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

Which of the following is NOT a form of IVTS?

1. Hundi

2. Chiti Banking

3. Chop Shop Banking

4. Merchant banking

The correct answer is: Merchant banking

Merchant banking is characterized as a specialized service provided by financial institutions that primarily focus on providing capital to companies in the form of share ownership instead of loans. It involves a range of financial services, including underwriting, facilitating mergers and acquisitions, and other forms of financial advising. Given its established and regulated nature within the formal banking system, merchant banking does not fall under the category of International Value Transfer Systems (IVTS), which are often informal or unregulated methods of transferring money across borders, typically utilized within communities for various reasons, including cultural preferences and lower costs. In contrast, Hundi, Chiti Banking, and Chop Shop Banking are all examples of IVTS. Hundi is a traditional system of money transfer widely used in South Asian communities, while Chiti Banking is a local savings and loan system based on communal trust. Chop Shop Banking, often associated with the car industry, involves informal financial transactions and value transfers. All these methods operate outside conventional banking systems and often aim to circumvent regulatory scrutiny, which distinguishes them from merchant banking.