Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

Which characteristic of a token significantly impacts its associated AML risks?

1. Age of the issuing company

2. Market capitalization

3. Underlying blockchain's transparency

4. Token distribution among stakeholders

The correct answer is: Underlying blockchain's transparency

The characteristic that significantly impacts a token's associated Anti-Money Laundering (AML) risks is the underlying blockchain's transparency. A transparent blockchain allows for greater visibility into transaction history and patterns, making it easier to trace illicit activities or the flow of funds. This transparency can help in identifying suspicious activities, enhancing the ability of regulators and compliance professionals to monitor transactions effectively. Tokens that operate on transparent blockchain networks, like Bitcoin or Ethereum, provide public access to transaction details. This accessibility can deter bad actors from using these tokens for illegal activities, knowing that their actions can be easily tracked. Conversely, tokens on more opaque or private blockchains may pose higher AML risks because the lack of transparency can obscure the flow of funds and the identities of involved parties, making it more challenging to detect and prevent money laundering. While factors such as the age of the issuing company, market capitalization, and token distribution among stakeholders may have indirect implications on the AML risks associated with a token, they are not as directly impactful on the ability to monitor and trace transactions as the blockchain's transparency.