ACAMS Crypto

Which financial institution or organization would bear the liability of offering sovereign cryptocurrencies to the public?

Central bank

What triggered the creation of Bitcoin?

A loss of trust in the banking sector following the 2008 economic crisis

A compliance officer is undertaking a risk review of a bank's smart contracts in the lending division. Which circumstances should the compliance officer consider as part of the review? (Select Two.)

The lending protocol was launched by a publicly known group.

&

The contracts have no code audit.

Which are the most critical risk factors relating to a decentralized finance project or smart contract? (Select Three.)

- Existence of admin keys

- Concentration of governance tokens

- Pseudonymity

Which method is most commonly used to add new stablecoins into circulation?

Minting through fiat currency

In blockchain technology, consensus mechanisms are best described as:

Algorithms that help blockchains synchronize data and remain secure.

Which is a key characteristic of a decentralized application?

No owners

An analyst is reviewing an Ethereum (ETH) address and observes an approval transaction. Which activity did the user of the ETH address most likely complete?

Gave permission for a contract to access the balance

An investigator suspects an individual is selling narcotics on the dark web and receiving payments in cryptoassets via a real-world shell company. Which hypothetical situation would best support the investigator's suspicions?

The suspect's business account history shows frequent incoming transfers from cryptoasset exchanges but no evidence of cryptoasset purchases.

Which type of wallet is known for allowing reduced transparency as well as the emergence of other virtual asset business models or activities, such as initial coin offerings?

Privacy

What heuristic should be used to cluster the input addresses in a Bitcoin transaction with many input addresses and one recipient address?

Common spend

What is the goal of address clustering?

Aggregating addresses into groups that include addresses connected to one entity

The technique of using blockchain analytics to determine whether a Bitcoin address is part of a larger wallet is called:

Address clustering

Which is true of Bitcoin (BTC) transactions?

BTCs cannot be reversed, canceled, or charged back.

Which functions fall under the current definition of a virtual asset service provider? (Select Two.)

- Conducting exchanges between one or more forms of virtual asset

- Facilitating transactions via a business between virtual asset and fiat currencies

Which is true about a transaction by a decentralized Bitcoin cryptocurrency mixer?

All transactions are conducted jointly between the participants.

Which is a disadvantage of using an unspent transaction output ledger model as the basis of a virtual asset?

Complexity of computation

Which function is provided by a blockchain oracle?

Posting real-time USD/ETH prices

Which type of virtual asset storage is considered most secure?

Hardware wallet

To mitigate the risk associated with a protocol designed to automatically execute specific actions, such as a virtual asset transfer between participants, a financial institution:

Is permitted to delegate the implementation of AML obligations to another legal person involved in the platform

Which statement is true about network vulnerabilities in terms of technology attacks on a blockchain?

A smaller network is easier to attack successfully than a larger one if additional countermeasures are not built into the system.

Data privacy, regulatory, jurisdiction, and dispute resolution risks associated with blockchain are known as:

Legal risks.

When would using a send as opposed to a transfer function in a smart contract create vulnerability?

If the external address is a smart contract

How is it possible that vulnerabilities exist in smart contract software? (Choose two)

- Smart contracts are purposefully constructed with minor flaws.

- The initial state of variables inside the contract's code may be alterable.

How does the Lightning Network operate?

It uses smart contracts to establish off-blockchain payment channels between pairs of users. Once these payment channels are established, funds can be transferred between them almost instantly.

An investigator reviews a case of artificial price pumping of artistic non-fungible tokens (NFTs) through wash sales between multiple cryptocurrency addresses and NFT marketplaces. The investigation reveals a single cryptocurrency address common to all sales and credited with exactly 5% of the value of every sale. This common address is most likely:

The original NFT artist receiving a royalty payment.

Which type of transaction is most secure?

Smart contract

What is the primary goal of using smart contracts on a blockchain?

To simplify business and trade between both anonymous and identified parties, sometimes without the need for a middleman

Which is a limitation of a smart contract?

Legal enforcement

What are trusted third-party providers of off-chain data to smart contracts called?

Oracles

Which activity indicates potential smurfing?

A customer makes multiple fiat deposits at a cryptoasset ATM each day up to the standard deposit limit or at frequent intervals.

A customer was convinced by a fraudster to accept US$25,000 through wire transfer. Then, the customer forwarded a significant portion to an unknown beneficiary. This scheme is best described as:

A money mule

A virtual asset service provider (VASP) receives an alert generated by a customer who runs a shoe store in a rural town. The customer received a wire transfer of US$100,000 and used it to purchase cryptoassets. Which red flags would lead the VASP to file a suspicious activity report? (Select Two.)

- The majority of the funds were converted and traded in cryptocurrency within 24 hours of the deposit.

- The deposit amounts are not aligned to the business activity.

According to the Financial Action Task Force, which red flag is most indicative of an attempt to conceal the source of funds from AML investigators at a cryptocurrency exchange?

A single transfer of cryptoassets from a coin mixing service to the customer's account at the exchange

Which statement reflects a characteristic of a virtual asset red flag?

Virtual asset red flags stem from factual characteristics, behaviors, patterns, and contextual factors.

A medium risk customer registers for an account stating EUR20,000 yearly net income, EUR115,000 in total assets, and an average deposit size of EUR4,000. The customer deposits EUR5,000 via instant payments, buys virtual assets, and transfers them to an unregulated virtual asset service provider (VASP) within 24 hours. Which red flags are most relevant? (Select Two).

- The assets have been transferred to a VASP that represents increased risk.

- The customer recently registered, deposited via an instant payment transfer, and immediately transferred the virtual assets out.

Which activity is unique to investigators at cryptoasset firms in comparison to investigators at non-cryptoasset firms?

Blockchain forensics

What are the three lines of defense for managing AML risk for virtual asset service providers? (Select Three.)

- Front line unit

- Internal audit

- Compliance unit

Which factors are red flags for a known crypto-related typology? (Select Two.)

- Crypto used is cashed out at an exchange providing access to privacy coins.

- Traded Bitcoin is associated with ransomware.

How could non-fungible tokens (NFTs) be vulnerable to financial crime?

NFTs purchased using tainted funds can be sold and repurchased by criminals to create seemingly legitimate sales records on the blockchain.

Which situation indicates a high risk of tax evasion using cryptoassets?

A business receives payment for goods and services in cryptoassets, but their balance sheet does not reference cryptoassets.

Which internationally recognized guidelines have improved international transparency of cryptoassets through information exchange on offshore assets held with financial institutions?

Organization for Economic Co-operation and Development Common Reporting Standards

Cybercriminals seek to exploit targets for cryptocurrency crimes by misrepresenting the purpose and performance of:

Smart contracts

Per the Financial Action Task Force's Recommendation 10, what is the threshold for occasional transactions for virtual asset service providers?

US$1,000

Which non-governmental body, comprised of global banks, published guidance for building a coherent and competent risk management framework?

The Wolfsberg Group

A bank was fined just under US$1.2 billion in 2012 for willfully failing to maintain an effective AML program. One consequence has been negative media coverage, including articles and documentaries. Regarding this negative media coverage specifically, which is the most significant reputational risk outcome?

Customers and investors may leave the bank, and new customers and investors might be wary of involving themselves with the bank.

Which type of risk can result in the loss of a company's standing within the industry or with customers, employees, and the general public when the company's failures within their AML compliance program become public?

Reputational risk

Which is a de-anonymizing technology that can help lower money laundering risk?

Blockchain analytical tools

Which is a known financial crime risk factor associated with cryptoassets?

Convertibility

Risks relevant to the originator of a transaction and the beneficiary of funds that are linked to a high-risk jurisdiction are known as:

Geographical risks

Which cryptoasset exchange poses the greatest risk of money laundering?

An individual peer-to-peer exchanger who accepts cash for cryptoassets

An analyst investigating a transaction monitoring alert notices several larger-than-normal virtual asset deposits into the customer's account with an unknown source of funds, followed by conversion to fiat currency. Which illicit activity does this most likely indicate?

Money laundering

A bank's AML risk officer is attempting to determine the inherent risk of a decentralized autonomous organization's (DAO) governance token. Which is the most important thing to consider for ongoing AML and sanctions risk management?

Whether the token is built on an anonymous or pseudonymous blockchain

A supervisory authority is analyzing a virtual asset service provider's (VASP) AML policies. The VASP engages in transfers to and from unhosted wallets, and its volume of transactions has grown beyond peers' recently, including a spike in suspicious activity reports. Based on Financial Action Task Force guidelines, which would be the expected improvement from the authority?

Screen by the VASP of its customer's and counterparty's wallet addresses against blacklisted wallet addresses.

If financial institutions continue to become more involved in cryptoasset markets, which two aspects of the business are most likely to be affected in unexpected ways?

Balance sheets and liquidity

Which factor is most impactful to a virtual asset service provider's risk appetite?

Company policy

A bank with a moderate risk appetite wants to launch a high-risk product that allows businesses to accept cryptocurrency as payment. Which statement best represents a risk-based approach for this bank?

Allow the product to be launched but not for high-risk countries and customers.

Which type of risk is appropriate to include in a company's risk appetite?

Regulatory

Which information should be collected when performing due diligence on a virtual asset service provider (VASP)? (Select Two.)

- Evidence of the sufficiency of the VASP's AML compliance framework (e.g., whether it performs KYC checks and has an AML policy)

- Adverse media, including whether the VASP has been subject to any regulatory action

Which types of information from a customer's risk profile addresses whether a company should consider terminating a business relationship? (Select Two.)

- Customer characteristics based on the nature and volume of trading activity

- Cluster levels focusing on clients conducting similar types of virtual assets transactions

Which services are provided by virtual asset service providers as defined by the Financial Action Task Force? (Select Two.)

- Virtual asset administration

- Virtual asset exchange

Which statement pertaining to CDD is true?

The non-face-to-face nature of the relationship should contribute to the risk level of the customer.

Which factor is important to understand the nature of, and to assess the risks posed by, cryptoassets?

Control of the ledger

Which functions are third-party blockchain analytics tools capable of performing? (Select Two.)

- Tracing the final destination of stolen cryptoassets

- Identifying and risk-rating wallets on the blockchain

Which virtual asset related transaction is a red flag indicator in terms of the size and frequency of a transaction?

Making multiple high-value transactions within a short period

Addresses connected to the internet to facilitate customers' deposits and withdrawals in cryptocurrency exchanges are called:

Hot wallets

An investigator is attempting to trace transactions that are linked to stolen funds. The transactions progress from an exchange, through two services, and finally settle in a second exchange. Why might the accurate tracing of these funds be difficult?

It is not always possible to connect exact funds entering services to exact funds leaving services.

Which is a benefit of blockchain analytics?

Risks associated with virtual asset service providers can be understood.

An analyst is using a blockchain analytics tool to review the indirect exposure between a customer and an illicit service to determine whether further investigation is required. Which type of activity most likely caused the analyst to make such a determination?

A peel chain

A deposit of 0.5 Bitcoin (BTC) by a low-risk customer generates an indirect dark net alert. 0.001 of the deposited BTC are connected to the dark net 15 wallets removed. Records from the customer show that the BTC were bought on a peer-to-peer platform. Which is the next best step for the analyst to take?

Record the outcome of the investigation as a tainted coin, but increase the risk rating of the customer for closer monitoring.

How do privacy coin transactions primarily remain anonymous within a blockchain, despite having listed public addresses?

A stealth address is created alongside the public address.

Which type of cryptocurrency poses a higher money laundering risk?

Privacy coins

Which is an example of an obfuscation pattern involving cryptoassets?

Combining illicit transactions with legitimate transactions

Which customer(s) require enhanced due diligence?

Private banking clients

Quantifying the financial crime risk of transactions is an essential part of any anti-money laundering program. Which factor increases the money laundering risk of a transaction?

The transaction is the first time the customer has made a payment to this company.

Which common red flags help organizations risk rate a cryptocurrency transfer from a bank to a cryptocurrency exchange? (Select Three.)

- Abnormal transaction patterns

- Unknown funding source

- Questionable customer profile

Which transaction threshold rules should a compliance officer focus on when setting up a transaction monitoring system for a virtual asset service provider? (Select Two.)

- Statistical analysis

- Customer segmentation

A compliance officer is integrating an artificial intelligence tool into the firm's transaction monitoring system. Which key item should be incorporated into the accompanying written procedures?

A description of the models used by the artificial intelligence tool

Which is an advantage of machine learning compared to rule-based systems in a cryptocurrency AML transaction monitoring program?

Fewer false-positive results and a higher detection rate

A bank purchases a new artificial intelligence-driven negative media search tool that uses natural language processing and wildcard searches to find negative media about customers. If regulators ask if the system is operating effectively, the strongest response is:

Independent consultants completed model validation and confirmed the system is operating effectively.

A transaction monitoring analyst at a virtual asset service provider has identified potential suspicious transactions. To whom should the case be escalated?

The AML officer

Which criteria are important for a financial institution to follow when escalating a client investigation as a result of repeat SAR filings? (Select Two.)

- Analyzing the relationship with the client

- Determining when to close the account

In most jurisdictions, what document is required to release supporting documentation for a SAR to a Financial Intelligence Unit (FIU)?

No specific documents are required.

An analyst at a cryptoasset exchange is filing a SAR on a customer whose account sees regular, low-value deposits of cryptoassets from known criminal addresses, among other transactions. In addition to the customer's cryptoasset wallet address, which information will be most important to include in the SAR?

The hashes of the questionable transactions

Which is a common red flag associated with the source of funds and the misuse of cryptoassets for criminal activities?

Using multiple payment methods linked to a cryptoasset wallet

Which would indicate a high-risk customer? (Select Two.)

- Direct sending or receiving exposure to mixers

- An individual using a virtual private network (VPN) or proxy

When considering doing business with a virtual asset service provider (VASP), which risk should a financial institution consider?

The number and types of cryptoassets the VASP provides its customers

Which are examples of a virtual asset service provider complying with the requirement of the travel rule? (Select Two.)

- The recipient entity obtains information on the originator.

- Beneficiary information is submitted in a virtual asset transfer.

Which statement is true regarding the application of the Financial Crimes Enforcement Network's travel rule to convertible virtual currencies (CVC)?

Transactions involving CVC qualify as transmittals of funds.

To comply with the travel rule, what do virtual asset service providers (VASPs) need to identify when processing a payment?

Whether they are transacting with another VASP versus a private wallet

Which issue represents the greatest obstacle to effective global adoption of the Financial Action Task Force travel rule?

Interoperability of technical solutions

According to the Financial Crimes Enforcement Network, what is the amount of fiat currency, or its convertible virtual currency equivalent, that may trigger requirements of the travel rule?

US$3,000

A bank is offering customers a service to send and receive cryptoassets to and from multiple entities. To remain compliant with regulator expectations and the Financial Action Task Force recommendations, the bank is required to send transaction originator and beneficiary identifying information to which types of counterparties? (Select Two)

- Cryptocurrency exchanges

- Other banks

Per the Financial Action Task Force guidance, technological solutions should support which main action that enables virtual asset service providers (VASPs) to comply with the travel rule?

Enable the submission of required and accurate originator and required beneficiary information immediately when a virtual asset transfer is conducted on a digital ledger technology platform.

Which internal policy meets AML best practices for low-risk customers?

Their CDD files are reviewed every two years.

Which situation presents the highest level of suspicion?

An individual receives five large wire transfers, totaling US$3 million, from a virtual asset exchanger which offers tumbling services. The amount received is not consistent with information collected during the KYC process.

What was the name of the International Consortium of Investigative Journalists' publication from 2016 that contained 214,000 off-shore companies and the identities of ultimate beneficial owners including politically exposed persons of governments of over 40 countries?

Panama Papers

Which type of open source intelligence would alert the chief compliance officer to enhance customer research, due diligence, and investigation processes? (Select Two.)

- Office of Foreign Asset Control lists

- Public cryptoasset keys

An analyst identifies a suspicious transfer of Bitcoin (BTC) and requires the transaction's timestamp and receiving address in order to file a suspicious activity report. How can the analyst best locate this additional information?

Input the transaction hash into a BTC blockchain explorer.

Which entity offers a solution that is decentralized, democratized, and authority-free?

A public blockchain