Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

A bank's inability to verify the identity of a client may indicate which of the following?

1. Compliance with regulation

2. Poor customer service

3. A risk of money laundering

4. High operational costs

The correct answer is: A risk of money laundering

A bank's inability to verify the identity of a client is a significant concern in the context of anti-money laundering (AML) measures. This scenario can indicate a heightened risk of money laundering. When a financial institution cannot confirm the identity of a client, it raises suspicions regarding the client's activities and intentions, potentially allowing individuals engaged in illicit activities to exploit the system. Effective customer identification is a fundamental aspect of AML compliance, as it allows banks to assess and manage risks associated with illicit financial flows. Failure to properly verify clients can lead not only to regulatory penalties but also to facilitating criminal activities, highlighting the critical importance of robust Know Your Customer (KYC) procedures in preventing money laundering. The other options do not adequately capture the implications of a bank's failure to verify client identities in the context of money laundering risks. While poor customer service and high operational costs might be related issues, they do not directly pertain to the specific risks and requirements associated with AML compliance. Compliance with regulation would not be indicated by such an inability; instead, it would suggest a potential breach of regulatory obligations.