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

What is one primary reason why a financial institution would report suspicious transactions?

1. To comply with regulatory requirements

2. To attract more customers

3. To prevent competition from other banks

4. To improve their public image

The correct answer is: To comply with regulatory requirements

A financial institution primarily reports suspicious transactions to comply with regulatory requirements. Regulatory bodies impose strict guidelines and laws that mandate financial institutions to monitor for unusual or suspicious activity that may indicate money laundering or other illegal activities. This compliance is crucial as it helps institutions avoid penalties, legal repercussions, and damage to their reputation. By adhering to these regulations, banks and other financial entities fulfill their obligations to both national and international legal frameworks, thereby contributing to the overall integrity and security of the financial system. While attracting more customers, preventing competition, and improving public image are important considerations for a financial institution, they do not serve as the primary motivation for reporting suspicious transactions. Compliance with regulatory requirements directly impacts a financial institution's operational legitimacy and sustainability.