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

Why must financial institutions avoid anonymous accounts according to FATF recommendations?

1. They are less profitable for the institution

2. They pose a higher risk for money laundering activities

3. They require more regulatory compliance

4. They limit customer engagement.

The correct answer is: They pose a higher risk for money laundering activities

Financial institutions must avoid anonymous accounts because such accounts pose a higher risk for money laundering activities. The Financial Action Task Force (FATF) emphasizes the importance of knowing the identity of customers to effectively prevent and detect illicit activities. Anonymous accounts can facilitate various forms of financial crime, including money laundering, terrorist financing, and other illegal activities, because they obscure the true identity of account holders. This lack of transparency makes it challenging for institutions to monitor and report suspicious transactions, which is crucial for effective anti-money laundering (AML) strategies. In contrast to the correct answer, other factors like profitability, regulatory compliance, and customer engagement, while relevant to the broader context of banking operations and customer service, do not equate to the fundamental threat posed by the potential misuse of anonymous accounts. The core concern is that anonymity undermines the financial institution's ability to trace illicit funds, thereby increasing the risk of enabling criminal activities.