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GLOBAL FINANCE WITH ELECTRONIC BANKING > Module 4 > Flashcards

Module 4 Flashcards

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1
Q

What is the primary purpose of regulatory frameworks in global finance?

A

To maintain the stability, integrity, and security of financial systems.

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2
Q

Name three primary challenges financial institutions face in global finance compliance.

A

Financial stability, transparency, and protection against fraud.

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3
Q

What do international regulatory frameworks provide for financial systems?

A

Clear legal boundaries, risk mitigation, and oversight of electronic banking operations.

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4
Q

What risks do regulatory frameworks aim to manage in global transactions?

A

Fraud, money laundering, and financial crises.

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5
Q

What are the Basel Accords, and who developed them?

A

A set of international banking regulations by the Basel Committee on Banking Supervision (BCBS).

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6
Q

What was the focus of Basel I?

A

Credit risk and requiring banks to hold capital equivalent to 8% of their risk-weighted assets.

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7
Q

How did Basel II enhance Basel I?

A

By adding guidelines for operational and market risks, improving risk management.

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8
Q

What did Basel III introduce after the 2008 financial crisis?

A

Stricter capital requirements, leverage ratios, and liquidity requirements.

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9
Q

What is the purpose of Anti-Money Laundering (AML) regulations?

A

To prevent the misuse of financial systems for illicit activities like money laundering and terrorist financing.

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10
Q

Which organization governs global AML and CTF standards?

A

The Financial Action Task Force (FATF).

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11
Q

What is the Volcker Rule, and what does it prohibit?

A

A regulation prohibiting banks from engaging in proprietary trading and limiting risky investments.

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12
Q

What is MiFID II, and where does it apply?

A

A European regulatory framework to increase transparency and protect investors in financial markets.

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13
Q

What does MiFID II require for transactions?

A

Near-real-time reporting to improve market transparency and oversight.

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14
Q

What challenges are addressed by regulatory frameworks for electronic banking?

A

Cybersecurity, fraud, and cross-border transactions.

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15
Q

What is PSD2, and what does it aim to improve?

A

An EU regulation to enhance competition, innovation, and security in electronic payments.

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16
Q

What is Strong Customer Authentication (SCA) under PSD2?

A

A requirement for multi-factor authentication to secure online payments.

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17
Q

How does PSD2 enable Open Banking?

A

By allowing third-party providers access to bank account information with customer consent.

18
Q

What does the Bank Secrecy Act (BSA) mandate for e-banking platforms?

A

Monitoring digital transactions and complying with AML regulations.

19
Q

What is Know Your Customer (KYC)?

A

A tool to verify customer identity and assess risks of money laundering or terrorism financing.

20
Q

What is the purpose of Transaction Monitoring Systems?

A

To detect unusual or suspicious transaction patterns in real-time or batch reviews.

21
Q

How does AML Compliance Software support banks?

A

By automating suspicious activity detection and generating reports.

22
Q

What is a Risk-Based Approach (RBA) in compliance?

A

A strategy categorizing customers by risk level for enhanced due diligence.

23
Q

Why are Internal Audits and Compliance Reviews essential?

A

To evaluate adherence to regulatory standards and identify gaps.

24
Q

What does Sanctions Screening involve?

A

Checking transactions against international sanctions lists to avoid penalties.

25
Q

What are Regulatory Reporting Systems used for?

A

Automating the generation and submission of reports to regulatory bodies.

26
Q

How do Cybersecurity and Data Protection Tools ensure compliance?

A

By preventing data breaches and ensuring compliance with data protection regulations.

27
Q

Why are Employee Training and Awareness Programs important?

A

To educate bank staff on compliance policies and regulatory requirements.

28
Q

What was the key regulatory failure in the Wells Fargo scandal?

A

Lack of internal controls leading to the creation of fraudulent accounts.

29
Q

What consequences did Wells Fargo face after the scandal?

A

$3 billion in fines, loss of customer trust, and stricter consumer protection regulations.

30
Q

What issue was central to the Danske Bank money-laundering scandal?

A

Weak internal controls allowing €200 billion in suspicious transactions.

31
Q

What reforms followed the Wirecard scandal in Germany?

A

Stricter auditing and compliance measures for fintech companies.

32
Q

What does Enhanced Due Diligence (EDD) focus on?

A

Thorough reviews of high-risk customers to mitigate financial crime risks.

33
Q

How do real-time Transaction Monitoring Systems aid compliance?

A

By flagging large or suspicious transaction patterns for further investigation.

34
Q

What is the role of Customer Due Diligence (CDD)?

A

Verifying identities and monitoring risks in customer activities.

35
Q

What is the significance of sanctions lists in compliance?

A

They prevent financial institutions from transacting with blacklisted entities.

36
Q

What is the focus of capital adequacy requirements under Basel Accords?

A

Ensuring banks have enough reserves to absorb potential losses.

37
Q

Why are leverage ratios important in Basel III?

A

To prevent banks from excessive borrowing that may lead to systemic risks.

38
Q

What does liquidity management ensure in Basel III?

A

That banks have enough liquid assets to meet short-term obligations.

39
Q

What risks do AML and CTF regulations specifically target?

A

Money laundering and financing of terrorist activities.

40
Q

How do strong internal controls benefit financial institutions?

A

By reducing risks of fraud, regulatory breaches, and financial losses.

GLOBAL FINANCE WITH ELECTRONIC BANKING (7 decks)

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