TheAML supervisory authorityis responsible for overseeing financial institutions' compliance with AML/CFT regulations.
* Option D (Correct):AML supervisory authorities, such as theFinancial Conduct Authority (FCA) in the UK,FinCEN in the US, orEuropean Central Bank (ECB) for EU institutions, conduct inspections, issue reports, and enforce penalties when AML deficiencies are found.
* Option A (Incorrect):Self-regulatory bodies provide guidelines butdo not have legal authorityto withdraw banking licenses.
* Option B (Incorrect):Law enforcement may investigate criminal conduct, butregulatory compliance issuesfall under AML supervisory authorities.
* Option C (Incorrect):FATF provides guidance and assessments but doesnot directly enforcecompliance at individual financial institutions.
Reference:FATF Recommendation 26 (Regulation and Supervision of Financial Institutions), EU AMLD Directives, FinCEN, FCA Regulatory Guidance.

The Third European Union Money Laundering Directive (3MLD) is a legal framework that aims to prevent the use of the financial system for the purposes of money laundering and terrorist financing. It was adopted in
2005 and repealed by the Fourth European Union Money Laundering Directive (4MLD) in 2015. The 3MLD applies to a range of entities that are considered to be exposed to the risk of money laundering and terrorist financing, such as:
* Financial institutions, which include credit institutions, financial intermediaries, insurance companies, investment firms, and payment service providers.
* Casinos, which include both online and offline gambling services that involve wagering a stake with monetary value.
* Real estate agents, which include both natural and legal persons that act as intermediaries in the buying and selling of real property or rights over it.
The 3MLD requires these entities to implement a number of measures to prevent and detect money laundering and terrorist financing, such as:
* Conducting customer due diligence, which involves identifying and verifying the customer and the beneficial owner, understanding the purpose and nature of the business relationship, and applying enhanced or simplified measures depending on the level of risk.
* Keeping records of customer and transaction data for at least five years after the end of the business relationship or the execution of the transaction.
* Reporting suspicious transactions or activities to the competent authorities without delay and without tipping off the customer.
* Establishing internal policies, procedures, and controls to ensure compliance with the 3MLD, and providing adequate training and awareness to staff.
* Cooperating with the relevant supervisory and regulatory authorities and financial intelligence units.
The 3MLD does not apply to defense attorneys, as they are not considered to be obliged entities under the directive. However, the 3MLD does apply to other legal professionals, such as notaries, lawyers, and accountants, when they perform certain activities on behalf of their clients, such as:
* Buying and selling of real property or business entities
* Managing of client money, securities, or other assets
* Opening or managing bank, savings, or securities accounts
* Organizing contributions for the creation, operation, or management of companies
* Creating, operating, or managing trusts, companies, foundations, or similar structures THE THIRD EU DIRECTIVE ON MONEY LAUNDERING AND TERRORIST FINANCING, page 11-12 Anti-money laundering and countering the financing of terrorism legislative package, page 1 CAMS Study Guide - 6th Edition, Chapter 1, Section 1.2, page 11 V

The junior account manager should file a suspicious transaction report (STR) with the Financial Intelligence Unit (FIU) of Country A, as he has reasonable grounds to suspect that the customer is involved in money laundering or terrorist financing. The customer's attempt to deposit a large sum of cash, followed by a series of smaller wire transfers from a high-risk jurisdiction, indicates a possible case of structuring or smurfing, which are techniques used by criminals to avoid detection and reporting thresholds. The junior account manager should not close the account, as this could alert the customer and disrupt the investigation by the FIU or law enforcement. The junior account manager should also not notify the anti-money laundering specialist of his bank, as this could create a conflict of interest or breach of confidentiality, unless the bank's policy requires such notification. The junior account manager should also not offer the customer a more secure method of depositing, as this could be seen as facilitating or condoning the customer's illicit activities, or exposing the bank to legal or reputational risks.
CAMS Study Guide, pages 97-98, 103-104, 107-108.
CAMS Exam Questions and Free Practice Test, Question 272.

According to the ACAMS study guide1, some of the common red flags for money laundering or financing terrorism are:
* Customers who provide insufficient or suspicious information, such as unusual or unverifiable identification documents, different taxpayer identification numbers, or vague or inconsistent information about their business or source of funds.
* Transactions that have unusual features, such as large cash payments, unexplained payments from a third party, use of multiple or foreign accounts, complex or illogical transactions, or transactions that are inconsistent with the customer's profile or expected behavior.
* Geographic concerns, such as transactions involving high-risk jurisdictions, offshore financial centers, secrecy havens, or countries subject to sanctions or embargoes.
* Ultimate beneficial ownership that is unclear, such as customers who use shell companies, trusts, or other legal entities to obscure their identity or the identity of the true owners or controllers of the funds or assets.
In this scenario, two red flags that could indicate money laundering or financing terrorism are:
* B. The guarantor company's ownership structure is overly complex. This could be an attempt to hide the true source or destination of the funds, or to evade regulatory or law enforcement scrutiny. The use of a trust formed in a Caribbean island and a holding company based in a European secrecy haven could also indicate geographic concerns, as these jurisdictions are known for their low transparency and high confidentiality.
* D. The ultimate beneficial owner is a young lady who has gained her wealth through a small business.
This could be a case of false or misleading information, as the source of funds is not commensurate with the size or nature of the transaction. The fitness studio business could be a front or a cover for illicit activities, or the young lady could be a nominee or a straw man for the real owner or beneficiary.
= 1 ACAMS. (2020). Study Guide for the Certification Examination: Sixth Edition. Miami, FL: ACAMS.

account opening documents and account statements are examples of supporting documentation that can help the law enforcement agency to verify the identity, profile, and activity of the customer involved in the suspicious transaction. These documents can provide useful information such as the customer's name, address, date of birth, identification number, occupation, source of funds, transaction history, and beneficiaries. These documents can also help to establish the baseline of normal and expected activity for the customer, and to identify any deviations or anomalies that may indicate money laundering, fraud, or other criminal activities.
Suspicious Activity Report Supporting Documentation, section "What Constitutes Supporting Documentation", paragraph 2: "Supporting documentation may include, for example, transaction records, new account information, tape recordings, e-mail messages, and correspondence." Documentation Requirements: Suspicious Activity Report Supporting Documentation, section "SARs Documentation Requirements", paragraph 2: "Keep all documents with evidence of the background, the purpose of the transactions, the trigger, the investigation carried out, and all findings and conclusions." BSA/AML Manual, section "Assessing the BSA/AML Compliance Program - BSA Compliance Officer", paragraph 3: "The BSA compliance officer is responsible for ensuring that the bank's BSA/AML compliance program is implemented effectively, including timely updates in response to changes in regulations or business activities, and for managing all aspects of the BSA/AML compliance program. The BSA compliance officer is also responsible for ensuring that the bank's BSA/AML compliance program is communicated to all personnel and that adequate training is provided to appropriate personnel."