Ch 4 Deck 5

Question 1

Under regulation FD information when material nonpublic information is intentionally or unintentionally released to some trading on it is only legal

Answer 1

after the required public disclosure is made

Question 2

Firms are required to establish and maintain reasonable procedures to prevent insider trading Most firms do this by

Answer 2

constructing a Chinese wall (information barrier)

Question 3

The purpose of a Chinese wall is to prevent the flow of material nonpublic information

Answer 3

from sensitive areas like IB to other parts of the firm

Question 4

Chinese walls often include physical separation between

Answer 4

investment banking areas and trading areas.

Question 5

to prevent insider trading, Sometimes when information is needed from an employee it is necessary to

Answer 5

bring the employee “over the wall”

Question 6

to prevent insider trading, Investment Banking and Research areas must maintain on certain securities current

Answer 6

restricted and watch lists.

Question 7

to prevent insider trading, Investment Banking and Research areas must make sure that restricted and watch lists are

Answer 7

disseminated to employees

Question 8

list of securities that the firm and employees are currently restricted from trading in.

Answer 8

Restricted List

Question 9

list of securities that is under scrutiny from the firm’s compliance program.

Answer 9

Watch List

Question 10

To prevent insider trading, The firm’s policy must explain how and why a security is

Answer 10

placed on a list (watch or restricted) and when it can be removed

Question 11

To prevent insider trading, both watch and restricted lists should be

Answer 11

documented and records should be kept

Question 12

Three stages of money laundering are

Answer 12

1. Placement
2. Layering
3. Integration

Question 13

the stage of money laundering when money moves into the financial system

Answer 13

1. Placement

Question 14

the stage of money laundering when transactions take place in order to confuse the origin of the assets

Answer 14

2. Layering

Question 15

the stage of money laundering when the assets are invested in authentic investments.

Answer 15

3. Integration

Question 16

Law that requires certain steps from financial institutions as part of their anti-money laundering program.

Answer 16

The Bank Secrecy Act of 1970 (BSA ‘70)

Question 17

as an anti-money laundering measure, BSA ‘70 requires financial institutions to keep a

Answer 17

Monetary Instrument Log

Question 18

as an anti-money laundering measure, BSA ‘70 requires financial institutions to keep a

Answer 18

Monetary Instrument Log (MIL)

Question 19

A Monetary Instrument Log (MIL) records

Answer 19

cash purchases of monetary instruments

Question 20

monetary instruments tracked in A Monetary Instrument Log (MIL) include

Answer 20

Money orders
Cashiers checks
Traveler’s checks

Question 21

Monetary Instrument Log must record cash purchases of monetary instruments with a value over

Answer 21

$3,000

Question 22

A financial institution must maintain records in the MIL

Answer 22

for five years.

Question 23

as an anti-money laundering measure, BSA ‘70 requires financial institutions to file

Answer 23

Currency Transaction Reports (CTR)

Question 24

Currency Transaction Reports (CTR’s) are filed with

Answer 24

the IRS

Question 25

CTR's must be filed with the IRS on any cash transaction above

Answer 25

$10,000 in one day

Question 26

the 10,000 threshold for filing a CTR with the IRS can come from

Answer 26

several smaller transactions

Question 27

as an anti-money laundering measure, BSA '70 requires that when financial institutions observe possible BSA violations they must file a

Answer 27

Suspicious Activity Report (SAR) | Exam loves this one!!!

Question 28

BSA '70 requires financial institutions to file an SAR on any client who appears to be avoiding

Answer 28

Bank Security Act reporting requirements (i.e., filing MILs or CTRs)

Question 29

BSA '70 requires financial institutions to file an SAR on any client who is behaving

Answer 29

in a way that suggests money laundering or other illegal activity.

Question 30

BSA '70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows the funds are

Answer 30

derived from illegal activity

Question 31

BSA '70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows The transaction was intended to hide or disguise

Answer 31

funds or assets derived from illegal activity,

Question 32

BSA '70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows The transaction was designed to evade

Answer 32

reporting requirements or other laws/regulations

Question 33

BSA '70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows There was no

Answer 33

business or apparent lawful purpose for the transaction

Question 34

BSA '70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows The transaction was not

Answer 34

typical for the customer

Question 35

BSA '70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker-dealer knows of no reasonable

Answer 35

explanation for transaction after examining all available facts.

Question 36

At what point in the money laundering process is the money no longer traceable?

Answer 36

Integration

Question 37

An example of placement is cash routed through

Answer 37

front operations

Question 38

An example of placement is cash converted to

Answer 38

cashiers checks

Question 39

An example of layering is transferring money

Answer 39

across several accounts and different companies

Question 40

An example of layering is moving money into a

Answer 40

shell company

Question 41

transactions recorded in MIL's don't have to be reported

Answer 41

outside the firm

Question 42

ongoing amount of transactions that is suspicious

Answer 42

consistently just under 10,000

Question 43

Another name for an SAR is

Answer 43

a FinCEN