CAMS cheat sheet

Money laundering has three stages: placement (illicit cash enters the financial system), layering (complex transactions sever the link to the origin), and integration (funds return to the economy as apparently legitimate assets).

Terrorist financing differs from money laundering: the funds may be legitimately sourced and small in amount, and the objective is financing an act of violence rather than disguising the origin of criminal proceeds.

A predicate offense is the underlying crime that generates the proceeds; jurisdictions using an 'all crimes' approach treat any serious offense as a predicate, while others list designated offenses.

Structuring (smurfing) is the splitting of cash transactions into amounts below reporting or recordkeeping thresholds, often using multiple branches, accounts, or individuals.

Trade-based money laundering moves value across borders by misrepresenting price, quantity, or quality of goods - for example over-invoicing imports, under-invoicing exports, or double-invoicing.

Alternative remittance systems such as hawala transfer value outside the formal banking sector, with brokers netting obligations and settling later, producing minimal documentation and high ML/TF vulnerability.

The risk-based approach allocates controls according to assessed risk: higher risk (PEPs, high-risk jurisdictions, complex structures) requires enhanced measures, and simplified measures are never permitted once suspicion exists.

Shell companies, nominee shareholders, and layered corporate structures are used to obscure beneficial ownership, which is why beneficial ownership transparency is a core FATF requirement.

Sanctions exposure is distinct from ML/TF risk: dealings with a designated person or entity are prohibited regardless of suspicious intent, whereas ML/TF risk is assessed and mitigated on a spectrum.

The core program elements are: senior management commitment and internal policies, a designated AML compliance officer, ongoing employee training, independent testing, and a customer due diligence/KYC program.

CDD requires four elements: identifying the customer, identifying the beneficial owner, understanding the purpose and expected nature of the relationship, and conducting ongoing monitoring.

CDD and transaction records are retained for at least five years after the relationship ends or the transaction is completed (FATF standard), and must be retrievable for authorities.

EDD is triggered by politically exposed persons, high-risk jurisdictions, complex or opaque ownership structures, private banking, and correspondent relationships.

The enterprise-wide ML/TF risk assessment is refreshed periodically and whenever new products, channels, technologies, geographies, or customer segments are introduced.

Independent testing must be performed by internal audit or a qualified external party that is independent of the AML compliance function it is reviewing.

Training is role-based, documented, delivered to new hires at onboarding, and refreshed at least annually, with attendance and content records retained.

In the three lines of defense model, business units own the risk, compliance sets and monitors controls, and internal audit provides independent assurance.

The designated compliance officer administers the program day to day: monitoring, training oversight, SAR/STR filing decisions, and reporting to senior management and the board.

The investigation lifecycle runs: alert generation, triage, investigation, disposition decision (file, escalate, or close), documentation, and feedback into monitoring rules.

Every closed alert requires a documented rationale explaining the facts reviewed, the analytics applied, and why the activity was determined not to be suspicious.

The SAR/STR narrative answers who, what, when, where, why, and how, describing specific transactions and observed behavior rather than legal conclusions.

Tipping off - disclosing to a customer or unauthorized third party that a report was or may be filed - is prohibited by law in most jurisdictions.

Information sharing between institutions for ML/TF purposes is permitted only where a statutory safe harbor, such as the USA PATRIOT Act section 314(b) framework, is satisfied.

Handling a law enforcement request requires verifying the legal authority and scope, producing only the records requested, logging what was disclosed, and preserving copies.

Evidence handling follows chain of custody: a documented, unbroken record of who accessed or transferred the material and when, with source documents never altered.

A lookback review retrospectively examines historical transactions over a defined period using a documented scope and methodology to identify unreported suspicious activity.

Escalation routes filing decisions to the designated compliance officer, with senior management notified of high-risk or high-value determinations.

The FATF 40 Recommendations are the global AML/CTF standard, covering criminalization, preventive measures, beneficial ownership transparency, and international cooperation, assessed through mutual evaluations.

FATF Recommendation 16 (the travel rule) requires that wire transfers carry originator and beneficiary information that is retained and screened for completeness.

The Wolfsberg Group publishes private-sector guidance on correspondent banking due diligence, politically exposed persons, and financial crime compliance principles.

The Basel Committee's CDD principles require banks to identify customers, understand expected activity, and apply risk-based monitoring for all accounts.

The EU Anti-Money Laundering Directives (notably the 5th and 6th) harmonize predicate offenses, enhance beneficial ownership registers, and set minimum penalties across member states.

US OFAC sanctions are enforced on a strict liability basis and apply the 50 percent rule, under which an entity is blocked when blocked persons hold a 50 percent or greater direct or indirect interest.

A politically exposed person is an individual entrusted with a prominent public function, together with family members and close associates; such relationships require EDD on source of wealth and source of funds.

Correspondent banking due diligence requires understanding the respondent institution's ownership, business model, customer base, and AML controls, including nested and payable-through account risk.

Regulatory examinations test the adequacy of the risk assessment, the quality of CDD files, the timeliness of reporting, the effectiveness of monitoring systems, and the independence of testing.