewed to address evolving AML risks effectively,
as recommended by CAMS-Audit guidelines.
Which findings indicate issues that would cause a lack of understanding of the risks associated with
the business the financial institution conducts? (Select Three.)
A. Finding 1
B. Finding 3
C. Finding 4
D. Finding 5
E. Finding 6
F. Finding 8
ACF
Finding 1
This highlights fundamental gaps in the risk assessment process. A lack of clarity in identifying and
analyzing risks associated with certain products, services, or client categories reflects an incomplete
understanding of the business's risk landscape.
CAMS-Audit emphasizes the importance of comprehensive risk assessments to identify inherent and
residual risks and align them with the institution's overall AML/CFT framework.
Finding 4
This pertains to inadequate integration of risk mitigation controls into operational processes, leading
to blind spots in identifying emerging threats. Institutions that do not properly embed risk controls
often fail to adapt to changing business or regulatory requirements.
Reference to FATF recommendations underlines the necessity of embedding controls that reflect
ongoing and emerging risks.
Finding 8
Failure to implement effective monitoring mechanisms or maintain updated customer or transaction
profiles suggests a superficial approach to understanding risk exposure. Without robust data tracking,
financial institutions may overlook key risk indicators.
CAMS-Audit documents stress the need for effective transaction and customer profile monitoring
systems as part of a sound risk-based approach.
Which finding indicates issues that could result in clients being subject to incorrect scenarios and
thresholds?
A. Firming 2
B. Finding 4
C. Finding 5
D. Finding 7
D
Finding 4 typically points to issues with the alignment of customer segmentation or risk profiling.
Incorrect segmentation or categorization directly impacts the assignment of scenarios and
thresholds, leading to clients being subjected to inappropriate monitoring settings.
For example, placing a low-risk client in a high-risk threshold group can cause unnecessary alerts,
while the opposite scenario might miss genuine suspicious activities.
May relate to broader systemic issues but does not specifically highlight misalignment
with thresholds or scenarios.
Typically involves data accuracy concerns but does not directly result in the application of
incorrect scenarios or thresholds.
Often pertains to gaps in coverage or monitoring rather than specific issues in the
calibration of scenarios and thresholds.
Advanced CAMS-Audit emphasizes the importance of precise customer segmentation and scenario
calibration to ensure transaction monitoring systems operate efficiently and effectively. Findings
pointing to misalignments in these areas are critical indicators of potential weaknesses.
FATF and Basel Committee standards require risk-based monitoring tailored to the risk profile of each
customer. Misaligned thresholds violate this principle, potentially leading to regulatory scrutiny.
The correct answer is B. Finding 4, as it identifies the misalignment of scenarios and thresholds with
customer risk profiles, which is a critical issue in ensuring effective AML monitoring systems.
Which finding must be first remediated in order to understand is risks the organization is exposed to?
A. Finding 1
B. Finding 3
C. Finding 5
D. Finding 8
A
Finding 1
This finding likely pertains to foundational gaps in the organization's risk assessment framework or
the absence of a comprehensive understanding of inherent risks. Without addressing this, the
organization cannot adequately identify, assess, or mitigate risks effectively.
According to CAMS-Audit standards, a thorough risk assessment is the cornerstone of an effective
AML/CFT program. It helps to prioritize resources and design appropriate controls based on the
identified risk levels.
Critical Role in Understanding Risks
Remediating foundational issues ensures that the organization has a clear understanding of its risk
exposure across all products, services, and jurisdictions. This step is essential before addressing
downstream issues such as customer due diligence (CDD) gaps or monitoring inefficiencies.
Alignment with Regulatory Requirements
FATF guidelines and CAMS-Audit practices emphasize that risk assessment should precede other
remediation efforts. Without this, the organization may address symptoms rather than root causes of
compliance and operational risks.
The auditor determines that the population for transaction monitoring testing can be stratified into
five distinct categories. To complete testing which sampling method should the auditor use to
identify the sample size?
A. Judgmental
B. Proportional
C. Statistical
D. Risk-based
C
Statistical sampling is the most suitable method when dealing with stratified populations, as it
ensures a representative sample is drawn from each distinct category.
This method allows auditors to achieve reliable results by applying mathematical and probabilistic
models to calculate the required sample size, ensuring unbiased and valid conclusions.
When the transaction monitoring population is divided into distinct categories, statistical sampling
ensures that each category is proportionately represented based on its size or risk level within the
overall population.
Relies on auditor discretion and may introduce bias, making it unsuitable for
ensuring proportional representation in stratified populations.
Focuses only on proportional representation but does not leverage statistical
tools to determine the optimal sample size or confidence levels.
While effective in certain contexts, it is better suited for focusing on high-risk
categories rather than ensuring comprehensive representation of all strata.
Advanced CAMS-Audit recommends statistical sampling for stratified populations to ensure that all
categories are adequately tested and results are statistically valid for compliance and performance
assessments.
The auditor should use statistical sampling to identify the sample size when testing a stratified
population for transaction monitoring. This ensures a reliable, unbiased, and mathematically sound
basis for the audit.
The auditor reviews the AML compliance program and after a walk-through, determines that AML-
related reports to the board could be useful to test the governance and management oversight. The
AML reports vary in content and complexity. Which sampling method should the auditor select?
A. Risk-based
B. Judgmental
C. Statistical
D. Proportional
B
Judgmental sampling is optimal when variability in report content and complexity necessitates the
auditor’s discretion to select the most informative samples.
Basel and FATF emphasize auditor judgment in situations requiring qualitative evaluation of
governance reports.
What type of audit approach should the auditor use when testing KYC files as part of an AML
examination?
A. Horizontal
B. Full scope
C. Vertical
D. Risk-based
C
A vertical audit focuses on reviewing the entire process or function within a single area or
department, such as testing KYC files for compliance and effectiveness in a specific customer group
or business line.
Vertical audits are particularly useful for examining KYC processes as they allow auditors to trace the
end-to-end workflow, from customer onboarding to risk assessment and ongoing monitoring.
The vertical approach provides detailed insights into compliance gaps within the KYC function,
helping auditors identify root causes and systemic issues, which is emphasized in CAMS-Audit
training.
Suspicious activity report testing in the last three audits did not identify any metrics to indicate that
volume vanes dramatically each month. Which step should the auditor take next?
A. Assign to continuous monitoring.
B. Include the lack of metrics as a deficiency in the reporting.
C. Escalate the finding regarding the lack of metrics to the board of directors.
D. Review within the IT audit.
B
AML compliance frameworks require metrics to track trends and unusual patterns in suspicious
activity reports (SARs). A lack of such metrics is a deficiency that undermines monitoring and
oversight.
Identifying and documenting deficiencies ensures accountability and facilitates corrective action,
aligning with AML audit standards.