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

What does US law prohibit Foreign Shell Banks from doing?

1. Opening accounts in non-US jurisdictions

2. Maintaining correspondent accounts at US Financial Institutions

3. Conducting any international transactions

4. Participating in the US securities market

The correct answer is: Maintaining correspondent accounts at US Financial Institutions

US law prohibits Foreign Shell Banks from maintaining correspondent accounts at US Financial Institutions. Foreign Shell Banks are financial entities that do not have a physical presence in any country and are not regulated by any recognized banking authority. The primary concern regarding these types of banks is that they can facilitate money laundering and other illicit financial activities due to the lack of robust oversight. By prohibiting these banks from maintaining correspondent accounts in the United States, regulators aim to mitigate risks associated with the potential for these institutions to be used to hide or transfer illicit funds without proper scrutiny. Correspondent accounts enable one bank to serve customers of another bank, generally used for international transactions, and allowing foreign shell banks access to US financial systems increases the risk of financial crimes. Maintaining the integrity of the US financial system is essential, and this prohibition is part of broader efforts to prevent money laundering and to uphold international financial regulations.