A sound Customer Due Diligence Program (CDD) is a key component of an effective anti-money laundering and counter-terrorism financing (AML/CFT) framework. According to the Financial Action Task Force (FATF), the global standard-setter for AML/CFT, CDD involves the following elements1:
Identifying the customer and verifying their identity using reliable, independent sources of information or documents.
Identifying the beneficial owner and taking reasonable measures to verify their identity, so that the financial institution understands who ultimately owns or controls the customer or the funds.
Understanding and obtaining information on the purpose and intended nature of the business relationship.
Conducting ongoing due diligence on the business relationship and scrutinizing transactions to ensure that they are consistent with the financial institution's knowledge of the customer, their business and risk profile, and the source of funds.
Therefore, the three elements of a sound CDD program that are listed in the question are:
Determination of what type of customer the financial institution will accept: This involves defining the customer acceptance policy and risk appetite of the financial institution, and applying appropriate risk-based measures to accept or reject customers based on their risk profile and the financial institution's ability to manage and mitigate those risks2.
Training as to how and to what extent to identify prospective customers: This involves providing adequate and regular training to the staff who are responsible for conducting CDD, and ensuring that they are aware of the legal and regulatory requirements, the internal policies and procedures, the risk indicators, the verification methods, and the reporting obligations3.
Obtaining date of birth and address of a prospective customer: This is part of the basic information that is required to identify and verify the customer's identity, and to establish their risk profile and the source of funds. The date of birth and address can also be used to check against various databases and watchlists to detect any potential matches with sanctioned or high-risk individuals or entities4.
The element that is not part of a sound CDD program is:
Determination of who in the institution should be assigned to the prospective customer as a liaison: This is not a mandatory or essential element of CDD, although it may be a good practice to assign a dedicated relationship manager or contact person to each customer, especially for high-risk or complex customers, to ensure effective communication, monitoring, and service delivery.
References:
FATF Guidance on Customer Due Diligence and Financial Inclusion 1
ACAMS Study Guide for the CAMS Certification Examination (6th Edition), Chapter 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) 2 ACAMS Study Guide for the CAMS Certification Examination (6th Edition), Chapter 4: Developing an AML/CFT Program 3 ACAMS Study Guide for the CAMS Certification Examination (6th Edition), Chapter 5: Conducting and Supporting the Investigation Process 4 Wolfsberg Group Guidance on Customer Due Diligence (CDD)

According to the ACAMS Study Guide 6th Edition, Chapter 2, page 36, one of the methods that financial institutions can use to identify suspicious or unusual activity is to monitor transactions for red flags or indicators of money laundering or terrorist financing. Some of the common red flags are:
* Transactions that are inconsistent with the customer's profile, business, or source of funds
* Transactions that involve high-risk countries or jurisdictions, especially those with weak or inadequate anti-money laundering regulations, or those known to be sources or destinations of illicit funds
* Transactions that involve the use of complex or unusual financial instruments or structures, such as multiple accounts, intermediaries, or offshore entities, that have no apparent economic or lawful purpose
* Transactions that involve the use of large amounts of cash, checks, or monetary instruments, especially if they are structured or aggregated to avoid reporting or recordkeeping requirements
* Transactions that involve the use of third parties or nominees, such as relatives, associates, or shell companies, to conceal the identity, ownership, or control of the funds or assets Option B is a transaction type that warrants investigation, as it involves sending large number of high dollar international wires to different countries, which could indicate that the customer is involved in layering or integration stages of money laundering, where the illicit funds are moved across borders and disguised as legitimate transfers. This transaction type also raises the risk of exposure to sanctions, terrorist financing, or other illicit activities, depending on the destination and purpose of the wires.
Option D is also a transaction type that warrants investigation, as it involves depositing a lot of checks drawn on banks in foreign countries, which could indicate that the customer is involved in placement or layering stages of money laundering, where the illicit funds are introduced into the financial system or converted into other forms of value. This transaction type also raises the risk of exposure to fraud, counterfeit, or forgery, depending on the origin and authenticity of the checks.
Option A is not a transaction type that warrants investigation, as it involves making regular cash deposits of a few hundred dollars every few days, which could be consistent with the customer's profile, business, or source of funds, especially if the customer is an ice cream vendor who operates in cash. This transaction type does not raise any red flags of money laundering or terrorist financing, unless there is evidence that the cash deposits are structured or aggregated to avoid reporting or recordkeeping requirements.
Option C is also not a transaction type that warrants investigation, as it involves writing multiple checks for a few hundred dollars to the same dozen payees every two weeks, which could be consistent with the customer's profile, business, or source of funds, especially if the payees are suppliers, employees, or contractors of the customer. This transaction type does not raise any red flags of money laundering or terrorist financing, unless there is evidence that the checks are used to facilitate illicit activities, such as bribery, kickbacks, or tax evasion.
References:
* ACAMS Study Guide 6th Edition, Chapter 2, page 36
* Red Flags And Atypical Customer Behavior: Anti-Money Laundering Awareness
* 4 Red Flags of Money Laundering or Terrorist Financing

Explanation

The most suspicious transaction indicators related to casino activities are:
A client requests a winnings check (cheque) in a third party's name. This could indicate an attempt to conceal the source or ownership of the funds, or to evade reporting requirements.
Acquaintances bet against each other in even-money games and it appears they are intentionally losing to one of the parties. This could indicate a scheme to launder money through the casino by transferring funds from one party to another without attracting attention.
A client requests the transfer of winnings to the bank account of a third party in a country without an effective anti-money laundering regime. This could indicate an attempt to move funds to a high-risk jurisdiction or to a person or entity that is involved in illicit activities.
The option that is not suspicious is:
A new client who is a large volume player asks the casino operator about the ability to transfer the funds to other locations in the same country. This could be a legitimate inquiry from a high-net-worth individual who travels frequently and wants to access their funds conveniently.
References:
ACAMS CAMS Certification Video Training Course - Exam-Labs1
Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)2 ACAMS Study Guide for the Certification Examination, 6th Edition, Chapter 8, page 173
https://www.acams.org/wp-content/uploads/2019/08/ACAMS-Study-Guide-6th-Edition-Chapter-8.pdf