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

What defines a foreign shell bank?

1. A bank that operates solely online without a physical presence

2. A bank with multiple international branches

3. A bank that only handles foreign currency

4. A bank that offers offshore accounts exclusively

The correct answer is: A bank that operates solely online without a physical presence

A foreign shell bank is defined primarily by its lack of a physical presence in any jurisdiction. This characteristic is critical because it implies that the institution does not have operations or branches that are subject to the regulatory supervision of the countries in which it claims to operate. Thus, a bank operating solely online without a physical presence falls under this definition, as it can engage in banking activities without being regulated in a particular country, which often raises concerns in the context of money laundering and the efficacy of governance. The other options point to various types of banking operations or characteristics that don't pertain to the core definition of a foreign shell bank. For instance, a bank with multiple international branches may have a substantial physical presence and be subject to regulatory oversight in those jurisdictions. Similarly, a bank that only handles foreign currency or offers offshore accounts exclusively might still maintain a physical operational base, which would negate its classification as a shell bank. Therefore, the defining feature of a foreign shell bank is its operation without a tangible presence, making the first choice the accurate answer.