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

According to FATF Recommendation 9, what type of entities should perform CDD elements for financial institutions?

1. Any unregulated entity

2. Supervised and regulated intermediaries

3. Only domestic intermediaries

4. Intermediaries under any jurisdiction

The correct answer is: Supervised and regulated intermediaries

FATF Recommendation 9 emphasizes that financial institutions should conduct customer due diligence (CDD) on their clients and must assess the risks associated with certain types of entities that engage in financial transactions. The focus is primarily on ensuring that intermediaries who provide financial services and facilitate transactions are properly monitored. The correct answer identifies supervised and regulated intermediaries as those entities that should perform CDD elements. This is important because supervised and regulated intermediaries are subject to oversight by regulatory authorities, ensuring they comply with established anti-money laundering (AML) laws and regulations. By performing CDD, these intermediaries help to verify the identities of their clients, assess risks, and prevent illicit activities such as money laundering and terrorist financing. This aligns with the FATF's objective of enhancing the integrity of the financial system and maintaining a robust framework that mitigates risks associated with money laundering. Other options, such as unregulated entities or those that are only domestic, fail to capture this necessary level of oversight and risk management required to protect the financial sector from exploitation. Additionally, intermediaries under any jurisdiction would imply a lack of regulatory supervision, which could lead to inconsistent adherence to CDD guidelines. Thus, the choice of supervised and regulated intermediaries reinforces the commitment to establishing a safe