Part II Chapter 7

Question 1

account analysis

Answer 1

Largely unique to the US banking system, this is a
record of the services provided to the customers of
a bank, along with detailed information on balances
and credits earned for those balances.

Question 2

account resolution

Answer 2

Usually made at the board of director’s level,
this is the basic account or service authorization
empowering a representative of the business to
enter into agreements for financial services. It
usually specifies the functions that can be performed
by specific individuals or job titles, the persons
authorized to open and close accounts, and the
entire scope and limitations of the relationship.

Question 3

blocked currencies

Answer 3

A type of political risk, this is the practice of a
government not allowing the conversion from the
local currency into a major trading currency.

Question 4

board/corporate resolution

Answer 4

A document usually approved by an enterprise’s
board of directors that gives a specific individual (or
individuals) the authority to facilitate the business of
the enterprise.

Question 5

certificate of incumbency

Answer 5

A document (signed by an enterprise’s corporate
secretary) confirming the authority of a corporate
officer to perform certain actions on behalf of the
enterprise.

Question 6

counterparty risk

Answer 6

The risk that the other party in a contract or financial

transaction will not perform as promised.

Question 7

current account

Answer 7

A bank depository account that is both a store of
value (deposits) and, perhaps more importantly for
treasury management purposes, a vehicle through
which an account holder uses a bank to transfer
funds to, and receive deposits from, a third party

Question 8

customer identification program (CIP)

Answer 8

The processes used by a financial institution to verify

and validate the stated identity of a customer.

Question 9

earnings credit allowance

Answer 9

The total dollar value of imputed interest that can
be used by a company to offset the bank service
charges incurred during the account analysis period.

Question 10

excess balance

Answer 10

A situation that occurs in an account when its
average collected balance is greater than either
the amount that the financial institution requires as
a compensating balance or the target level that a
company has chosen to maintain.

Question 11

expropriation

Answer 11

A government takeover of property, with or without

compensation.

Question 12

forced reinvestment

Answer 12

A type of political risk in which funds cannot be
transferred out of a country in any form, or the
amount that can be transferred is limited

Question 13

Foreign Corrupt Practices Act (FCPA)

Answer 13

US legislation that specifically prohibits payments
to foreign officials or their family members for
the purpose of gaining any improper business
advantage.

Question 14

International Bank Account Number (IBAN)

Answer 14

An international standard for identifying bank

accounts across national borders.

Question 15

know your customer (KYC)

Answer 15

The due diligence procedures that a financial
institution must follow to determine or verify the
identity of its customers.

Question 16

money market deposit account (MMDA)

Answer 16

A type of demand deposit account that pays an
unregulated rate of interest determined by individual
institutions.

Question 17

naturalization

Answer 17

A government takeover of a company.

Question 18

nonresident account

Answer 18

An account with a global financial institution that is
owned by a nonresident of the country in which the
global financial institution is chartered.

Question 19

request for information (RFI)

Answer 19

A document requesting information about a
vendor’s interest in providing, and ability to provide,
services. The requesting company provides a formal
description of its needs and asks selected vendors
to provide general information as to how they could
meet the company’s needs.

Question 20

request for proposal (RFP)

Answer 20

A formal document prepared by a sourcing
company that outlines objectives, needs, and service
requirements and may be used to obtain bids for
anything ranging from one specific service to a
company’s entire relationship.

Question 21

request for quotation/quote (RFQ)

Answer 21

A document whose purpose is to invite suppliers into

a bidding process on specific products or services.

Question 22

required majority ownership

Answer 22

A type of political risk in which a government
requires that companies must be owned by resident
nationals.

Question 23

scorecard

Answer 23

A management tool used to measure a service
provider’s performance in both a qualitative and
quantitative method.

Question 24

service agreement

Answer 24

A legal document (contract) that describes the
requirements and expectations of both the purchaser
and provider of a specific service or services.

Question 25

service level agreement (SLA)

Answer 25

An agreement that specifies the level of service
expected from a financial service provider, along with
a description of any penalties for failure to comply
with the requirements of the agreement.

Question 26

sovereign risk

Answer 26

The risk that a government may default on its debt.

Question 27

statement of beneficial interest

Answer 27

A document that specifies who has control over

funds or accounts.

Question 28

time deposit account (TDA)

Answer 28

A depository account that must be maintained at
a financial institution for a contractually specified
period of time.

Question 29

value dating

Answer 29

A process whereby a bank sets a forward value date
on which the value of funds credited to an account
is determined, and establishes a back value date on
which the value of funds debited from or credited to
an account is determined.

Question 30

virtual bank accounts

Answer 30

A set of internal ledgers with only the header

account being a real account.