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Flashcards in BSA/AML Deck (71):
1

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

2

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.

3

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

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.

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.

5

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.

6

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

7

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.

8

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.

9

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.

10

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.

11

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.

12

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.

13

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.

14

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

c. The serial numbers of the travelers' checks purchased

15

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

c. Copies of the tax return of the correspondent bank

16

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.

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.

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.

17

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

d. All loans exceeding $10,000, but not secured by real property

The record retention requirement applies to loans over $10,000, not secured by real property.

18

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

a. Refuse the transaction

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

19

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

d. Customer's identity

20

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

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

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.

21

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.

c. He should ask Ms. O'Reilly why she is conducting these transactions and then determine whether to file a SAR.

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.

22

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

c. Payroll customers

The other alternatives are all types of entities that are exempt under the Phase I rules.

23

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

d. The bank's CIP program must enable it to form a reasonable belief about the identity of the person

CIP regulatory requirements cannot be waived. A bank may use nondocumentary 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.

24

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

c. Al Williams Seafood Restaurant

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.

25

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.

a. A SAR should be filed.

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.

26

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

d. Monitor cash transactions of less than $10,000 for suspicious patterns

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.

27

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 nonlisted 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

d. Alpha, Beta, and Zeta

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.

28

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

a. Submit a copy of the supporting documentation with the SAR

29

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.

c. Ms. Redmond need not file a SAR on this incident because the total amount is less than $25,000.

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.

30

What are the 4 "pillars" of a BSA program?

1. Policies and procedures for compliance, reporting and recordkeeping.
2. Training of appropriate personnel (including Board)
3. System of internal controls
4. Person responsible for day-to-day compliance activities (BSA Officer)

31

When is a CTR required?

Cash in or cash out of MORE than $10,000 by the same person or on behalf of the same person (or entity) on any one business day.

32

What is Phase I of CTR exemption requirements?

1) Automatically eligible for an exemption if:
- Other financial institutions
- Any entity performing governmental-type functions
- Listed entities (including their subsidiaries) - publicly traded on a stock exchange. Be careful with franchises!
2) File an exemption for only for listed entities.

33

What is Phase II of CTR exemption requirements?

Businesses that are not listed on any exchange that meet certain qualifications before the exemption can be granted:
- Customer must have a transaction account
- Must be a customer for 2 months before exemption is permitted
- They must have frequent reportable transactions (5/yr)

34

What are some customers that are not eligible for CTR exemptions?

Examples include: Doctors, lawyers, auto or boat dealers

35

How often must the Bank verify a customer's CTR exemption status?

at least annually. This must be a documented review.

36

When must the Bank file an exemption form for a customer who is eligible for CTR exemptions?

Within 30 days of an exemptible transaction.

37

What is the dollar amount threshold for a SAR if a bank suspects an identified insider ( of committing or aiding in committing a crime?

There is no dollar amount threshold.

38

A SAR must be filed when the bank detects a known or suspected crime involving $_____ or more and has a substantial basis for identifying a suspect.

$5,000

39

A SAR must be filed when the bank detects a known or suspected crime involving $_____ or more and has no substantial basis for identifying a possible suspect.

$25,000

40

A SAR must be filed when the bank suspects transactions aggregating $____ or more than involves potential money laundering or violation of the BSA.

$5,000

41

If there is continuous suspicious activity, how often should a bank file a SAR?

Re-file a supplemental/additional SAR every 90 days (quarterly)

42

Who must be notified when a SAR has been filed?

the Board or committee

43

T/F: You can't inform the person on whom a SAR has been filed?

True

44

What information should you collect on a Monetary Purchase Record if the purchaser is also a depositor?

Name
Date
Type of Instrument
Serial numbers
Dollar amount
Verification and method of verifying identity

45

What information should you collect on a Monetary Purchase Record if the purchaser is not a depositor?

In addition to the other things you'd collect for a depositor, must also collect:
Address of purchaser
SSN or other identifying number
Birthdate

46

Are there any recordkeeping requirements for wire transfers over a certain threshold?

Yes, the Bank must maintain records for fund transfers for $3,000 or more.

47

What does FinCEN stand for?

Financial Crimes Enforcement Network (Treasury)

48

What is a 314(a) request?

A law enforcement agency may request information from a financial institution by contacting FinCEN.

49

What is a 314(b) request?

A voluntary information request between financial institutions regarding possible terrorist financing or money laundering activities.

50

What is the bank's responsibilities regarding 314(b) requests?

Both banks must notify FinCEN if a bank participates in this type of request/activity. This notification is good for 1 year.

51

What does MSB stand for?

Money service business

52

What are examples of MSBs?

Financial services providers who are:
- currency dealers or exchangers
- check cashers
- issuers of traveler's checks, money orders or stored value
- sellers or redeemers of traveler's checks, money orders or stored value
- money transmitters

53

With the exception of money transmitters, what is the threshold for a company to be considered a MSB?

Someone who conducts more than $1,000 in business with one person in one or more transactions in one category of activity in any one day.

*Money transmitters have no activity threshold.

54

Who must MSBs register with every 2 calendar years?

The Treasury

55

Who is a MSB does not have to register with the Treasury?

USPS

56

BSA requires recordkeeping of all non-real estate loans above $______.

$10,000. Banks must record the name and address of the borrower, amount, purpose and date of the loan.

57

What does PEP stand for?

Politically exposed persons

58

What is a politically exposed person?

A senior judicial or non-elected administrative official of a foreign government, or certain family members.

59

What is pouch activity?

Entails the use of a courier, carrier or other agent that transports currency, monetary instruments or other documents from outside the US to a financial institution in the US.

60

What are the three requirements for CIP?

- Verify identity
- Maintain records of identifying information
- Determine whether the person appears on a list

61

What are the 4 elements of identity that is required to be captured for CIP?

Name
Address
DOB
ID #

62

Once a person's identifying information is collected, what's the next requirement under CIP?

Verifying the information that has been received (through documents or non-documentary means)

63

What if a bank cannot form a reasonable basis that you know a customer's true identity for certain?

CIP must prescribe measures to obtain information on others associated with the customer (i.e., signatories) when standard methods are insufficient.

64

Does BSA require that banks maintain actual copies of the documents that for verifying identities?

No, actual copies are not required, but just DESCRIPTIONS of the documents that were relied upon.

Some states may prohibit actual documents.

65

T/F: CIP must include procedures for determining whether the customer appears on any list of known or suspected terrorists or terrorist organizations issued by an Federal government agency and designated as such by Treasury.

True. There's no CIP specific list, but we must run every person thru OFAC.

66

BSA requires that banks give adequate notice to customers that the bank is requesting info to verify their identities. When and how must the notice be given?

Before the account is opened, either orally or in writing, may be posted in lobby or website, may be included on the account application.

67

This type of prohibited transaction allows a transaction to happen, but we won't give it back.

Blocked account

68

This type of prohibited transaction is not allowed to happen.

Rejected transaction.

69

What are some of the countries that appear on the country-specific sanctioned list, for diamond trading, narcotics trafficking, nonproliferation (arms control) or terrorism reasons?

Balkans
Cuba
Iran
Iraq
Liberia
North Korea
Sudan
Syria
Zimbabwe

70

What are exceptions to blocking or rejecting transactions called?

licenses

71

If you have a specific license that allows a transaction to occur, what does the bank need to do?

Verify the license with OFAC.