BSA/AML

Question 1

Which of the following customers may be exempted under Phase II of the Bank Secrecy Act?
A. Government agencies
B. Correspondent banks
C. Payroll customers
D. Businesses whose stocks are traded on a national stock exchange

Answer 1

The correct answer is c. 31 CFR Chapter X 1020.315(b)(7)
Outline III B(2)(f)
The other alternatives are all types of entities that are exempt under the Phase I rules.

Question 2

Bob Jones, president of ACME bank, has had a banking relationship with Linda O’Reilly, a local real estate agent for several years. Ms. O’Reilly keeps most of her deposit accounts with ACME and also has had several personal loans there. Over a three-month time period, Ms. O’Reilly consistently (two or three times a week) brings to the bank a series of money orders in amounts ranging from $7,000 to $15,000, made payable to her in denominations of $1,000, and asks the teller to take them and issue one cashier’s check payable to her. After this activity has continued for three months, Mr. Jones notices the frequency of cashier’s checks issued to Ms. O’Reilly on a management report. It catches his attention because he does not know why Ms. O’Reilly would need this number of cashier’s checks. On inquiry, the head teller explains the weekly transactions.
Which of the following statements best describes Mr. Jones’s responsibility?
A. He should immediately file a SAR. There is no logical explanation for this activity.
B. He should immediately file a CTR. Ms. O’Reilly is trying to evade the BSA currency transaction.
C. He should ask Ms. O’Reilly why she is conducting these transactions and then determine whether to file a SAR.
D. He is not required to do anything. Mr. Jones is well acquainted with this customer, and it is not illegal to purchase cashier’s checks.

Answer 2

The correct answer is c. 12 CFR 21.11; 112 CFR 163; 2 CFR 208.62(c)(4)(iii);
12 CFR 353.3
Outline XI A(1)
This activity is obviously out of the realm of the usual types of banking for this customer. It also appears somewhat suspicious. The exchange of one form of monetary instrument for another is unusual for this customer when done this frequently. Therefore, the banker has a responsibility to investigate and determine if any laws have been broken.

Question 3

Which of the following is MOST effective in strengthening an anti-money-laundering program involving cash transactions?
A. Review all deposits of $25,000 or more
B. Complete CTR worksheets on all cash transactions of $5,000 or more
C. Complete SAR worksheets on all cash transactions of $5,000 or more
D. Monitor cash transactions of less than $10,000 for suspicious patterns

Answer 3

The correct answer is d. Outline XI D
This is the only action that will assist the bank in detecting suspicious activity that is occurring under the $10,000 cash level. Monitoring transactions over $25,000 is probably already occurring with the bank’s reporting systems. Completing worksheets for cash transactions is not as helpful as looking for patterns in the activity.

Question 4

4. 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.

Answer 4

The correct answer is c. 31 CFR Chapter X 1020.315(b)(4)
Outline III B(2)(d) and (4)(h)
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.

Question 5

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

Answer 5

The correct answer is d. 31 CFR Chapter X 1010.313(b)
Outline III A(3)
Multiple cash transactions must be aggregated

Question 6

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

Answer 6

The correct answer is d. 12 CFR 208.62(c)(4)
Outline XI A(1)
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.

Question 7

On which of the following loans must a bank maintain records under the Bank Secrecy Act?
A. All loans exceeding $5,000 and secured by real property
B. All loans exceeding $5,000, but not secured by real property
C. All loans exceeding $10,000 and secured by real property
D. All loans exceeding $10,000, but not secured by real property

Answer 7

The correct answer is d. 31 CFR Chapter X 1010.410(a)
Outline XIII J
The record retention requirement applies to loans over $10,000, not secured by real property.

Question 8

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

Answer 8

The correct answer is c. 31 CFR Chapter X 1010.330(e)(3)

Outline XIII L

Question 9

Records that must be retained for deposit accounts include which of the following?
A. Average daily balance
B. Overdraft history
C. All amounts of currency deposited or withdrawn
D. Customer’s identity

Answer 9

The correct answer is d. 31 CFR Chapter X 1020.410(c)(1)

Outline X B

Question 10

Which of the following businesses would be eligible to be an exempt person under the requirements of the Bank Secrecy Act?
 	 	A. 	Jackson's Used Cars
 	 	B. 	Evanston Recreational Boats
	 	C. 	Al Williams Seafood Restaurant
 	 	D. 	Goldsmith Aircraft Distributors

Answer 10

The correct answer is c. 31 CFR Chapter X 1020.315(e)(viii)
Outline III B(4)(h)
The other businesses listed cannot be exempted from the reporting requirements of the Bank Secrecy Act. The act and regulation prohibit the exemption of any business that sells or buys automobiles, boats, or airplanes.

Question 11

Fastfood, Inc., a nationwide restaurant chain, opened an account at First National Bank last year. Fastfood is making daily cash deposits in amounts of $15,000 to $20,000. First National needs to determine if this company is an exempt person. What should the bank do first?
A. Because the restaurant is an established depositor, the bank should provide an unlimited exemption for cash deposits and withdrawals.
B. The bank should look in the newspaper or on the Internet to determine if Fastfood, Inc.’s, stock appears on one of the listed exchanges.
C. The bank should ask the company if it qualifies as a listed business.
D. The bank should perform a corporate records check to determine if the company is chartered in the United States.

Answer 11

The correct answer is b. 31 CFR Chapter X 1020.315(e)(iii)
Outline III B(2) and (4)(c)
The bank is responsible for determining whether the company is a listed business. The bank may rely on a general circulation newspaper or an Internet Web site operated by one of the major exchanges.

Question 12

When completing and filing a SAR, what is the bank NOT required to do?
A. Submit a copy of the supporting documentation with the SAR
B. Submit the SAR within 30 days of the initial detection of facts
C. Report the SAR information to the bank’s board of directors
D. Maintain a copy of the SAR and supporting documentation for 5 years

Answer 12

The correct answer is a. SAR Instructions

Outline XI B(1)(d)

Question 13

A routine review of account records reveals that suspicious activity involving foreign currency has occurred in the account of one of the bank’s directors. Which of the following actions should be taken FIRST?
A. A SAR should be filed.
B. The bank’s board of directors should discuss the account activity without the affected director being present.
C. The bank’s president should meet with the affected director to discuss the account activity.
D. The bank should file a CTR, checking the box that indicates the report is for suspicious activity.

Answer 13

The correct answer is a. Any suspicious activity involving an insider requires a SAR. If the activity has occurred (and there is no question that it is suspicious) the bank should file the SAR.

Question 14

14. 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

Answer 14

The correct answer is b. Form 104 (CTR) Instructions
Outline III A(2)
Only official documents can be used for identification

Question 15

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

Answer 15

The correct answer is b. 31 CFR Chapter X 1010.520(b)
Outline IX A(2)(b)
The bank is required to search all current accounts and all records maintained in the last 12 months.

Question 16

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

Answer 16

The correct answer is d. The 2007 Joint Statement on BSA Enforcement
Outline XIV D(3)
The other alternatives do not rise to the seriousness required for a cease and desist order.

Question 17

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.

Answer 17

The correct answer is d. 31 CFR Chapter X 1020.315(b) and (d)
Outline III B(2)(e)
The company has been verified to have legitimate needs for cash transactions so the bank can exempt it once its due diligence is complete.

Question 18

In April Lillian Redmond, the teller supervisor for First National Bank, discovers five counterfeit $20 bills in several teller drawers. In May and in June she discovers two additional counterfeit $20 bills. She has no knowledge of criminal activity on the part of any of the bank’s employees or customers. She does not suspect any particular person in this transaction. Which of the following statements is true?
A. Ms. Redmond must report the counterfeit funds on a SAR and must name the most likely individual(s) on the report.
B. Ms. Redmond must report the counterfeit funds on a SAR but is not required to name any individual(s) on the report.
C. Ms. Redmond need not file a SAR on this incident because the total amount is less than $25,000.
D. Ms. Redmond need not report this incident on a SAR because each incident is less than $5,000.

Answer 18

The correct answer is c. 12 CFR 21.11(c)(3), 12 CFR 163, 12 CFR 208.62(c), and 12 CFR 353.3(a)
Outline XI A(1)
Because Ms. Redmond does not have a substantial basis for identifying a suspect and the amount is under $25,000, she may report it but is not required to do so

Question 19

First National Bank has several exempt customers.
• Alpha is an exempt person because its stock is listed on a major stock exchange.
• Beta is an exempt person because it meets the non-listed customer requirements.
• Zeta is exempt because it is a payroll customer.
For which customer(s) must the bank conduct an annual review to determine its continuing eligibility to be exempt from CTR filings?
A. Alpha
B. Beta
C. Zeta
D. Alpha, Beta, and Zeta

Answer 19

The correct answer is d. 31 CFR Chapter X 1020.315(d); 103.22(5)
Outline III B(3)
Alpha should be reviewed annually to ensure its stock continues to be listed on a major exchange, and Beta and Zeta are not listed businesses, so the bank must conduct a review annually.

Question 20

A bank is conducting due diligence for a foreign correspondent bank account. Which of the following is NOT required information?
A. The identities of the correspondent bank’s true ownership
B. Information on the government licenses of the correspondent bank
C. Copies of the tax return of the correspondent bank
D. Information on the products and services the correspondent bank offers

Answer 20

The correct answer is c. 31 CFR Chapter X 1010.610
Interagency BSA/AML Manual
Outline VIII C(2)(b)

Question 21

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

Answer 21

The correct answer is c. 12 CFR 21.21(c)(3), 12 CFR 208.63(c)(3), and 12 CFR 326.8(c)(3)
12 USC 1958
Outline I B(4)(c)

Question 22

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

Answer 22

The correct answer is d. 31 CFR Chapter X 1020.315(b), (c) and (e)
Outline III B(2)(d) and (4)
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 non-listed business.

Question 23

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

Answer 23

The correct answer is d. 31 CFR Chapter X 1010.311 , and FIN-1988-R002,
formerly known as Administrative Ruling 88-2
Outline IV A and C
The bank is not responsible for filing a CMIR because it was neither the sender nor the receiver of the cash.

Question 24

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

Answer 24

The correct answer is d. 12 CFR Chapter X 1010.310
Outline III A
This is the only one of the choices that involved currency in excess of $10,000

Question 25

A compliance officer is constructing a review of a transaction in which M, 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. M’s date of birth
B. M’s deposit account number
C. The serial numbers of the travelers’ checks purchased
D. The name of the branch where the transaction occurred

Answer 25

The correct answer is c. 31 CFR Chapter X 1010.415(a)(1)(i)(D)
Outline VI B(1)

Question 26

Which of the following is an accurate statement according to the requirements of the customer identification program regulations?
A. A bank must always require documentary verification of a customer’s identification
B. A bank may waive any part of the CIP requirements if senior management approves the waiver and there is a good cause
C. A physical address or a post office box is acceptable for any new customer
D. The bank’s CIP program must enable it to form a reasonable belief about the identity of the person

Answer 26

The correct answer is d. 31 CFR Chapter X 1020.220(a)(2)
Outline X B(3)(a)(i)
CIP regulatory requirements cannot be waived. A bank may use non-documentary methods to verify identification if it is reasonable to do so. A physical address is required for all customers except for a few exceptions, such as a person on active duty with an army post office box.

Question 27

. When all the required information is NOT provided by a person purchasing a cashier’s check with $8,000 in currency, what should the bank do?
A. Refuse the transaction
B. Complete the transaction and record available information
C. Complete the transaction and file a SAR
D. Complete the transaction and insist that the customer return with the required information

Answer 27

The correct answer is a. Outline VI A, B

The bank should not carry out a transaction that will result in a BSA violation.

Question 28

In which of the following circumstances is it LEAST appropriate for a bank to file a SAR regarding Internet activity?
A. Bank determines that one of its customers is the victim of identity theft
B. Bank becomes aware of identity theft of its domain name (i.e., another entity selects a name similar to the bank’s in order to confuse customers and obtain confidential financial information)
C. Bank discovers that someone has hacked into its data system in order to obtain confidential customer data
D. Bank determines through its transaction-monitoring program that a customer is making electronic transfers between his own checking and savings accounts that are just below the $10,000 reporting level

Answer 28

The correct answer is d. The other activity involves potential or suspected wrongdoing. The transfer of funds between an individual’s own account is less suspicious because it is less likely to be a criminal act or to facilitate a criminal act.

Question 29

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

Answer 29

The correct answer is d. 31 CFR Chapter X 1010.415(a)
Outline VI B
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.

Question 30

The Report of International Transportation of Currency or Monetary Instruments Report (CMIR) must be filed with the Bureau of Customs. Which option best describes the monetary items that must be reported on a CMIR?

A. Traveler’s checks, money orders, bills of lading, cash, or coin from the U.S.

B. Traveler’s checks, money orders, warehouse receipts, cash, or coin from the U.S.

C. Traveler’s checks, money orders, ACH transfers, cash, or coin from the U.S.

D. Traveler’s checks, money orders, promissory notes with no payee, cash, or coin from the U.S.

Answer 30

The correct answer is d. A, B, and C are incorrect because bills of lading, warehouse receipts, and ACH transfers are monetary instruments that are not required to be reported using a CMIR.

Question 31

A bank may exempt certain types of customers from currency transaction reporting. Which statement is true regarding the Designation of Exempt Person (DOEP)?

A. Banks are required to file a DOEP report for, or conduct an annual review of, all customers who are Phase I

B. Banks must file DOEP reports for entities exercising governmental authority

C. An annual review is not required when a financial institution exempts a bank that is a customer of the financial institution

D. Before banks can treat a Phase II customer as exempt, it must ensure that the business derives no more than 25 percent of its gross revenues from any ineligible business activity

Answer 31

The correct answer is c. A is incorrect because the DOEP filing and annual review is only required for Phase I customers that are businesses listed on a major national stock exchange (‘‘listed businesses’’). B is incorrect because banks are not required to file a DOEP report for entities exercising governmental authority as they are considered customers who are Phase I, and are therefore, exempt. D is incorrect because before treating a Phase II customer as exempt, a bank must ensure that the business derives no more than 50 percent of its gross revenues from any ineligible business activity.

Question 32

Suspicious activity reporting forms the cornerstone of the Bank Secrecy Act (BSA) reporting system. Which statement best describes why a Suspicious Activity Report (SAR) is used?

A. To exempt certain customers from submitting a Currency Transaction Report, unless those customers are engaging in ineligible activities

B. To report large amounts of monetary instruments entering or leaving the U.S. in an aggregate amount exceeding $10,000

C. To report known or suspected violations of law or suspicious activity observed by financial institutions subject to the regulations of the BSA

D. To report a financial interest in, signature, or other authority over one or more financial accounts in foreign countries

Answer 32

The correct answer is c. A is incorrect because this describes why a Designation of Exempt Person (DOEP) form is used. B is incorrect because this describes why a Report of International Transportation of Currency or Monetary Instruments (CMIR) form is used. D is incorrect because this describes why a Report of Foreign Bank and Financial Accounts (FBAR) form is used.

Question 33

Who is responsible for filing a Report of International Transportation of Currency or Monetary Instruments (CMIR)?

A. A bank employee is the primary person filing a CMIR

B. A commercial bank files a CMIR when monetary instruments are received from an established customer who maintains a deposit relationship with the bank

C. Your customer who transported currency exceeding $10,000 from a place outside the United States

D. The U.S. Postal Service when they mail over $10,000 in currency into or out of the United States

Answer 33

The correct answer is c. A is incorrect because a bank employee, rarely, if ever, is responsible for filing a CMIR. B is incorrect because CMIR is not required to be filed by a commercial bank when monetary instruments are shipped to or received from an established customer maintaining a deposit relationship with the bank. D is incorrect because the obligation to file the CMIR is solely on the person who transports, mails, ships or receives over $10,000 in currency into or out of the United States. No other person is under any obligation to file a CMIR

Question 34

FinCEN collects and analyzes the currency transaction information on a Currency Transaction Report (CTR) to support law enforcement investigative efforts to abolish worldwide money laundering developments. Which option correctly describes a reportable currency transaction?

A. A currency transaction is any transaction involving the physical transfer of currency from one person to another and covers deposits, withdrawals, exchanges, or transfers of currency or other payments

B. A currency transaction is any transaction involving the electronic transfer of currency from one person to another and covers deposits and payments

C. A currency transaction is any transaction involving only the physical transfer of foreign currency from one person to another and only covers wire transfers disbursed in cash and foreign currency exchanges

D. A currency transaction is limited to transactions involving the physical transfer of currency from one business entity to another and covers deposits, withdrawals, exchanges, or transfers of currency or other payments

Answer 34

The correct answer is a. B is incorrect because a currency transaction involves cash, not electronic transfers and covers more than just deposits and payments. C is incorrect because a currency transaction involves more than just foreign currency and is not limited to foreign currency exchanges or wires disbursed in cash. D is incorrect because a currency transaction involves both business entities and individuals.

Question 35

The requirement to file a Currency Transaction Report (CTR) applies to which institution?

A. Only banks under federal supervision that are FDIC insured

B. Only banks under OCC supervision and that are members of the Federal Reserve

C. Only financial institutions that would be Phase I exempt

D. All financial institutions, including casinos and money service businesses

Answer 35

The correct answer is d. A, B, and C are incorrect because all financial institutions including casinos and MSBs must file CTRs.

Question 36

With the globalization of the economy, more and more people in the U.S. have foreign financial accounts. Which situation would require completion of a Report of Foreign Bank and Financial Authority (FBAR)?

A. A U.S. person has foreign financial accounts that have an aggregate value exceeding $5,000 at any time during the calendar year

B. A U.S. person has financial interest in one or more accounts in a military banking facility

C. A non-resident of the U.S. who has signature authority on one or more accounts in a foreign country

D. A U.S. person has financial interest in one or more accounts in Russia and the aggregate value of the account exceeds $10,000 during the calendar year

Answer 36

The correct answer is d. A is incorrect because a FBAR is required when the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year. B is incorrect because an account in a ‘‘military banking facility’’ is not considered to be an account in a foreign country. C is incorrect because the FBAR filing requirements are for U.S. citizens or residents only.

Question 37

According to FinCEN, there are four core elements of a customer due diligence program and they should be explicit requirements in the anti-money laundering (AML) program for all covered financial institutions. Which option is one of those core elements?

A. Beneficial ownership identification and verification

B. Filing of exemption forms for all marijuana businesses seeking to open an account with the bank

C. Reporting to the news media regarding the subjects of any Suspicious Activity Reports (SARs)

D. Filing Currency Transaction Reports (CTRs) within 90 days of suspicious transactions

Answer 37

The correct answer is a. B, C, and D are incorrect because they are not part of the core elements of customer due diligence.

Question 38

To comply with the CDD Rule, bank employees must collect the same basic customer identification for beneficial owners that they currently collect under the bank’s CIP program: name, date of birth for individuals, address, and identification number. However, the beneficial ownership rule carves out an important exception that will be helpful to financial institutions. What is that exception?

A. Banks can rely on copies of identification documents instead of the originals

B. Banks need not form a reasonable belief regarding identity of the beneficial owner

C. Banks do not need to retain this information once it has been collected

D. Banks cannot use foreign documents to satisfy its CIP requirements

Answer 38

The correct answer is a. B is incorrect because forming a reasonable belief regarding the true identity of the beneficial owner is key to complying with the new rules. C is incorrect because, although banks are not required to retain the documents submitted, they do need to document the information collected and retain that documentation for five years after the account is closed. D is incorrect because foreign documents are not prohibited.

Question 39

Steven is a CSR at Triple County Bank. He is currently involved in four separate activities, one of which requires him to obtain beneficial ownership information. Which activity requires Stephen to obtain beneficial ownership information?

A. Opening a new commercial checking account for a for-profit company

B. Sending out a notice foe a certificate of deposit (CD) rollover with no changes

C. Debiting a commercial account for a safe deposit box automatic renewal

D. Renewing a loan by extending the due date with no other underwriting required

Answer 39

The correct answer is a. B, C, and D are incorrect as these activities are exempt from the definition of new account under FinCEN’s rule.

Question 40

A loan officer at your bank is opening a commercial line of credit for a limited liability company. The individual opening the account has refused to provide Customer Identification Program (CIP) information on the beneficial owners, stating that he should not be required to give the bank personal information to open a business account. What should the loan officer do?

A. Refuse to open the account

B. Open the account and collect the information later

C. Fill out the certification form himself after the customer leaves the bank

D. Open the account without the information

Answer 40

The correct answer is a. B, C, and D are incorrect because the new rule requires that the bank obtain CIP on beneficial owners prior to establishing the account. The loan officer may wish to explain the requirements of the new rule to the prospective customer

Question 41

Under the ownership prong of the CDD Rule, the bank must identify any natural persons that hold a certain percentage of ownership in the legal entity. The financial institution may rely on information provided by the individual completing the certification form. What percentage of ownership triggers this requirement?

A. 50%

B. 25%

C. 10%

D. 35%

Answer 41

The correct answer is b. A, C, and D are incorrect because these are not the percentage of ownership used to define a beneficial owner.

Question 42

Under the CDD Rule, there is a two-pronged approach to defining a beneficial owner: an ownership prong and a control prong. What must a bank look for when determining if the control prong applies?

A. A single individual with significant responsibility to control, manage or direct the legal entity customer

B. Any ‘‘nominees’’ or ‘‘straw men’’ with apparent control over the legal entity seeking to establish the account

C. Any corporation or other legal entity that owns or controls the company that is establishing the account

D. Any stockholders with more than a 10% ownership of stock in the legal entity opening the account

Answer 42

The correct answer is a. B and D are incorrect because, under the control prong, a beneficial owner is defined as a single individual with significant responsibility to control, manage or direct the legal entity customer, including an executive officer or senior manager (e.g., a chief executive officer, chief financial officer, chief operating officer, managing member, general partner, president, vice president or treasurer) or any other individual who regularly performs similar functions. C is incorrect because a bank must always identify a living, breathing human as a beneficial owner. A corporate entity can never be a beneficial owner.

Question 43

Subject to certain limitations, banks are required to identify and verify the identity of the beneficial owner(s) of a legal entity customer when the customer opens an account. Which type of account is included under the CDD Rule?

A. Point of Sale (POS) credit products

B. Accounts to finance the purchase of postage

C. Commercial lines of credit

D. Accounts to finance insurance premiums

Answer 43

The correct answer is c. A, B, and D are incorrect because these are examples of categories of accounts that are not subject to the CDD Rule.

Question 44

Which option identifies the most significant change to the Bank Secrecy Act (BSA) program requirements under the CDD Rule?

A. Banks must file Currency Transaction Reports (CTRs) on cash deposits exceeding $10,000 in one business day

B. Banks may exempt some business entities from CTR reporting as long as those entities are not engaged in any ineligible activities

C. Banks must establish written procedures reasonably designed to identify and verify the beneficial owners of legal entity customers who open new accounts

D. Banks must monitor for suspicious activity and report any suspicious activity through the use of a Suspicious Activity Report (SAR)

Answer 44

The correct answer is c. A, B, and D are incorrect because these are BSA requirements that have been in effect for many years.

Question 45

Prior to the CDD Rule, banks were not required to know the identity of the beneficial owners that own or control their legal entity customers, and the Financial Action Task Force (FATF) criticized the U.S. for this omission. What serious issue had resulted from this practice?

A. It enabled individuals and entities seeking to hide ill-gotten proceeds to access the financial system anonymously

B. It created problems for banks attempting to use their Customer Identification Procedures (CIP) when identifying business entities

C. It prevented aggregation of cash deposits when those deposits were made at different branches of the same institution

D. It allowed banks and other financial institutions to understand the true nature and purpose of a customer relationship

Answer 45

The correct answer is a. B, C, and D are incorrect because they are not issues that resulted from this practice.

Question 46

Certain entities are excluded from the CDD Rule requirements. What option identifies two types of exempt entities?

A. A living trust and a sole proprietorship

B. A corporation and a partnership

C. A limited liability company and a foreign corporation

D. A limited partnership and a business trust created by a state filing

Answer 46

The correct answer is a. B, C, and D are incorrect because these entity types are included under the CDD Rule.

Question 47

Banks are required to obtain a certification from the individual opening an account for a legal entity, at the time the account is opened. What is the purpose of the certification?

A. Confirm the names of the beneficial owners

B. Verify the status of the beneficial owner as owner of the legal entity

C. Verify the tax-exempt status of the legal entity for IRS reporting purposes

D. Confirm that the entity is not a charitable organization

Answer 47

The correct answer is a. B is incorrect because banks are not required to verify the status of the beneficial owner as the owner of the legal entity. Instead banks are required to verify the identity of the beneficial owners. C and D are incorrect because determining the tax exempt or charitable status of the entity is not the purpose of the certification form.

Question 48

Banks are not always comfortable having tellers answer customer questions about Currency Transaction Report (CTR) reporting. For this reason, FinCEN provides a pamphlet, Notice to Customers: A CTR Reference Guide. Which statement best describes the educational pamphlet?

A. To discourage an employee from assisting a customer in structuring transactions

B. To be used by financial institutions to help answer CTR questions asked by customers

C. For internal use only because it contains information on the currency transaction reporting requirement

D. It is a document that financial institutions are required to use

Answer 48

The correct answer is b. A is incorrect because although banks may use the pamphlet to ensure that tellers are not inadvertently providing information assist customers in structuring transactions, the purpose of the pamphlet is that it is to be used as a resource to help customers understand CTR reporting. C is incorrect because the pamphlet can be provided to customers since it uses plain language to explain the CTR reporting requirement. D is incorrect because financial institutions are in no way required to use the pamphlet, but they may find it useful for communicating with customers when a customer has questions about particular currency transactions.

Question 49

Mr. Callier opens a new account with a $6,000 cash deposit into his new savings account and another $5,000 cash deposit into his new checking account. The CSR explains that because the transaction exceeds $10,000, the bank will need to complete a Currency Transaction Report (CTR). Mr. Callier says, ‘‘Separately, the deposits do not exceed $10,000, so why complete the report?’’ He also wants to know if completing the CTR will affect his deposits. Identify the best response the CSR should give to Mr. Callier.

A. Yes, you are right, Mr. Callier. If I separate the deposits, each transaction does not exceed $10,000, so we won’t have to complete the CTR

B. It’s our policy, Mr. Callier. We need to file the CTR when a transaction totals more than $10,000 in cash to make sure it’s not illegal. Because you are new to our bank and your transaction is more than $10,000, we need to file the CTR

C. Mr. Callier, multiple currency transactions totaling more than $10,000 during any one business day are treated as a single transaction if the bank has knowledge that they are by or on behalf of the same person. Together your transactions total $11,000, so a report is required. However, completing the CTR will not affect your cash deposits

D. Mr. Callier, the CTR is required because the total of your transactions is more than $10,000 in cash. We need to fill it out so my manager can report the transaction by the end of the day. This way we can track it and send it to law enforcement officials

Answer 49

The correct answer is c. A is incorrect because all cash transactions made by or on behalf of the same person in one business day must be aggregated and a CTR filed. B is incorrect because ‘‘it’s our policy’’ does not explain the need to file the CTR, or how it would or would not affect the deposits. Additionally, the teller should not be insinuating that the transaction may be illegal. D is incorrect because the explanation does not answer how completing the CTR will or will not affect the customer’s transaction and hints that the CSR believes there may be something illegal in the transaction.

Question 50

. Mr. Harper comes to your teller window to deposit $12,500 cash into his checking account. When you explain that a Currency Transaction Report (CTR) is required, he asks to take back $3,000 so the deposit is just under the reporting threshold. Which option represents the best way to respond to Mr. Harper’s actions?

A. Explain that what he has done is highly suspicious and will need to be reported to law enforcement

B. Refuse to give him the money back and tell him, ‘‘Once you give it to us, it’s ours and you can’t take it back.’’

C. If your bank allows you to do so, provide the FinCEN brochure that more fully explains the CTR requirements or advise Mr. Harper that it is against the law to intentionally act in a manner to avoid the filing of a CTR

D. Give him the money back, say nothing and immediately file a Suspicious Activity Report (SAR) for structuring

Answer 50

The correct answer is c. A is incorrect because you cannot tell a customer that a SAR will be filed. B is incorrect because the bank cannot refuse to give the money back. D is incorrect because although this may ultimately be required, it could be that the customer simply does not realize that his actions are a violation of law.

Question 51

Which option would you use to describe the purpose of the Currency Transaction Report (CTR) to your customers?

A. Ensures that the bank is being used for legitimate purposes

B. Identifies suspicious activity on the report

C. Classifies illegal transactions and activities

D. Shares illegal activities among law enforcement agencies

Answer 51

The correct answer is a. B, C, and D are incorrect because they do not describe the purpose of the CTR.

Question 52

When you are responding to a customer’s questions explaining why you need to complete a Currency Transaction Report (CTR), you should include three key points. What is one of the key points?

A. What happens to the CTR after the form has been completed

B. What the BSA requirement is for completing the CTR

C. How the CTR explains why the transaction may be illegal

D. How completing the CTR may delay the processing of the transaction

Answer 52

5. Incorrect. The correct answer is c. A is incorrect because you cannot tell a customer that a SAR will be filed. B is incorrect because the bank cannot refuse to give the money back. D is incorrect because although this may ultimately be required, it could be that the customer simply does not realize that his actions are a violation of law.
6. Correct. The correct answer is d. A, B, and C are incorrect because they are insufficient responses. Completing a CTR or asking for information due to a deposit, withdrawal, currency exchange, transfer, or loan payment involving more than $10,000 in currency should be explained to the customers consistent with the bank’s policy in this area.

Question 53

Elsa Dudich comes into your branch with $10,100 in currency that she recently won gambling. She deposits $1,000 into her checking account and $9,100 into her money market savings account. Jason, the new teller completing the transactions, begins to complete a Currency Transaction Report (CTR). Ms. Dudich becomes concerned and asks Jason to explain what he is doing. How should Jason respond to Ms. Dudich?

A. That’s a good question. Let me get my supervisor

B. Under rules issued by the government, banks are required to use this form for transactions that appear suspicious

C. Our bank policy does not allow me to explain why it is being used for this transaction

D. The bank is required to file a CTR whenever a customer conducts transactions involving cash that adds up to more than $10,000 in a single day

Answer 53

The correct answer is c. A, B, and D are incorrect because most CTRs are filed for legitimate banking activity