UNIT 25 QBANK Flashcards
Which of the following publishes and maintains a list of known terrorists and drug traffickers and those controlled by them or acting on their behalf?
A) The Financial Crimes Enforcement Network (FinCEN)
B) The Office of Foreign Assets Control (OFAC)
C) The Financial Industry Regulatory Authority (FINRA)
D) The Federal Open Market Committee (FOMC)
B) The Office of Foreign Assets Control (OFAC)
Explanation
Such a list is maintained by OFAC and is available to broker-dealers and other companies in the financial industry. It must be consulted when a firm takes on a new customer and on other occasions. The FOMC carries out open-market operations for the Federal Reserve. FinCEN is concerned with detecting and preventing the various steps of money laundering, and FINRA, of course, is responsible for regulating trades at the NYSE and in the over-the-counter (OTC) market in the United States.
The USA PATRIOT Act’s required Customer Identification Program is designed chiefly to prevent
I. real estate fraud.
II. funding of terrorist activities.
III. use of insider information.
IV. money laundering.
A) I and III
B) II and IV
C) II and III
D) I and IV
B) II and IV
II. funding of terrorist activities.
IV. money laundering.
Explanation
The Customer Identification Program that must be in place at every broker-dealer firm is designed to ensure that all customers are who they say they are. Accurate identification makes it more difficult to fund terrorist activities or launder money for those who might intend to.
Firms must file a SAR within how many days of becoming aware of a suspicious transaction?
A) 30 days, and they are required to notify the customer involved that a report has been filed
B) 30 days, and they are prohibited from notifying the customer involved that a report has been filed
C) 10 days, and they are prohibited from notifying the customer involved that a report has been filed
D) 10 days, and they are required to notify the customer involved that a report has been filed
B) 30 days, and they are prohibited from notifying the customer involved that a report has been filed
Explanation
A SAR must be filed within 30 days of becoming aware of the suspicious activity, and firms are prohibited from notifying the customer involved that a report has been filed.
Suspicious activity reports (SARs) are
A) filed with Financial Industry Regulatory Authority (FINRA) as required by FINRA’s code of conduct.
B) filed to the Financial Crimes Enforcement Network (FinCEN) as required by the USA PATRIOT Act.
C) filed internally only for analysis involving potential problematic patters.
D) filed with the Securities and Exchange Commission (SEC) as required by the Securities Exchange Act of 1933.
B) filed to the Financial Crimes Enforcement Network (FinCEN) as required by the USA PATRIOT Act.
Explanation
Suspicious activity reports (SARs) are filed to the Financial Crimes Enforcement Network (FinCEN) as required by the USA PATRIOT Act.
Those who look to hide money from government agencies and law enforcement to avoid the payment of taxes or to fund criminal enterprises often look to launder money in the following order:
A) placement, integration, layering.
B) layering, placement, integration.
C) placement, layering, integration.
D) integration, layering, placement.
C) placement, layering, integration.
Explanation
The three basic stages of money laundering are placement, layering, and lastly, integration. Placement is when funds or assets are moved into the laundering system and most susceptible to detection. The next stage is layering used to conceal the source of the funds or assets. This is done through a series of layers of transactions that are generally numerous and can vary in form and complexity. Lastly, integration is when the illegal funds are commingled with legitimate funds in what appear to be a legitimate business concern often using front companies operating on a cash basis.
An AML compliance officer should do all of the following except
A) insure the firm is properly training employees on the requirements of the BSA.
B) notify customers immediately when an SAR is being filed.
C) insure the firm is meeting all requirements of the Bank Secrecy Act for opening new accounts.
D) monitor compliance with all BSA requirements at the firm.
B) notify customers immediately when an SAR is being filed.
Explanation
Firms are prohibited from notifying customers when an SAR is filed.
A customer who tries to disguise deposits of more than $10,000 in currency by making multiple smaller deposits in currency is guilty of
A) structuring.
B) layering.
C) placement.
D) integration.
A) structuring.
Explanation
Placement, layering, and integration are phases of money laundering. Making multiple deposits to stay under the radar of having a CTR filed is structuring.
A bank employee has noticed that one of its customers has deposited $9,000 in his account every Monday, Wednesday and Friday for the past four weeks. Though the action could be legitimate, the customer might be trying to circumvent which of the following?
A) The Maloney Act
B) The Trust Indenture Act
C) The Bank Secrecy Act
D) The Securities Exchange Act
C) The Bank Secrecy Act
Explanation
The Bank Secrecy Act requires, among other things, that transactions in currency amounting to more than $10,000 in a single day be reported on a Currency Transaction Report, CTR (Form 112). By keeping deposits under $10,000, the depositor might be engaging in one of the many forms of structuring. That is, structuring deposits in such a way so as to avoid the reporting requirements.
A customer enters several orders in complex securities without concern on the returns or losses. This suspicious activity is most likely the result of which stage of money laundering?
A) Placement
B) Layering
C) Integration
D) Structuring
B) Layering
Explanation
Hiding the illicit nature of funds in money laundering is known as layering. This stage often involved using multiple accounts, countries, and asset types to leave a convoluted and difficult to follow trail on where the money came from. Customers unconcerned about losses can be a red flag for layering.
Under the USA PATRIOT Act, financial firms must create and maintain records of wire transfers only
A) to bank customers.
B) to a different state.
C) to retail investors.
D) of $3,000 or more.
D) of $3,000 or more.
Explanation
Records of wire transfers of $3,000 or more must kept, regardless of their destination.
The Specifically Designated Nationals (SDN) list must be checked
A) prior to distribution of dividends and interest.
B) when opening a new account for an individual or other entity.
C) prior to each trade in an account.
D) prior to settlement of each trade.
B) when opening a new account for an individual or other entity.
Explanation
The SDN list must be checked for each new customer when opening an account. There is no requirement to check the list once the account has been opened.
All of the following are stages of money laundering except
A) integration.
B) initiation.
C) placement.
D) layering.
B) initiation.
Explanation
Initiation is a made up term. The other options are the stages of money laundering.
If a broker-dealer suspects that a transaction involves funds derived from illegal activity, a suspicious activity report (SAR) would be triggered at what threshold?
A) At least $10,000 in funds or other assets
B) At least $5,000 in funds or other assets
C) More than $5,000 in funds or other assets
D) More than $10,000 in funds or other assets
B) At least $5,000 in funds or other assets
Explanation
The threshold for triggering a suspicious activity report (SAR) is at least $5,000 in funds or other assets. Do not confuse this with a Currency Transaction Report (CTR), which is triggered by amounts greater than $10,000.
Which of the following would require the filing of a SAR? Any transaction alone or in aggregate involving at least
A) $5,000 and appears to serve no business or legal purpose.
B) $3,000 and appears to serve no business or legal purpose.
C) $3,000 on a single day.
D) $5,000 on a single day.
A) $5,000 and appears to serve no business or legal purpose.
Explanation
SARs are required to be filed by the firm if the transaction appears to serve no business or legal purpose, and the transaction involves alone or in aggregate at least $5,000.
A customer wishes to deposit $20,000 in cash into her account. This requires
A) filing a CTR with FinCEN.
B) written verification of the source of funds.
C) principal approval.
D) filing a SAR with FinCEN.
A) filing a CTR with FinCEN.
Explanation
Any cash transaction of over $10,000 in cash must be report to FinCEN using the Currency Transaction Report. Reps must be aware of their firm’s procedures, however, because many firms have more stringent internal requirements (such as receiving principal approval).
Deposits received in currency for amounts over $10,000 in a day would require the firm to report the transaction in how many days on what form?
A) SAR within 30 days
B) CTR within 30 days
C) SAR within 15 days
D) CTR within 15 days
D) CTR within 15 days
Explanation
The Bank Secrecy Act requires firms to report on a CTR any currency received in the amount of more than $10,000 on a single day, within 15 days.
Records relating to a Currency Transaction Report (CTR) must be retained for
A) five years.
B) four years.
C) six years.
D) three years.
A) five years.
Explanation
Currency Transaction Reports (CTRs) must be retained on file, together with other records generated in conjunction with them, for five years.
Which of the following acts deals with money laundering?
A) The PATRIOT Act
B) The Securities Investor Protection Act of 1970
C) The Securities Exchange Act of 1934
D) The Securities Act of 1933
A) The PATRIOT Act
Explanation
The Securities Act of 1933 requires the registration of most new issues, The Securities Exchange Act of 1934 created the SEC, the Securities Investor Protection Act of 1970 created SIPC, and The PATRIOT Act written after 9/11 addresses money laundering and other anti-terrorist issues.
An officer of a financial firm has identified what might represent suspicious behavior on the part of a customer, involving more than $5,000. When must the firm file a suspicious activity report (SAR)?
A) Within 30 calendar days
B) Within 5 business days
C) By the end of the business day
D) Within 180 calendar days
A) Within 30 calendar days
Explanation
A SAR must be filed with FinCEN within 30 calendar days of the firm becoming aware of the suspicious activity. The suspected parties may not be informed that they are the subject of an SAR.
What is the final stage of money laundering?
A) Integration
B) Initiation
C) Placement
D) Layering
A) Integration
Explanation
Initiation is a made up term not related to money laundering. Placement is the first step, followed by layering and integration.
