CMFAS CACS – Client Advisor Competency Standards (CACS) ​Paper 1 Exam

Correct: Providing a fee schedule at account opening that includes the maximum and minimum dollar amounts or percentage ranges for all applicable fees is the right answer because the Private Banking Code of Conduct mandates the dissemination of a fee schedule covering all investment product and service categories at the time of account opening, specifying these ranges rather than just stating fees are negotiable.

Incorrect: The suggestion to inform the client that fees are merely subject to negotiation is wrong because the Code explicitly prohibits entities from only stating that fees are negotiable without providing specific minimum/maximum ranges. The option to disclose only fees for the initial investment is incorrect because the fee schedule must comprehensively cover all investment product and service categories offered by the entity. The option regarding verbal disclosure with a thirty-day follow-up is wrong because the written fee schedule is a mandatory requirement at the specific time of account opening, not a delayed obligation.

Takeaway: Covered Entities must provide a comprehensive written fee schedule at the time of account opening that includes specific price ranges or dollar amounts for all available service categories.

Correct: Statement I is correct because the Private Banking Code of Conduct specifically mandates that rebates for the sale or distribution of SGD-denominated primary issue bonds must be capped at 25 basis points. Statement II is correct because for discretionary portfolio services where a management fee is already charged, the Covered Entity is expected to either not retain retrocessions or rebate them to the client. Statement III is correct because the Code requires Covered Entities to disclose the specific circumstances under which a client’s positions may be closed out or assets disposed of without prior consent.

Incorrect: Statement IV is incorrect because the Code requires Covered Entities to maintain proper documentation and records of the investigation process for complaints, including documents reviewed and interviews conducted, rather than allowing for informal or verbal-only records.

Takeaway: Covered Entities must adhere to specific rebate caps for SGD bonds and maintain high standards of transparency regarding retrocessions and margin account risks to ensure fair treatment of private banking clients. Therefore, statements I, II and III are correct.

Correct: The description of a trust as a relationship governed by a trust deed rather than a separate legal entity is the right answer because the source text defines a trust as a relationship for stewardship and explicitly lists that it is not a legal entity.

Incorrect: The statement that a trust is a contractual arrangement is wrong because the text specifically clarifies that a trust is not a contract. The description of a trust as a codified legal entity is incorrect because trusts are common law structures and the text confirms they are not legal entities. The option suggesting it is a corporate structure is wrong because the text explicitly states that a trust is not a company.

Takeaway: In wealth planning, a trust is characterized as a fiduciary relationship governed by a trust deed and is distinct from legal entities, companies, and contracts.

Correct: A professional trustee who is remunerated for services is held to a higher standard of care and skill than a layman because the law expects a higher level of expertise from those who hold themselves out as professionals. This distinction ensures that individuals or companies charging for their services are held to a benchmark beyond that of an ordinary prudent person.

Incorrect: The statement that the statutory duty of care cannot be modified is incorrect because the Trustees Act specifically allows the trust instrument to express a contrary intention. The claim that all trustees are held to the same standard is wrong because the law distinguishes between the expectations for professionals and laymen. The assertion that liability only arises from a lack of honesty is false because a trustee can also be held liable for failing to exercise the required level of care and skill.

Takeaway: Professional trustees in Singapore are held to a higher standard of care than laymen, though the trust instrument may expressly exclude certain statutory duties of care.

Correct: Statement I is correct because the source text explicitly states that under Singapore law, the perpetuity period is 100 years. Statement III is correct because Asset Holding Companies (AHCs) are separate legal entities used for risk management and ring-fencing liabilities. Statement IV is correct because the protector’s role includes the active power to remove and appoint trustees to provide an independent check.

Incorrect: Statement II is incorrect because a Letter of Wishes is not legally binding; it only serves as a guide for the trustee to exercise their powers in a manner desired by the settlor.

Takeaway: Trustees must adhere to the trust’s governing law, such as Singapore’s 100-year perpetuity period, while utilizing structures like AHCs and protectors for risk management and oversight. Therefore, statements I, III and IV are correct.

Correct: Statement I is correct because the Industry Sound Practices mandate that the Management of Covered Entities must enhance and enforce internal policies to detect and prevent the use of the institution for harboring proceeds from serious tax crimes. Statement III is correct because when an External Asset Manager (EAM) is involved, the Covered Entity is required to assess and obtain confirmation that the EAM adheres to equivalent standards of due diligence and tax-risk management.

Incorrect: Statement II is incorrect because the guidelines state that Covered Entities should communicate to clients that the clients themselves are responsible for their own tax obligations, rather than the institution. Statement IV is incorrect because the framework explicitly states that if there are reasonable grounds to suspect funds are proceeds from serious tax crimes, the Covered Entity should not accept the client and must file a Suspicious Transaction Report (STR).

Takeaway: Covered Entities must implement rigorous internal controls and due diligence to prevent tax-related money laundering while ensuring clients understand their personal responsibility for tax compliance. Therefore, statements I and III are correct.

Correct: The statement regarding ownership separation is correct because a trust involves a trustee holding legal title for the benefit of others, while a foundation is a separate legal entity that holds both legal and beneficial title to its assets itself.

Incorrect: The claim that Singapore recognizes foundations is incorrect because the regulatory text explicitly states that Singapore currently does not recognize foundations. The assertion that foundation beneficiaries hold beneficial ownership is wrong because, unlike a trust, foundations do not have a separation of legal and beneficial ownership. The description of trust deeds and charters is incorrect because it swaps the governing documents; trusts are established by deeds while foundations are established by charters.

Takeaway: A fundamental difference between the two structures is that trusts involve a split in ownership types, whereas foundations are distinct legal entities that own assets outright.

Correct: Subjecting the account to Enhanced Due Diligence (EDD) is the required response when the actual amount of assets passing through an account is significantly larger than the expected amount indicated at onboarding. This process involves heightened transaction analysis and ensuring checks are performed by independent staff to mitigate tax-related risks and affirm the bona fides of assets.

Incorrect: Immediate termination and filing a Suspicious Transaction Report is premature; an STR is filed when there are reasonable grounds to suspect serious tax crimes, and termination requires specific internal protocols and senior management approval. Requesting a new declaration while maintaining standard monitoring is insufficient because the Code specifically requires red flags to trigger EDD, not just administrative updates. Allowing the Relationship Manager to conduct a one-time review alone is incorrect because the Code emphasizes the need for independent staff and mechanisms to ensure their independence during the EDD process.

Takeaway: Under the Private Banking Code of Conduct, specific red flags such as asset discrepancies must trigger Enhanced Due Diligence involving independent oversight and heightened monitoring.

Correct: Joint tenancy is the appropriate mechanism because it incorporates the right of survivorship. Under this legal arrangement, when one joint tenant passes away, their interest in the property is automatically absorbed by the surviving joint tenant(s), bypassing the need for probate or inclusion in the deceased’s estate.

Incorrect: Tenancy in common is incorrect because it does not include the right of survivorship; instead, the deceased’s specific share becomes part of their estate. A private investment company is incorrect because while it offers control, the shares themselves are still personal assets that must be dealt with through a will or probate process. Inter-vivos gifting is incorrect because it requires the donor to give up their interest in the property immediately during their lifetime, rather than providing for a transfer specifically upon death.

Takeaway: Joint tenancy is a common wealth planning tool used to ensure the seamless transfer of property to a survivor without the delays associated with the probate process.

Correct: The bank may provide the service in exceptional circumstances if an independent party approves the request, but the Relationship Manager is strictly prohibited from delivering the documents. According to the Private Banking Code of Conduct, Relationship Managers are never permitted to deliver hold-mail or account statements to clients to ensure the integrity of the reporting process.

Incorrect: The statement that hold-mail is strictly prohibited is incorrect because the Code allows for it in exceptional circumstances with proper independent approval. The suggestion that the Relationship Manager can deliver statements if they obtain a signed acknowledgement is wrong because the Code explicitly forbids the Relationship Manager from handling the delivery of hold-mail. The option suggesting the Relationship Manager should personally verify the identity of the collector is incorrect as the Code requires independent verification and controls to prevent the Relationship Manager from bypassing internal oversight.

Takeaway: To mitigate the risk of fraud or unauthorized transactions, the Private Banking Code of Conduct prohibits Relationship Managers from delivering hold-mail or statements to clients, even when such services are authorized.

Correct: Statement I is correct because the source text identifies founder control and cost savings as specific benefits of foundations. Statement III is correct because lack of familiarity in certain jurisdictions can lead tax authorities to reclassify foundations as other entities for tax purposes. Statement IV is correct because the text explicitly states that trusts are generally more widely recognized globally than foundations.

Incorrect: Statement II is incorrect because the text specifies that in Singapore, banks and law firms providing trust services are exempted from holding a trust business license, contradicting the claim that all providers must be licensed.

Takeaway: While foundations offer benefits like founder control and cost-efficiency, they face challenges regarding global recognition and tax classification compared to the more widely accepted trust structure. Therefore, statements I, III and IV are correct.

Correct: The individual is currently undergoing bankruptcy proceedings or has been declared a bankrupt is the right answer because the Fit and Proper guidelines explicitly state that financial soundness is compromised by being or becoming bankrupt.

Incorrect: The option regarding the forgery of a client’s signature is wrong because this falls under acts involving fraud and dishonesty rather than financial soundness. The option about disseminating false information is wrong because it describes market conduct violations like market manipulation. The option concerning the failure to disclose material information is wrong because it relates to inappropriate advice and misrepresentation under the Financial Advisers Act (FAA).

Takeaway: The Fit and Proper criteria evaluate a Covered Person’s honesty, integrity, competence, and financial soundness, with bankruptcy specifically impacting the latter.

Correct: Disclosing the limitations and difficulties is mandatory under the SFA Regulations when an advertisement contains a device, such as a formula, that assists a person in making buy or sell decisions.

Incorrect: The requirement for a list of recommendations applies to past performance claims, not formulas, and must cover at least one year, not six months. Approval for marketing materials is generally an internal process involving the entity’s legal and compliance department rather than a requirement for MAS to approve every specific formula. Prohibiting the use of the formula for investment timing is not required; instead, the regulation focuses on ensuring the user understands the limitations of the tool through prominent disclosure.

Takeaway: Under the SFA, any technical device or formula used in marketing to assist with investment decisions must be accompanied by clear disclosures regarding its limitations.

Correct: Statement I is correct because, as per the regulatory definitions, an irrevocable beneficiary can only be changed if the policy owner obtains the specific consent of that existing beneficiary. Statement III is correct because universal life insurance is a flexible policy where monthly charges are deducted from the cash value; if the interest credited is lower than these charges over time, the value can be eroded until the policy lapses.

Incorrect: Statement II is incorrect because the source text explicitly states that whole life insurance has little appeal for High Net Worth Individuals (HNWIs) as it does not offer flexibility over premiums or death benefits. Statement IV is incorrect because it describes medical underwriting; financial underwriting is the specific process of assessing whether the insured has the financial capacity to purchase and maintain the insurance policy.

Takeaway: While HNWIs use insurance for wealth preservation, they must distinguish between rigid structures like whole life and flexible ones like universal life, while understanding the specific requirements of beneficiary designations. Therefore, statements I and III are correct.

Correct: Introducing the client to every provider on their list is the right answer because MAS Notice FAA-N02 requires that when an introducer represents multiple entities, they must introduce the client to all relevant providers for the required services with the client’s consent.

Incorrect: Providing performance comparisons is wrong because the regulations focus on disclosure of the introducer’s role and remuneration rather than qualitative analysis or performance benchmarking of the providers. Holding client funds is wrong because the MAS Notice explicitly prohibits introducers from receiving or dealing with client money or property under any circumstances. Providing limited recommendations is wrong because the scope of an introducer is strictly limited to non-advisory activities, and they are specifically prohibited from marketing collective investment schemes or giving advice.

Takeaway: Introducers must adhere to strict disclosure requirements and are prohibited from providing investment advice or handling client assets to ensure a clear distinction between introduction and financial advisory services.

Correct: Statement I is correct because Variable Universal Life (VUL) policies allocate values into investments like funds or bond portfolios, which leads to more volatile policy values compared to traditional universal life. Statement II is correct because Private Placement Life Insurance (PPLI) functions as an insurance wrapper where the legal ownership of assets is transferred to the insurance company while the bank typically retains custody.

Incorrect: Statement III is incorrect because VUL policies require more regular monitoring of performance, not less, due to the volatility of the underlying investments. Statement IV is incorrect because PPLI is characterized by flexibility and control over underlying investments, whereas fixed cash values and fixed death benefits are specific features of Whole Life insurance.

Takeaway: While VUL and PPLI offer high-net-worth individuals investment flexibility and tax mitigation, they require active monitoring and involve the transfer of legal ownership of assets to the insurer. Therefore, statements I and II are correct.

Correct: A corporation is classified as an accredited investor if its net assets exceed S$10 million, as evidenced by its most recent audited balance sheet or a certified balance sheet if auditing is not mandatory.

Incorrect: The option focusing on paid-up capital is incorrect because the regulatory threshold is based on net assets, not the amount of capital issued to shareholders. The option regarding annual turnover is wrong because the definition relies on the entity’s wealth (assets minus liabilities) rather than its yearly sales performance. The option mentioning total assets is incorrect because it fails to account for liabilities, which must be deducted to determine the required net asset value.

Takeaway: Corporate eligibility for accredited investor status is strictly defined by a net asset threshold of S$10 million rather than turnover or capital figures.

Correct: Statement I is correct because integration is the final stage of money laundering where laundered funds are placed back into the economy to appear legitimate. Statement III is correct because the MAS Act specifies that a financial institution contravening MAS Regulations is liable on conviction to a fine not exceeding $1 million.

Incorrect: Statement II is incorrect because the source text explicitly states that terrorism financing can be derived from legitimate sources such as donations from charities or business operations. Statement IV is incorrect because proliferation financing specifically includes the act of providing funds or financial services, not just the physical manufacture or transport of goods.

Takeaway: Covered Persons must distinguish between the stages of money laundering and recognize that both legitimate and criminal funds can be used in terrorism financing, subject to strict MAS penalties. Therefore, statements I and III are correct.

Correct: MAS supervision and the protection mechanisms of the Insurance Act apply only to life insurance companies registered in Singapore is the right answer because the scope of MAS’s authority is legally limited to entities registered under the local statutes.

Incorrect: The claim that insurance companies must be incorporated in Singapore to be registered is wrong because the text states incorporation is not a requirement for registration. The statement that the Financial Advisers Act governs all offshore providers is incorrect because the Act applies specifically to intermediaries operating in Singapore. The suggestion that foreign insurance companies are exempt when serving High Net Worth Individuals is false because any company distributing products in Singapore must be registered.

Takeaway: MAS regulatory oversight and statutory protections under the Insurance Act are strictly limited to insurance companies that are registered in Singapore.

Correct: Statement I is correct because the SFA (Section 339(1)) and FAA (Section 90) explicitly state that acts done partially in Singapore and partially outside can constitute an offence due to their extra-territorial effect. Statement II is correct because the provision of account-opening documentation to clients in another country is specifically listed as an example of a cross-border activity.

Incorrect: Statement III is incorrect because even if a jurisdiction permits unsolicited services, Covered Persons must always consult their legal and compliance department for guidance and permission before proceeding. Statement IV is incorrect because a breach of foreign licensing laws can lead to criminal or other adverse consequences for both the Singapore Covered Entity and the individual Covered Person.

Takeaway: Cross-border activities are subject to both Singapore’s extra-territorial laws and foreign regulations, requiring mandatory consultation with legal and compliance departments to mitigate personal and institutional risks. Therefore, statements I and II are correct.

Correct: The bank must perform CDD if the cross-border wire transfer exceeds S$1,500 because MAS Notice 626 specifically mandates this threshold for international wire transfers involving clients without established business relations. This requirement ensures that significant cross-border fund movements are monitored even without a formal account.

Incorrect: The threshold of S$20,000 is incorrect because it applies to general transactions for clients without business relations rather than the specific category of cross-border wire transfers. The thresholds of S$10,000 and S$5,000 are incorrect as they do not match the specific regulatory limits defined in the MAS Notice for this scenario.

Takeaway: Under MAS Notice 626, CDD is triggered for cross-border wire transfers exceeding S$1,500 or general transactions exceeding S$20,000 for clients without established business relations.

Correct: Statement I is correct because the glossary defines a “Resident of Singapore” as any person whose period of residence in Singapore exceeds one year. Statement III is correct because the definition of an institutional investor includes entities incorporated outside Singapore that are regulated by a foreign public authority performing functions corresponding to the Monetary Authority of Singapore (MAS).

Incorrect: Statement II is incorrect because the definition of an “Overseas Investor” specifically requires that the individual is not a citizen or a permanent resident of Singapore; therefore, a permanent resident cannot be an overseas investor. Statement IV is incorrect because the definition of an “Investment Product” under the FAA includes spot foreign exchange contracts only if they are not for the purposes of leveraged foreign exchange trading.

Takeaway: Regulatory definitions in Singapore often rely on specific residency durations and explicit exclusions, such as the carve-out for leveraged trading within the definition of investment products. Therefore, statements I and III are correct.

Correct: Statement I is correct because the regulatory framework for legal persons requires identifying natural persons with executive authority if no natural person can be identified through ownership or control. Statement III is correct because screening is mandatory for cross-border wire transfers exceeding S$1,500 when the customer has not established a formal business relationship with the bank.

Incorrect: Statement II is incorrect because the bank remains ultimately responsible for its CDD obligations even if it relies on a third party to perform the measures. Statement IV is incorrect because for trusts, the bank must identify the settlors, trustees, and beneficiaries (or class of beneficiaries) during the onboarding process, not just at the point of distribution.

Takeaway: Financial institutions must follow a specific identification hierarchy for beneficial owners of legal persons and adhere to strict monetary thresholds for screening transactions involving non-account holders. Therefore, statements I and III are correct.

Correct: A certificate of deposit issued by a bank or finance company is correct because the definition of securities in Section 2 of the SFA explicitly excludes these instruments, along with bills of exchange and units in collective investment schemes.

Incorrect: A debenture issued by a corporation or other legal entity is wrong because debentures are specifically included in the statutory definition of securities. A unit in a business trust representing a beneficial interest is wrong because the SFA explicitly classifies these units as securities. An instrument conferring legal ownership in a partnership is wrong because the definition covers any instrument representing legal or beneficial ownership in a corporation, partnership, or limited liability partnership.

Takeaway: While the SFA provides a broad definition for securities, it specifically carves out certain banking and money market instruments like certificates of deposit and bills of exchange.

Correct: Scrutinizing transactions across all related accounts collectively is the definition of holistic monitoring. According to MAS Guidelines for private banking, when a bank is aware of customers having a common beneficial owner or multiple accounts, it must review them on a consolidated basis to better identify suspicious, complex, or unusually large patterns of transactions.

Incorrect: Monitoring accounts as separate legal entities is incorrect because it prevents the bank from seeing the full picture of the client’s activities, which is the goal of holistic monitoring. Consolidating monitoring only upon client request is wrong because these are regulatory risk-management requirements, not optional client services. Prioritizing only the primary account is insufficient because suspicious activity can be distributed across multiple accounts to evade detection, making a consolidated review necessary.

Takeaway: Holistic monitoring requires a consolidated review of all accounts sharing a common beneficial owner to effectively detect complex or suspicious transaction patterns.

Correct: Statement I is correct because ‘U-turn’ transactions, where funds received from a foreign jurisdiction are immediately remitted back to the same or another jurisdiction, are specifically identified as suspicious indicators for transfers abroad. Statement II is correct because the use of repeatedly amended or frequently extended letters of credit is a recognized red flag for trade-based money laundering. Statement III is correct because the purchase of large amounts of precious metals that are not in line with a client’s business or background is listed as a suspicious indicator related to tax crimes.

Incorrect: Statement IV is incorrect because maintaining account balances that are consistently aligned with the documented turnover and scale of business operations is a characteristic of legitimate commercial activity. The suspicious indicator described in the regulations involves building up large balances that are specifically ‘not consistent’ with the known turnover of the client’s business.

Takeaway: Wealth management professionals must recognize that suspicious activity can manifest across various domains, including trade finance and cross-border transfers, requiring a holistic understanding of red-flag indicators. Therefore, statements I, II and III are correct.

Correct: The scenario where a corporate client makes large cash deposits and then issues cheques to various entities not associated with its business is a specific indicator of suspicious activity. According to the MAS Guidelines, company operations should typically involve debits and credits consistent with commercial norms; using large cash amounts to pay unrelated parties lacks a clear business purpose and suggests potential money laundering.

Incorrect: Maintaining multiple accounts for different business divisions with distinct cash flows is a common and legitimate practice that does not inherently suggest suspicious activity. Providing a bank guarantee that is fully aligned with current market conditions is standard financial behavior and does not meet the red flag criteria of being ‘not in conformity’ with the market. Providing easily verifiable documentation for a sudden increase in account activity helps establish plausibility and transparency, which is the opposite of the ‘difficult or expensive to verify’ information that triggers suspicion.

Takeaway: Financial institutions must scrutinize transactions that deviate from a client’s normal business profile, particularly those involving large cash sums or payments to unrelated third parties without a clear economic purpose.

Correct: Statement II is correct because the provided text explicitly states that it is an offence to “tip-off” a client that a Suspicious Transaction Report (STR) has been or is in the process of being filed. Statement III is correct because the regulatory framework requires that the basis for not submitting an STR for any suspicious transactions escalated by employees must be properly substantiated and documented to ensure accountability.

Incorrect: Statement I is incorrect because for cross-border wire transfers below or equal to S$1,500, the bank is only required to include the names and account numbers (or unique transaction numbers) of the originator and beneficiary; additional details like residential address are only mandatory for transfers exceeding S$1,500. Statement IV is incorrect because the text states that if suspicions are raised later regarding a transaction that did not initially appear suspicious, an obligation to report then arises.

Takeaway: Financial institutions must adhere to specific documentation requirements for wire transfers based on the S$1,500 threshold and maintain strict confidentiality regarding the filing of Suspicious Transaction Reports to avoid tipping-off offences. Therefore, statements II and III are correct.

Correct: Implementing risk-based policies to determine whether to execute, reject, or suspend a transfer is the right answer because the regulations specifically mandate beneficiary institutions to have these internal controls for handling transfers with missing information.

Incorrect: The claim that the institution must immediately reject the transfer is wrong because the institution is expected to apply a risk-based approach rather than an automatic rejection. The suggestion to wait exactly three business days is wrong because that timeframe refers to the ordering institution’s deadline to provide information upon request, not a mandatory processing delay. The statement about verifying the beneficiary only above a certain threshold is wrong because the requirement to verify unverified beneficiaries applies to all cross-border transfers regardless of amount.

Takeaway: Beneficiary institutions are required to use risk-based procedures to decide the fate of wire transfers that arrive with incomplete originator or beneficiary details.

Correct: The transaction involving the shipment of advanced manufacturing equipment to a destination country that does not possess a relevant industrial or technical base is the right answer because it directly aligns with the indicators of Proliferation Financing (PF) listed in Appendix B. Such a mismatch suggests that the goods are not intended for legitimate domestic use and may be part of a circuitous route to a restricted destination or for the development of weapons of mass destruction.

Incorrect: The option about updating authorized signatories is wrong because the guidelines specify that changes are suspicious when they are “frequent,” whereas a change following a documented board restructuring is a standard business practice. The option regarding the use of safe deposit boxes is wrong because the indicator requires the use to be “extensive” and “not justified” by the client’s profile, while this scenario describes use consistent with their needs. The option concerning transfers from institutions with stringent controls is wrong because the actual suspicious indicator involves institutions with “known deficiencies” in their AML/CFT frameworks.

Takeaway: Financial institutions must identify Proliferation Financing risks by monitoring for trade-based inconsistencies, particularly when the technical nature of the goods is incompatible with the industrial capabilities of the destination country.