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

What are bearer share certificates?

1. Shares issued to specific individuals

2. Negotiable certificates made out to 'Bearer'

3. A type of corporate bond

4. Non-negotiable shares owned by organizations

The correct answer is: Negotiable certificates made out to 'Bearer'

Bearer share certificates are a type of financial instrument issued by a corporation that represents ownership of shares and is made out to 'Bearer.' This means that whoever physically holds the certificate is the owner of the shares, which allows for a high degree of anonymity and transferability. The lack of a registered owner can facilitate ease of transfer, as the shares can be sold or transferred simply by handing over the certificate without the need for any formal documentation or registration. This method of ownership can create challenges for anti-money laundering (AML) efforts, as it can potentially enable money laundering and tax evasion due to the anonymity it provides to shareholders. As bearer shares do not have a recorded owner in the company's books, tracing ownership can be extremely difficult for authorities investigating financial crimes. The other options describe different types of shares or securities that do not align with the definition of bearer shares. For instance, shares issued to specific individuals involve a registered owner, while corporate bonds are debt instruments rather than equity. Non-negotiable shares owned by organizations would also be registered and do not have the transferability characteristic of bearer shares.