BSA/AML Flashcards
Which of the following procedures would be MOST effective in controlling the flow of information from the bank to the government in conjunction with SAR filing?
A. File SARs only after they have been reviewed by the board of directors
B. Designate one department, such as Legal or Security, to process, review, and file SARs on behalf of the bank
C. Allow individual branches to file SARs on behalf of the bank to ensure that filing time requirements are met
D. Allow each business group or product group (e.g., Consumer Loans, Auto Loans) to develop and implement procedures to process, review, and file SARs related to its particular group
B. Designate one department, such as Legal or Security, to process, review, and file SARs on behalf of the bank
If the bank does not obtain the TIN from the deposit account holder when the account is opened, the Bank Secrecy Act requires that the bank:
A. Begin 28% withholding of interest
B. Close the account after 30 days
C. If the account holder has applied for a TIN but not received one, obtain the TIN within a reasonable time after account opening
D. Notify the Treasury Department of affected account information
C. If the account holder has applied for a TIN but not received one, obtain the TIN within a reasonable time after account opening
Banks must obtain the TIN of the customer either when the account is opened, or a reasonable time thereafter (if the account holder has applied for a TIN but not received it prior to account opening). Backup withholding at a 28% rate is not required by the BSA, nor does the BSA require the bank to close the account. The Treasury Department need not be notified, either.
Which of the following is considered a non-listed business that is eligible for exemption from CTR reporting requirements?
A. Pawn shop
B. Auction house
C. Licensed real estate broker
D. Licensed parimutuel racetrack
Parimutuel: A betting system in which all bets of a particular type are placed together in a pool
D. Licensed parimutuel racetrack
When reviewing continued eligibility for an exemption for currency transaction reporting under the Bank Secrecy Act, a review of which of the following is LEAST helpful?
A. Suspicious Activity Reports (SARs)
B. Currency Transaction Reports (CTRs)
C. Customer organizational documents
D. Reports of International Transportation of Currency or Monetary Instrument Reports (CMIRs)
B. Currency Transaction Reports (CTRs)
Your examiner tells you that your bank is straining its resources by not exempting any of its commercial account holders from CTR filing. The examiner notes that many of these customers are publicly traded and could be exempted. Which of the following actions is in the bank’s BEST interest?
A. Exempt all large commercial customers by the end of the month
B. Hire more staff to handle the volume of CTRs generated by your bank
C. Provide your commercial customers with an exemption request form
D. Determine whether granting exemptions is a manageable risk for the bank
D. Determine whether granting exemptions is a manageable risk for the bank
The bank’s examiner is correct that publicly-traded commercial customers are eligible for CTR exemptions; however, there is no requirement under the BSA for the bank to exempt them, if it does not wish to do so. Hiring more staff, while perhaps wise in this situation, is not in the bank’s best interest if some of the customers are exemptible. There is no exemption request to provide customers. The bank should make a risk-based decision whether or not to exempt some of these commercial customers.
When establishing an exemption from currency transaction reporting for Phase II exempted customers, banks must perform all of the following EXCEPT:
A. Obtaining a signed customer exemption statement
B. Filing Form 110 (Designation of Exempt Person)
C. Establishing and maintaining a monitoring system to detect suspicious currency activities
D. Manually reviewing the exempt person supporting documentation
A. Obtaining a signed customer exemption statement
During a review of your bank’s customer identification procedures, you are likely to find regulatory deficiencies if the bank does NOT:
A. Require a CIP log at each branch in the prescribed format
B. Require its employees to copy the customer’s driver’s license
C. Require verification of the identity of each customer
C. Require verification of the identity of each customer
The Customer Identification Program (CIP) rules require banks to verify the identity of each customer. There is no requirement to maintain a CIP log at each branch, nor is there a requirement to copy the customer’s driver’s license. Banks must record information about the identification document, such as the driver’s license, but not copy it. Banks are permitted to verify identities using passports; thus, there is no regulatory deficiency there.
A customer presented $13,000 in cash for deposit to her account. She withheld $4,000 from the transaction when the teller began to complete a CTR. In this situation, the bank should:
A. File the appropriate SAR form with respect to the structured transaction
B. Make an entry in its log of cash sales of monetary instruments
C. File a CTR for the $13,000 transaction
D. Refuse the transaction
A. File the appropriate SAR form with respect to the structured transaction
This is an example of a structured transaction, which requires a SAR. Whenever a customer reacts in a way to avoid a regulatory filing such as a CTR, a SAR is required to be filed. This does not involve a sale of a monetary instrument, nor must the bank refuse the transaction. A CTR need not be filed because there was not a reportable cash-in of over $10,000, since the customer withheld $4,000.
You are developing bank procedures for determining when to escalate issues or problems identified as a result of repeat SAR filings on the same account. These procedures should include all of the following criteria EXCEPT:
A. Closing the account
B. Notifying the customer
C. Notifying law enforcement, if applicable
D. Review by senior management and legal staff
B. Notifying the customer
What is NOT included in an effective BSA/AML program?
A. Monitoring for suspicious activities
B. Risk assessment and risk identification process
C. Prohibiting transactions with SDNs and blocked persons
D. Customer due diligence and enhanced due diligence process
C. Prohibiting transactions with SDNs and blocked persons
For how long must a bank keep records of transactions involving currency in amounts greater than $10,000?
A. Two years
B. Three years
C. Five years
D. Seven years
C. Five years
James Walker DBA Walker Enterprises has been a customer of the bank for one month. The company told the bank that it would regularly make deposits in excess of $10,000 because it operates several laundromats in the city. The bank performed a background check on the company before opening the account. For its first 30 days, the company made 12 large cash deposits. Can the bank exempt this company now? Why or why not?
A. No. It is a not a corporation, but a sole proprietorship.
B. No. It has not maintained an account at the bank for 12 months.
C. No. It operates an ineligible business.
D. Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.
D. Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.
The company has been verified to have legitimate needs for cash transactions so the bank can exempt it once its due diligence is complete.
*It’s not a hard and fast rule that the customer be a customer of the bank for at least 2 months. A bank can exempt a customer who hasn’t been a customer for at least 2 months if it conducts due diligence and determines that it warrants an exemption despite not being a customer for at least 2 months.
What should a bank’s Bank Secrecy Act compliance program include?
A. All lobby notice requirements
B. The one-year record retention requirements
C. Designation of individuals responsible for day-to-day compliance
D. A list of types of loans covered by the Act
C. Designation of individuals responsible for day-to-day compliance
B is not accurate because there is no overarching 1 year BSA record retention requirement. D. is not correct because BSA relates to more than loans.
Mammoth Enterprises is a new customer to the bank. It is a wholly owned subsidiary of Mammoth Corporation. Which of the following statements, if true, would make Mammoth Enterprises an exempt customer at the bank?
A. Mammoth Corporation is a London corporation, trading on the London Stock Exchange.
B. Mammoth Corporation is a U.S. corporation with unlisted stock.
C. Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange.
D. Mammoth Enterprises is a U.S. corporation primarily in the investment banking business.
C. Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange.
A subsidiary of a corporation whose common stock is listed on the New York or American Stock Exchanges may be designated as an exempt person.
Which of the following is NOT considered an acceptable form of identification for an individual when completing a CTR?
A. U.S. passport
B. Long-term deposit account relationship
C. State-issued photo identification (e.g., driver’s license)
D. Photo identification card issued by a local government agency
B. Long-term deposit account relationship
Only official documents can be used for identification.
Which of the following transactions requires completion of FinCEN Form 104, a CTR?
A. Deposit of checks totaling $12,000 to a checking account
B. Cash purchase of a cashier’s check for $7,800
C. Cash withdrawal of $3,000 from a checking account
D. Cashing of a $14,000 check for a customer
D. Cashing of a $14,000 check for a customer
This is the only one of the choices that involved currency in excess of $10,000
The manager of Main Street branch calls and relates the following information: John Smith purchased a cashier’s check for $1,000 cash at 10:00 a.m. on Tuesday. At 11:30 a.m. Mr. Smith returned and purchased a cashier’s check for $2,500 cash and deposited traveler’s checks totaling $9,000 into his checking account. At 4:00 p.m. Mr. Smith returned and deposited $8,000 cash into his checking account. This deposit was after normal banking hours, so it was recorded as of Wednesday’s business date. What action should the bank take?
A. None, because no single cash transaction exceeded $10,000
B. File a Currency Transaction Report (CTR) for $11,500
C. Record the $1,000, $2,500, and $9,000 transactions on the bank’s monetary instrument sales log because the total exceeds the $3,000 threshold
D. Record the $1,000 and $2,500 transactions on the bank’s monetary instrument sales log because the total exceeds the $3,000 threshold
D. Record the $1,000 and $2,500 transactions on the bank’s monetary instrument sales log because the total exceeds the $3,000 threshold
If a bank employee knows multiple currency transactions or multiple cash purchases of monetary instruments have occurred during a single business day, aggregation is necessary. During the business day of Tuesday, aggregate cash purchases of cashier’s checks totaling $3,500 would be sufficient to trigger log entries, but not a CTR.
Mrs. Evans, a customer of First National Bank, deposits $15,000 in cash to her account. During the transaction, Mrs. Evans explains that she received the money in the mail from her sister in Europe. What responsibility does the bank have?
A. Complete a Currency Transaction Report (CTR)
B. Complete a United States Customs form 4790 (CMIR)
C. Complete both a currency transaction report and a CMIR
D. Complete a CTR and encourage Mrs. Evans to file a CMIR
D. Complete a CTR and encourage Mrs. Evans to file a CMIR
The bank is not responsible for filing a CMIR because it was neither the sender nor the receiver of the cash.
First National Bank is attempting to determine which of the following customers would qualify as exempt persons:
* Nationwide Foods, Inc., is a national company with stock listed on the New York Stock Exchange
* National Paper Products, is a wholly owned subsidiary of Nationwide Foods, Inc.
* Products Incorporated, a depositor for three months, is a regional company whose stock is designated a NASDAQ Capital Markets Company and that sells and leases large boats
* Century Enterprises, a local company owning several local restaurants, is a long-time bank customer and frequently makes cash deposits in excess of $10,000. All of Century’s stock is owned by a local family.
Which of these customers would qualify as an exempt person?
A. All except for Nationwide Foods, Inc.
B. All except for National Paper Products
C. All except for Century Enterprises
D. All except for Products Incorporated
D. All except for Products Incorporated
The NYSE company and its wholly owned subsidiary are exempt. The local company can be exempt because it has maintained an account for at least two months and frequently makes large cash deposits. Products Incorporated is not eligible because its stock is not listed on a major exchange and does not qualify as a nonlisted business.
For which of the following is a bank most likely to be in danger of receiving a cease and desist order?
A. Repetition in a BSA examination of a noncritical deficiency reported in a previous BSA examination
B. Failure to document AML training to its part-time clerical employees
C. A 2 percent error rate on the bank’s CTRs
D. Failure to file suspicious activity reports
D. Failure to file suspicious activity reports
The other alternatives do not rise to the seriousness required for a cease and desist order.
An individual comes into the bank and makes a $6,000 cash deposit into a checking account. At the same time, the individual buys a $7,000 cashier’s check with cash. According to the Bank Secrecy Act, what is the bank is required to do?
A. File a SAR for $13,000
B. File a CTR for the $6,000 cash deposit
C. Aggregate the transactions and retain information about the purchase of the cashier’s check
D. Obtain the recordkeeping information for the purchase of the cashier’s check and complete a CTR for the total cash-in transaction of $13,000
D. Obtain the recordkeeping information for the purchase of the cashier’s check and complete a CTR for the total cash-in transaction of $13,000
Multiple cash transactions must be aggregated.
Martha Whitmire, the BSA Compliance Officer for First National Bank, is responsible for monitoring the bank’s daily currency activity and wire transfers, for compliance with information retention and reporting requirements. Ms. Whitmire notices during her review on March 10 that, during the previous two weeks, a transaction occurred on the same account several times during the week. The activity appeared at one branch office as cash deposits in dollar amounts under the reporting thresholds. Ms. Whitmire discusses this activity with the branch manager and determines that this same deposit activity occurred several times during the previous six weeks. She then conducts a more extensive examination of the account’s activity for several months and discovers that cash deposits were made at one branch office and purchases of bank cashier’s checks were made by withdrawals from the same account at a different branch office. All withdrawals and purchases of cashier’s checks were for the identical amount as the cash deposits.
Which statement best describes Ms. Whitmire’s responsibility?
A. Complete a CTR for each of the cash activities at the branch office
B. Make no report of the activities because the transactions were not discovered until after the 15-day reporting deadline
C. Report the account activity to senior management for further review
D. Report the account activity as suspicious account activity and recommend that a SAR be filed
D. Report the account activity as suspicious account activity and recommend that a SAR be filed
Based on the fact that the customer was structuring deposits and purchasing cashier’s checks after making the cash deposits, which is potentially a laundering activity, the bank should file a SAR.
When conducting a records search pursuant to a FinCEN request, what must a bank search?
A. All customer records from the previous five years
B. All accounts maintained within the previous 12 months and transaction records for 6 months
C. Only records that can be electronically searched
D. Nothing; searches are voluntary
B. All accounts maintained within the previous 12 months and transaction records for 6 months
The bank is required to search all current accounts and all records maintained in the last 12 months.
A compliance officer is constructing a review of a transaction in which Mary, a deposit account customer, used cash to purchase travelers checks in an amount of $4,000. The compliance officer must determine compliance with financial recordkeeping and currency reporting regulations. Which of the following pieces of information must be part of the bank’s records for this transaction?
A. Mary’s date of birth
B. Mary’s deposit account number
C. The serial numbers of the travelers’ checks purchased
D. The name of the branch where the transaction occurred
C. The serial numbers of the travelers’ checks purchased
If the purchaser has a deposit account with the bank, record the purchaser name, date, types of instruments, serial numbers, and amount.
If the purchaser does not have a deposit account with the bank, record the above info. Also record the purchaser’s name, address, SSN or other ID number, and date of birth.