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

What defines a cash-based business?

1. A business that primarily deals in credit transactions

2. A business primarily accepting cash payments for goods or services

3. A business that undergoes extensive international banking

4. A business exclusively for online transactions

The correct answer is: A business primarily accepting cash payments for goods or services

A cash-based business is defined as one that primarily accepts cash payments for its goods or services. This means that the majority of transactions conducted by such a business involve physical currency, rather than credit cards, checks, or other forms of electronic payments. Being cash-based can have significant implications for anti-money laundering efforts. These businesses might pose a higher risk for money laundering activities due to the anonymity and difficulty in tracking cash transactions. Understanding the operational characteristics of cash-based businesses is crucial for compliance professionals since they require stringent monitoring to detect and prevent illicit financial activities. In contrast, other options present scenarios that do not typify cash-based businesses. Businesses dealing primarily in credit transactions are associated with electronic or credit payment methods, thus they do not meet the definition of being cash-based. Similarly, businesses that undergo extensive international banking typically engage with multiple financial systems, which may involve various currencies and payment methods, making them less reliant on cash. Finally, businesses that operate exclusively online transactions tend to use electronic payment systems, such as credit cards or digital wallets, rather than cash, further differentiating them from cash-based operations.