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

What does the USA Patriot Act address regarding foreign correspondent banks?

1. Increasing fees for services

2. Regulatory procedures for US financial institutions

3. Permit unrestricted relationships

4. It has no implications

The correct answer is: Regulatory procedures for US financial institutions

The USA Patriot Act addresses regulatory procedures for US financial institutions, particularly in the context of enhancing measures to combat money laundering and terrorist financing. One of the key components of the Act is the requirement for US financial institutions to implement robust due diligence procedures when dealing with foreign correspondent banks. This means they must assess the risk associated with these foreign banks and apply appropriate controls to ensure compliance with anti-money laundering (AML) regulations. The law emphasizes the need for transparency in transactions involving foreign correspondent accounts, which can sometimes be utilized for illicit activities such as money laundering. By establishing thorough regulatory procedures, the USA Patriot Act aims to safeguard the US financial system from potential abusive practices connected to foreign entities. The other options do not accurately reflect the intent and provisions of the USA Patriot Act. For instance, increasing fees is not a focus of the Act, nor does it permit unrestricted relationships with foreign banks, which would be contrary to the due diligence requirements established to mitigate risks. Additionally, stating that it has no implications is incorrect given the Act’s significant impact on regulatory practices for financial institutions operating in an increasingly global environment.