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

When is a jurisdiction considered to be 'ring-fenced'?

1. When it attracts foreign investments aggressively.

2. When residents are denied access to tax benefits.

3. When non-residents are prevented from accessing the domestic market.

4. When it is a tax haven for everyone.

The correct answer is: When non-residents are prevented from accessing the domestic market.

A jurisdiction is considered to be 'ring-fenced' when non-residents are prevented from accessing the domestic market. 'Ring-fencing' refers to the practice of isolating certain financial operations to protect them from external forces, often to maintain a favorable tax environment or regulatory framework for domestic entities. By restricting non-residents from accessing the domestic market, a jurisdiction effectively protects its local businesses and promotes local economic activity while limiting external competition. In contrast, attracting foreign investments aggressively does not create a ring-fencing effect but rather opens up the market. Denying residents access to tax benefits implies a restriction on local economic participation rather than specifically targeting non-resident access. Lastly, defining a jurisdiction as a tax haven for everyone does not accurately signify a 'ring-fenced' environment, as it suggests an open approach to all investors without the isolation characteristic of 'ring-fencing.'