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

What is needed for effective monitoring of correspondence banking services?

1. An exclusive agreement with all clients

2. Comprehensive audits and supervision

3. A ban on overseas transactions

4. Continuous client outreach programs

The correct answer is: Comprehensive audits and supervision

Effective monitoring of correspondence banking services necessitates comprehensive audits and supervision. This approach is critical because it allows financial institutions to systematically assess the risk associated with their correspondent banking relationships. Through thorough audits, institutions can evaluate the activities and transactions flowing through these accounts, ensuring they are legitimate and comply with regulatory standards. Comprehensive supervision also involves continuous oversight and evaluation of compliance measures in place. It ensures that the institution can detect any irregularities or suspicious activities quickly. Such a structured approach helps financial institutions mitigate the risks of money laundering and other financial crimes that can arise from correspondence banking, which often involves cross-border transactions and increases the complexity of monitoring. While agreements with clients, bans on transactions, and outreach programs can be elements of a larger risk management strategy, they do not independently ensure the ongoing oversight and comprehensive risk assessment that audits and supervision provide. Thus, comprehensive audits and supervision are indispensable for fostering a robust compliance environment in correspondence banking services.