CAMS flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Placement stage

The first stage of money laundering, in which illicit cash is introduced into the financial system through deposits, purchases of monetary instruments, or commingling with legitimate business receipts.

Layering stage

The second stage of money laundering, using successive complex transactions such as wire transfers, shell entities, and asset conversions to separate proceeds from their criminal origin and obscure the audit trail.

Integration stage

The final money laundering stage, in which laundered funds re-enter the legitimate economy as apparently lawful assets, investments, real estate, or business income and become difficult to distinguish.

Terrorist financing vs money laundering

Terrorist financing often uses legitimately sourced funds in small amounts to fund violence, whereas money laundering seeks to conceal the criminal origin of larger proceeds and return them as legitimate wealth.

Structuring (smurfing)

Splitting cash transactions into amounts below reporting thresholds, or distributing them across multiple people, branches, or accounts, to avoid currency transaction reports and recordkeeping triggers.

Trade-based money laundering

Moving value across borders by misrepresenting the price, quantity, or quality of goods in trade documentation, such as over-invoicing imports or under-invoicing exports.

Predicate offense

The underlying crime that generates the proceeds being laundered; jurisdictions either list designated predicate offenses or adopt an all-crimes approach covering any serious offense.

Alternative remittance (hawala)

A value transfer system operating outside formal banking, where brokers net obligations and settle later; minimal documentation and reliance on trust create high money laundering and terrorist financing vulnerability.

Risk-based approach

Allocating compliance resources according to assessed risk, applying enhanced due diligence to higher-risk customers, products, and geographies, and simplified measures to lower-risk relationships unless suspicion exists.

Designated AML compliance officer

The individual responsible for day-to-day administration of the AML program, including oversight of monitoring, training, suspicious activity reporting decisions, and reporting to senior management and the board.

Independent testing

Periodic review of the AML program by internal audit or a qualified outside party that is independent of the compliance function it reviews, verifying effectiveness and identifying control gaps.

Customer due diligence elements

Identifying the customer, identifying the beneficial owner, understanding the purpose and expected nature of the relationship, and conducting ongoing monitoring of activity against that expectation.

Enhanced due diligence triggers

Circumstances requiring deeper scrutiny, including politically exposed persons, high-risk jurisdictions, complex or opaque ownership structures, private banking relationships, and correspondent banking relationships.

Simplified due diligence limits

Reduced measures may apply only to customers assessed as lower risk, and are never permitted where there is suspicion of money laundering or terrorist financing or where enhanced measures are mandated.

Record retention standard

The FATF standard requiring customer due diligence and transaction records to be kept for at least five years after the relationship ends or the transaction is completed, retrievable for authorities.

Three lines of defense

A control model in which business units own risk, the compliance function designs and monitors controls, and internal audit provides independent assurance over the entire AML program.

Risk assessment refresh triggers

An enterprise-wide money laundering and terrorist financing risk assessment is updated periodically and whenever new products, delivery channels, technologies, geographies, or customer segments are introduced.

Alert triage

Initial review of a system-generated alert to determine whether it warrants full investigation, can be closed with a documented rationale, or requires immediate escalation to the compliance officer.

SAR narrative content

A clear account answering who, what, when, where, why, and how, describing specific transactions and observed behavior without jargon or conclusions of law.

Tipping off prohibition

A legal bar on disclosing to the customer, or to any unauthorized third party, that a suspicious activity or transaction report has been or may be filed.

Closing an alert

Documenting why monitored activity was determined not to be suspicious, including the facts reviewed and analytics applied, so that the decision is defensible to examiners and auditors.

Law enforcement inquiry handling

Verify the legal authority and scope of the request, produce only the records requested, log what was disclosed, and preserve copies of everything provided.

Chain of custody

A documented, unbroken record of who handled evidence or records and when, ensuring material remains unaltered and admissible throughout an investigation or legal proceeding.

Information sharing safe harbor

Statutory protection allowing financial institutions to share customer information with other institutions for money laundering and terrorist financing purposes when specified legal conditions are met.

Lookback review

A retrospective examination of historical transactions over a defined period, conducted with documented scope and methodology, to identify suspicious activity that was not previously reported.

FATF 40 Recommendations

The international AML/CTF standard covering criminalization, preventive measures, beneficial ownership transparency, and international cooperation, assessed through mutual evaluations and public follow-up reports.

Travel rule (Recommendation 16)

The requirement that wire transfers carry originator and beneficiary information, which originating and beneficiary institutions must obtain, retain, and screen for completeness.

OFAC 50 percent rule

A US sanctions rule under which an entity is treated as blocked if one or more blocked persons own, directly or indirectly, an interest of 50 percent or more.

Politically exposed person

An individual entrusted with a prominent public function, together with family members and close associates, presenting higher corruption risk that requires enhanced due diligence.

Wolfsberg Group

An association of global banks that publishes private-sector AML guidance, including principles for correspondent banking due diligence, politically exposed persons, and financial crime compliance.

Correspondent banking due diligence

Understanding a respondent institution's ownership, business model, customer base, and AML controls, including the risks created by nested and payable-through accounts and transactions.

Strict liability sanctions

Sanctions compliance is judged by whether a prohibited transaction or dealing occurred rather than by intent, so violations can be penalized even without knowledge or willfulness.