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

What is required for money transfer/exchange businesses according to FATF recommendations?

1. No regulation is necessary

2. They should be unmonitored

3. They must be registered and monitored

4. They should operate independently

The correct answer is: They must be registered and monitored

Money transfer and exchange businesses are recognized as potential risk areas for money laundering and terrorist financing activities, making it crucial for them to be effectively regulated and monitored. According to the Financial Action Task Force (FATF) recommendations, these businesses must be registered and monitored to ensure compliance with anti-money laundering (AML) regulations. Registration helps establish a formal framework where businesses can be identified and held accountable for their operations. Monitoring further ensures that these businesses adhere to existing regulations, implement necessary internal controls, and conduct adequate customer due diligence. This is essential in identifying and mitigating risks associated with illicit financial flows. The emphasis on registration and monitoring reflects an understanding that these financial entities can be exploited if they are not subject to proper oversight, thereby reinforcing the integrity of the financial system as a whole.