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

What term refers to a situation where a debt is incurred and will be paid at a later date?

1. Extradition

2. Deferred Payment

3. Enhanced Due Diligence

4. Electronic Funds Transfer

The correct answer is: Deferred Payment

The term that accurately describes a situation where a debt is incurred and will be paid at a later date is "Deferred Payment." This concept is fundamental in finance and credit transactions, indicating that the repayment of a debt is delayed, allowing the debtor to manage their resources or expenses before settling the obligation. Deferred payments can be common in various financial arrangements, such as loans, credit purchases, and installment agreements. In this context, "Extradition" pertains to the legal process of surrendering an individual from one jurisdiction to another for prosecution or punishment and is unrelated to debts. "Enhanced Due Diligence" refers to a higher level of scrutiny applied to businesses and customers considered high risk, particularly to prevent money laundering and terrorist financing, rather than the timing of debt payments. "Electronic Funds Transfer" involves the electronic movement of money from one bank account to another, a method of transferring funds that doesn’t specifically address debt repayment timelines or obligations. Understanding "Deferred Payment" is vital in the financial industry as it reflects how businesses manage cash flow and credit, impacting overall financial health and planning.