Flashcards in Practice Exam Deck (101):
Under the Bank Protection Act, how often must a security program provide for training of officers and employees?
B. As needed
D. Initially and periodically
Which of the following statements describes a bank's reporting requirements when it awards a big-screen television, valued at $800, to a customer as a grand-opening prize?
A. The prize is not reportable
B. The cost of the prize is reportable on Form 1099-INT.
C. The fair market value of the prize is reportable on Form 1099-MISC.
D. The fair market value of the prize is added to the interest paid on the customer's account and reported on Form 1099-INT
Your bank has ten joint marketing agreements with non-affiliated third parties to offer additional financial products to your customers. Each of the contracts renews every two years. Prior to renewal, you should review the new contracts to determine whether ___________.
A. it would be cost-effective to offer the products directly
B. the third party has provided privacy notices to your customers
C. the products offered by the third party are competitively priced
D. the contract contains the appropriate third-party confidentiality clause
Regulation M covers leases for personal property ____________.
A. used in connection with a home-based business
B. in excess of $54,600, except for airplane leases
C. for personal, family, or household purposes for a period of time exceeding four months, for a total contractual amount not exceeding $54,600
D. used for agricultural purposes
The job responsibilities of a newly hired compliance officer include review of all bank advertising. This review has never been done before. Which of the following actions is MOST appropriate for the new compliance officer to take FIRST?
A. Discontinue all advertising and suspend payment of vendors until the review is complete.
B. Discuss the bank's advertising philosophy with management.
C. Discuss future advertising plans with management.
D. Inform the marketing department that all current and future advertising material will be reviewed.
The head of the banks collections and recovery department called you to ask about a proposed process improvement that he is considering for the department. He wants to reduce the number of third party debt collectors the bank uses to collect delinquent loans and use internal bank employees to conduct collection efforts, including calling delinquent customers and sending communications requesting payments. He wants your thoughts on the Fair Debt Collection Practices Act and its implications on such a change. Your advice to the collections and recoveries manager includes:
A. The bank employees will need to be fully trained in the provisions of the Fair Debt Collection Practices Act, since it applies to their collection activities
B. Debts collected by bank employees must be collected in the name of a fictitious third party in order to protect the bank from liability
C. The Fair Debt Collection Practices Act does not apply to debts collected by bank employees, however, the employees should be trained to refrain from the unfair and abusive provisions of the Act
D. The collection process should not be brought in house because of Fair Debt Collection Practices Act restrictions
The bank has decided to begin offering a full range of non-deposit investment products to retail customers. Your FIRST step should be to ____________.
A. review the state insurance licensing requirements
B. develop a program to obtain Series 6 & 7 licenses for the sales staff
C. develop new account forms that include processes to determine suitability
D. review the Interagency Statement on the Retail Sale of Nondeposit Investment Products
The dollar amount of the application reported on the HMDA LAR should be recorded as a number that is ____________.
A. exact to ensure that the correct application can be identified at a later date
B. rounded to the nearest hundred; for example, a loan of $150,400 should be reported as $150.4
C. rounded to the nearest thousand; for example, a loan for $150,400 should be reported as $150
D. rounded up to the next thousand; for example, a loan for $150,400 should be reported as $151
The dollar amount of the application reported on the HMDA LAR should be recorded as a number that is ____________.
A. exact to ensure that the correct application can be identified at a later date
B. rounded to the nearest hundred; for example, a loan of $150,400 should be reported as $150.4
C. rounded to the nearest thousand; for example, a loan for $150,400 should be reported as $150
D. rounded up to the next thousand; for example, a loan for $150,400 should be reported as $151
Which of the following should the compliance officer accomplish FIRST to implement the information sharing provisions of the Fair Credit Reporting Act?
B. Identify the institution's affiliates
C. Modify account holders' agreements by adding opt-out language
D. Prepare opt-in agreements to mail to existing account holders
A customer who has preauthorized transfers made on the 15th of each month to the utility company, sent written notification to the bank on the 5th of the current month that he wanted to discontinue the automatic transfers. The bank received the customer's notification on the 7th. On the 20th of the month, the customer telephoned to state that his account balance indicated that payment was NOT stopped. The bank should advise the customer that ____________.
A. the problem must be corrected by the utility company
B. the bank has no liability, but will discontinue the transfer effective as of the next billing cycle
C. federal law requires 30-day prior written notice to stop payment on preauthorized transfers
D. the account will be credited promptly
Under CRA rules, banks other than small banks must report which of the following types of loans?
A. Loans to small farms
B. Automobile loans secured by home equity
C. Unsecured consumer loans
D. Unsecured consumer credit card lines
An internal audit reveals APR calculation issues. In responding, you should FIRST ____________.
A. perform a root cause analysis
B. attend a seminar on Regulation Z
C. implement training for applicable employees
D. contact vendors regarding system enhancements
Which of the following is considered a non-listed business that is eligible for exemption from CTR reporting requirements?
A. Pawn shop
B. Auction house
C. Licensed real estate broker
D. Licensed pari-mutual race track
ABC Bank is considering offering a special loan promotion in conjunction with the local cosmetic surgeon, Dr. Tucker, PC. The banks loan application forms will be available in the doctors office and patients who want to finance cosmetic surgery procedures can arrange financing directly with the bank. Dr. Tuckers officer will refer patients to the bank and provide bank application forms upon request. The banks application forms include an authorization that the applicant signs allowing the bank to obtain information from Dr. Tuckers office as necessary to process the application for credit. Which of the following is true in connection with such applications?
A. the bank is permitted to contact the doctor's officer to determine and verify the medical purpose of the loan
B. the bank is not permitted to contact the doctor's office for information relating to the credit application
C. the bank is permitted to contact the doctor's office only if the loan is approved
D. the bank is permitted to contact the doctor's office to obtain any information about the applicant because the applicant provided the signed authorization
HMDA requires institutions that lose their reporting exemption status because of size or location to begin reporting by the ____________.
A. end of the calendar quarter in which the exemption is lost
B. end of the calendar year in which the exemption is lost
C. calendar year following the year in which the exemption is lost
D. calendar year following a 1-year grace period after the exemption is lost
An internal fair lending review indicated no evidence of overt discriminatory practices. However, 60% of the unsecured loans approved to male applicants were charged loan fees that were lower than the bank's policy, and only 10% of the female applicants received reduced loan fees. There was insufficient documentation in the credit files to justify these pricing differences. The MOST appropriate action the compliance officer should take is to ____________.
A. note the event, but indicate that no overt discrimination was found
B. conduct a complete demographic and regression analysis to determine the full extent of this fair lending issue
C. develop specific policy provisions for fee exception approvals and documentation, and retrain lending personnel
D. anticipate a referral to the Department of Justice on the next regulatory exam due to inconsistent application of loan policy that has resulted in disparate impact
A bank may provide services to a non-bank affiliate under contract for fees if ____________.
A. the contract may be cancelled at any time
B. the terms are substantially the same as those prevailing at the time for comparable non-affiliated transactions
C. the bank provides such services exclusively to the non-bank affiliate
D. prior written regulatory approval is obtained
The loan originators for consumer credit transactions secured by a dwelling in your institution are subject to all of the following requirements EXCEPT:
A. A criminal background check through NMLSR or law enforcement agency
B. Registration under the SAFE Act
C. Periodic training covering state and federal loan origination requirements
D. Membership in the National Mortgage Loan Originator Society (NMLOS)
By policy, a bank does not collect income information on employee loan applications. When completing the HMDA LAR's income field, the bank must record the ____________.
A. Zero dollar amount
B. income information, regardless of its policy
C. income information, but may use codes to protect the employee's identity
D. code for ''not applicable''
Which of the following procedures would be MOST effective in controlling the flow of information from the bank to the government in conjunction with SAR filing?
A. File SARs only after they have been reviewed by the board of directors.
B. Designate one department, such as Legal or Security, to process, review, and file SARs on behalf of the bank.
C. Allow individual branches to file SARs on behalf of the bank to ensure that filing time requirements are met.
D. Allow each business group or product group (e.g., Consumer Loans, Auto Loans) to develop and implement procedures to process, review, and file SARs related to its particular group.
One purpose of CRA Regulations is to ____________.
A. encourage banks to help meet the credit needs of their local community
B. require banks to satisfy all of the credit needs of their local community before they make loans elsewhere
C. require that banks increase their real estate lending
D. ensure that 51% of a bank's real estate loans are to individuals living in low- and moderate-income neighborhoods
A bank is considering changing its business hours of operation. Currently, branches arre not open on Saturdays and Sundays. The bank is considering opening all branches on Saturdays from 9:00 am to 11:00 am for routine teller transactions through the drive-up windows. The loan operations manager asks the compliance manager how this change will impact the process for mailing consumer loan disclosures to customers for mortgage loans. The compliance manager responds by explaining that:
A. The change will require the bank to consider Saturday as a business day for purposes of delivering Loan Estimates to consumers after receipt of an application.
B. The change will not affect the timing of delivery of Loan Estimates to consumers after receipt of an application.
C. The change will affect the timing of delivery of Revised Loan Estimates to consumers after receipt of an application.
D. The change will require the bank to consider Saturday as a business day for purposes of the 7 day waiting period prior to loan consummation.
Your bank is considering closing a branch office. You should review which of the following FIRST?
A. Percentage of out-of-area deposits
B. Ratio of loans in the assessment area to total loans
C. Bank's branch closing policy and procedures
D. How much time remains on the building lease
If the bank does not obtain the TIN from the deposit account holder when the account is opened, the Bank Secrecy Act requires that the bank ____________.
A. begin 28% withholding of interest
B. close the account after 30 days
C. obtain the TIN within a reasonable time after account opening
D. notify the Treasury Department of affected account information
During a review of your bank's customer identification procedures, you are likely to find regulatory deficiencies if the bank does NOT ____________.
A. require a CIP log at each branch in the prescribed format
B. require its employees to copy the customer's driver's license
C. permit a passport as an acceptable form of identification
D. require verification of the identity of each customer
A customer defaults on his automobile loan and the bank threatens to repossess the automobile. His uncle's corporation, his father's partnership, and his father-in-law agree to cosign the loan. The cosigner notice must be received by the ____________.
A. uncle's corporation only
B. father-in-law only
C. father-in-law and the father's partnership
D. uncle's corporation, the father-in-law, and the father's partnership
A recent regulatory change increased the amount of FDIC insurance coverage for individual depositors. The compliance manager should FIRST _____________.
A. develop a new policy in this area
B. maintain the current program without change
C. update the content of employee training material
D. revise the internal monitoring schedule in this area
In monitoring a bank's compliance with the federal Fair Housing Act, it is LEAST relevant to review ____________.
A. the bank's financing of rental property
B. handicap accessibility to property secured by a first mortgage loan made by the bank
C. the bank's participation in advertising for the sale of housing in a community within the bank's market area
D. the HMDA/LAR for the bank, if applicable, or, alternatively, the loan register for first mortgage loans generated by the mortgage department
When conducting a compliance review of consumer closed-end mortgage periodic statements, be sure to check for:
A. Balance on which the finance charge is computed
B. Past Payments Breakdown
C. Minimum Payment Warning Statement
D. Grace period, or that no grace period applies
When conducting an audit of IRS tax compliance procedures, you should select a sample of which of the following forms?
B. CTR Form 104
C. 17 F-IX-A
Your bank is considering a candidate for a vacant director position. The GREATEST potential regulatory risk, if the individual is appointed, is his or her ____________.
A. past overdraft history
B. current indebtedness to your institution
C. current indebtedness to correspondent banks
D. level of stock ownership in your institution
You learn that your bank has created a report of all deposit and loan customers. Presumed gender and ethnicity for each customer has been assigned based on customer first and/or last names. You should tell management that they ____________.
A. Must destroy the report because of fair lending concerns
B. May provide the report to a third party vendor who is using it to determine who will receive a flyer about home equity loans
C. Must provide the report to an affiliate for marketing purposes
D. May use the report to conduct an internal fair lending review
To determine whether your bank is a small servicer under Regulation Zs definition of small servicer and thereby exempt from RESPA requirements for early intervention mortgage servicing notices, you should:
A. Determine your bank's asset size as of December 31st of the prior calendar year
B. Determine the number of mortgage loans your bank originates as of the current date
C. Determine the number of mortgage loans your banks services together with any affiliates as of the current date
D. Determine whether your bank is located in a rural or underserved county
When establishing an exemption from currency transaction reporting for Phase II exempted customers, banks must perform all of the following EXCEPT ____________.
A. obtaining a signed customer exemption statement
B. filing Form 110 (Designation of Exempt Person)
C. establishing and maintaining a monitoring system to detect suspicious currency activities
D. manually reviewing the exempt person supporting documentation
When your bank receives a garnishment order for an account that potentially contains federal benefit payments, how long of a lookback period is the bank required to check the account for covered benefit payments?
A. 2 months
B. 1 month
C. 6 months
D. 3 months
Under the Interagency Statement on Retail Sales of Nondeposit Investment Products, the required disclosures can be provided to the bank's customer in all of the following ways EXCEPT:
A. orally during sales presentations
B. orally and in writing at the time an investment account is opened
C. in advertisements and promotional brochures
D. in writing by a teller when referring a customer to the investment sales area
The compliance manager's bank has a corporate initiative to acquire three financial institutions during the next two years. The recently completed regulatory examination included National Flood Disaster Protection Act violations, reimbursable violations of the Truth-in-Lending Act, a ''needs to improve'' rating under CRA, and violations for improperly completing hold notices under Regulation CC. On which of the following violations should the compliance manager focus FIRST?
A. National Flood Disaster Protection Act
B. Truth-in-Lending Act
D. Regulation CC
In which of the following situations is a bank required by federal regulation to verify and record the identity of the customer and provide that, and other specific information, only upon request from the IRS?
A. A customer asks to withdraw $5,000 from his checking account and asks that the withdrawal be issued in the form of a cashier's check.
B. An individual purchases $12,000 worth of traveler's checks using cash to pay for the purchase.
C. A customer uses cash to purchase traveler's checks totaling $2,000 and, at the same time, uses cash to purchase a cashier's check for $3,000.
D. A customer deposits $6,000 in cash to her savings account.
A number of bank customers are members of the Army Reserve and have been called to active duty for six months. Your bank's president wishes to issue a press release stating that the bank will suspend all loan payment requirements while loan holders are on duty, extend the maturity date of each loan, and permit interest to accrue at only 10% while the loan holders are on active duty. You are asked to review the press release. Which of the following statements represents the advice you should give the president?
A. The bank is in full compliance with the Servicemembers' Civil Relief Act.
B. The bank must reduce the interest rate to 6% on the date that the service persons enter the area declared as an official ''Disaster Area.''
C. The bank must reduce the interest rate on loans to military persons to 6% effective 30 days after notice is received by the bank.
D. Upon request, the bank must reduce the interest rate on the loans to 6% effective on the date that the service members are called to report for active duty, and remain at 6% until they are released from orders.
A banks credit standards for evaluating a consumers ability to repay a real estate mortgage loan should include:
A. consideration of the number of deposit accounts held at other institutions
B. consideration of the length of the deposit relationship with the institution
C. consideration of the value of the property securing the loan
D. consideration of the consumer's monthly payment on any simultaneous loan
First National Bank charges consumers for the cost of pulling a credit bureau report for all consumer closed-end mortgage loans. The fee of $24 is assessed at the time an application is received. This practice is:
A. Permitted, provided the fee is bona fide and reasonable
B. Not permitted, unless consumers have been given written estimated loan disclosures and indicated an intent to proceed
C. Not permitted, unless at least three business days have lapsed since the application was received by the creditor
D. Permitted, provided the fee is charged to all applicants and nonrefundable
You are developing bank procedures for determining when to escalate issues or problems identified as a result of repeat SAR filings on the same account. These procedures should include all of the following criteria EXCEPT ____________.
A. closing the account
B. notifying the customer
C. notifying law enforcement, if applicable
D. review by senior management and legal staff
The Loan Department received a written complaint from a mortgage loan customer alleging that the bank has made a number of errors in timely crediting loan payments to the borrowers mortgage loan account. To comply with the RESPA mortgage servicing requirements, the bank must FIRST:
A. Request supporting documentation from the borrower to verify borrower's identity
B. Acknowledge receipt of the complaint in writing within 10 days
C. Acknowledge receipt of the complaint in writing within 5 business days
D. Notify all consumer reporting agencies that the bank uses that a dispute has been filed on the account by the consumer
Your bank is in acquisition mode and you have been asked to provide a list of items you would like to review from the targeted bank. In order to minimize impact to the targeted bank, you have been asked to include only critical items that could impact the sale or its price. Which of the following items is MOST important to consider?
A. Complaint file
B. Compliance program policy
C. Board of Directors minutes
D. Internal monitoring audits
The bank's insurance representatives take applications in person and by telephone. Which of the following monitoring procedures is MOST effective for ensuring disclosure compliance when applications are taken by telephone?
A. Conduct a periodic random survey of sales representatives' telephone order forms.
B. Provide sales representatives with a copy of the review procedures used to monitor compliance.
C. Review a sample of the written disclosures for compliance with the regulatory requirements.
D. Compare the date that a written disclosure was mailed to the customer with the date of the telephone conversation.
Consumer High Cost Mortgage loans are subject to certain limitations, including which of the following?
A. No variable rates of interest
B. Negative Amortization
C. No escrowed accounts for taxes and insurance
D. Term of more than 25 years
In your fair lending self-monitoring program, you found a prohibited basis that would result in a regulatory violation was factored into the credit score. You should instruct management to FIRST ____________.
A. order an immediate stop to making loans
B. suspend the use of the credit scoring system until it can be corrected
C. contact all affected denied applicants regarding the potential unfair treatment and ask them to re-apply
D. rewrite the applicable policies and procedures to include a second review program to provide an independent evaluation
To avoid a violation of the Regulation O prohibition against paying an overdraft of a director, a bank should ____________.
A. establish a written, preauthorized interest-bearing credit line with a specified repayment schedule, with each director to cover possible overdrafts
B. charge sufficiently large overdraft fees to directors in order to deter overdrafts
C. report directors' overdrafts in writing, within ten days, to the bank's supervisory agency
D. limit the aggregate outstanding overdrafts of any one director to 2.5% of capital and surplus, or $100,000, whichever is less
A financial institution plans to introduce a new package of services that will include deposit accounts, investment services, credit products, and electronic banking. You are included on the project committee to develop and implement this package. Which of the following is the MOST appropriate role for you, as the compliance officer, on this committee?
A. Voicing opinions on pricing and features of the package
B. Informing the committee that bank and investment products cannot be packaged together
C. Keeping informed about the package so that compliance can be monitored once the package is implemented
D. Advising the committee on disclosure requirements, regulatory limitations, and liability provisions affecting the package
An audit of the bank's consumer real estate loan department revealed that Notices to Cosigners had not been provided when required. Which of the following actions should the bank take FIRST?
A. Establish a policy prohibiting the bank from making loans involving cosigners.
B. Identify all loans affected and reimburse borrowers for the overcharged amount.
C. Incorporate the notice requirement into the department's written lending procedures.
D. Conduct a follow-up review to determine whether corrective action has been taken
A financial institution offers residential loans. After reading a new regulation that expands HOEPA coverage, the compliance officer analyzes the institution's lending portfolio and determines that no existing loans are covered. The compliance officer should NEXT ____________.
A. advise management to sell that portion of the mortgage portfolio
B. incorporate the new HOEPA triggers into existing training and procedures
C. purchase new software that identifies HOEPA covered loans
D. draft a policy covering the new HOEPA rules
Which of the following procedures BEST determines whether a bank is in compliance with IRS regulations regarding deposit accounts?
A. Preparation of a computer printout showing TINs for all corporations with average balances in excess of $10,000 a month
B. Analysis of all signature cards to assure that at least two persons are authorized to sign checks, and that their TINs are on the cards
C. Analysis of a bank's last report on Form 1097C-1, and determination of whether follow-up reports have been filed within 60 days of the date of filing
D. Determination of whether TINs are properly requested for all new accounts opened
During the past several years, a bank has acquired several banks through merger. Management has decided to standardize the various deposit products into a simplified list of products, and to change all accounts accordingly. This will create beneficial changes for some customers and adverse changes for others. With regard to informing customers of the changes under Regulation DD, the BEST course of action is to ____________.
A. do nothing, because a disclosure need not be given when an institution acquires an account through acquisition or merger
B. send a notice to all account holders with the first statement that reflects the changes
C. revise the disclosures and mail them with a letter describing the changes, and stating that account holders should read about the new accounts
D. send a message via periodic statement that changes will occur and that account holders should request a disclosure showing the new accounts
You are concerned that the bank is disbursing funds before the right-of-rescission period has expired. Which of the following BEST describes the types of loans that you should examine for compliance?
A. Purchase-money mortgages
B. Refinancings of installment loans when no new money has been advanced
C. Home equity and ARM second mortgages
D. Renewals of home equity lines of credit with no new advances
Your bank receives a federal agency administrative order requiring the bank to produce records pertaining to a customer. The bank is entitled to reimbursement from the federal agency under Regulation S, UNLESS:
A. The records pertain only to an individual customer
B. The records are requested by the agency in connection with an investigation of the financial institution
C. The customer is not informed of the request in advance
D. The records are stored electronically
You have learned that the Federal Reserve has issued a proposed regulation to implement a recently enacted federal law. The proposal would have a significant adverse impact on one of the financial institution's existing activities. You have prepared a summary of the proposal for management. Which of the following actions is MOST appropriate for you to take?
A. Wait to distribute information until the rule is final.
B. Distribute the summary and begin efforts to comply with the proposed requirements.
C. Distribute the summary and advise that the financial institution may send a comment letter.
D. Distribute the summary along with guidance on how to lobby Congress to amend the recent law.
An auditor asked for your guidance regarding an audit in process. Review of 20 adverse action notices revealed that 2 were sent late, and 2 did not show the name and address of the credit reporting agency when required by the Fair Credit Reporting Act. Each of the errors was made by a different employee. Given these findings, you should advise the auditor to ____________.
A. continue with the audit, as this is not a problem
B. cite the errors as technical exceptions
C. review more items to determine more complete scope of the problem
D. read Regulation B and the Fair Credit Reporting Act for guidance
Under the Right to Financial Privacy Act, a customer's authorization to release information must include which of the following?
A. Customer's TIN
B. Date the account was opened
C. Records to be disclosed
D. Authorization for a period of one year
Which of the following is a contract provision permitted under Regulation AA rules regarding unfair or deceptive acts or practices?
A. Confession of judgment clause
B. Waiver of exemption clause
C. Assignment of wages
D. Purchase-money security interest in household good
On February 1, the bank board of directors approved the closing of one of its branches effective April 1 due to its continued unprofitability. Customers of the bank will be notified of the planned closing. The bank is at risk of violating which of the following regulatory requirements?
A. Adverse action notification
B. Analysis of community impact
C. Timely notice to the appropriate federal regulatory agency
D. Posted notification of closing on the premises of the branch to be closed
A compliance officer is monitoring the bank's opt-out forms and procedures for compliance with the requirements of the Privacy of Consumer Financial Information Regulation. A violation of this regulation will occur if the bank's opt-out form ____________.
A. requires the consumer to mail the form back to the bank to be effective
B. requires the signatures of all joint account holders to be effective for joint accounts
C. requires the consumer to call a toll-free telephone number during normal business hours in order to opt-out
D. permits its on-line banking customers to opt out electronically by completing the form on the bank's on-line banking site
A recent Homeowner's Protection Act (HPA) audit revealed that your bank releases a borrower from PMI coverage only when the borrower requests the release. After correcting your policies and procedures, your bank should NEXT drop PMI coverage for all eligible loans covered by HPA where the LTV has reached _____.
Under FIRREA Appraisal Standards, the definition of ''market value'' is NOT based on the consummation of a sale and passing of title under conditions whereby:
A. the buyer and seller are typically motivated
B. the buyer and seller agree to special or creative financing terms
C. the price represents the normal consideration for the property sold
D. a reasonable time is allowed for exposure on the open market
A bank has been meeting periodically with a local community activist group to get the groups input on the needs of the community and how the bank can help serve those needs through its lending activities. The bank president read an article about the CRA Sunshine Regulation and asked the compliance officer what the banks responsibilities are under this regulation as it relates to these meetings with the community group. Which of the following best represents the banks responsibilities under the CRA Sunshine Regulation?
A. The bank must document in writing the minutes of all meetings and place the minutes in its CRA Public File
B. The bank has no responsibilities under the CRA Sunshine Regulation in relation to the meetings
C. If the bank and the community group agree to any specific actions during the meetings, the bank must make those agreements public
D. If the meetings last for more than 3 years, the bank must formalize an agreement with the community group in writing and make that agreement public
Which of the following disclosures must be provided in writing at the time a variable rate deposit account is opened?
A. Frequency of potential rate changes
B. Consumer's right to withdraw funds at any time
C. Average rate paid on the account during the past 5 years
D. An example, based on a hypothetical $1,000 deposit, illustrating how the APY would have been affected by interest rate changes during the past 15 years
Which of the following are exempt from the requirement under Regulation GG to implement policies and procedures to block illegal transactions?
A. Gateway operators that receive ACH debits from a foreign sender
B. Participants in a money transmitting business
C. Money transmitting business operators
D. Beneficiary bank participant in a wire transfer system
Every bank's CRA public file must contain all of the following information EXCEPT a ____________.
A. list of branches
B. map of the assessment area(s)
C. list of the types of services that the institution offers
D. description of current efforts made to help meet community credit needs
For a bank located in an MSA, which of the following is MOST relevant when identifying the bank's CRA assessment area?
A. Competitors' trade areas
B. Data derived from marketing surveys
C. Data derived from zip code analysis
D. Political or geographic subdivisions
Which of the following types of collateral is EXEMPT from flood insurance regulations?
A. Individual condominium units
B. Agricultural land that includes gas or liquid storage tanks
C. Mobile homes attached to a foundation that is leased space
D. Commercial buildings under construction where the interior is unfinished
When making its modified LAR available to the public, a financial institution must include which of the following?
A. Gross annual income
B. Action taken date
C. Date application received
D. Application or loan number
A data integrity review for CRA and HMDA data submissions should include which of the following?
A. Analysis of loans made by geography
B. Analysis of applications by race, sex, and income
C. Verification of key data field accuracy
D. Verification that loan denials were denied in accordance with bank loan policy
Instructions to executive officers regarding their reporting obligations under Regulation O should NOT include ____________.
A. reporting extensions of credit to the board of directors
B. reporting their related interests
C. submitting detailed current financial statement with a loan application
D. completing the annual report of indebtedness to correspondent banks
A review of the bank's deposit accounts reveals that ABC Widget Manufacturing Company, Inc. has recently opened a NOW account. Which of the following actions is MOST appropriate for the bank to take?
A. Inform the customer that the account is closed.
B. Close the account and, pursuant to federal regulations, require reimbursement by the customer of interest paid on the account.
C. Convert the NOW account to a non-interest bearing account and discuss other options with the customer.
D. Re-title the account as ABC Widget Manufacturing, and remove Inc. from the title.
The PRIMARY objective of compliance monitoring for the minimum security devices regulations is ____________.
A. identification of instances of suspicious activity by the bank
B. evaluation of security procedures established by the bank's security officer
C. review of instances of criminal activity in the area that could impact the bank
D. determination of whether new employees are fingerprinted
Which of the following represents the required method for providing a consumer with the insurance consumer protection disclosures in connection with a loan transaction?
A. At the time of loan application
B. Included in the Truth-in-Lending disclosures
C. In a separate written disclosure at loan closing
D. With the required settlement service provider disclosure
Which of the following statements is NOT correct regarding the blocked countries and specially designated nationals covered by OFAC?
A. The customer's address must be outside the U.S. for OFAC to apply to the customer's transactions.
B. Nonbank subsidiaries of U.S. banks must comply with OFAC regulations
C. The bank is subject to fines, regardless of whether the funds get to the blocked country or specially designated national.
D. Fines and penalties for OFAC violations of the Iraqi Sanctions Act can cost banks up to $1 million and individuals up to $250,000 and/or up to 12 years in jail.
Under the banks Funds Availability Policy, funds are generally given next day availability. However, the bank discloses that it will also hold funds on a case-by-case basis and under certain exceptions as permitted by law. A check for $2,000 is deposited on Monday, July 6, 2015. A decision is made to place a hold on the check due to the fact that there are alterations on it. It is drawn on an out-of-state company. When should funds be made available to the depositor?
A. Since it is a large deposit, the first $500 on July 7th and remainder by July 13th
B. Next day; Policy requires next day availability and no valid reason exists for delay
C. $2,000 by July 13th
D. $200 by July 7th; $1,800 by July 13th
When reviewing for compliance under Regulation DD, which of the following items must be included in an advertisement for a time deposit account where a fixed interest rate is advertised?
A. Fees on the account
B. The APY
C. The basis for the interest rate
D. A description of how any early withdrawal penalty will be calculated
National Bank is headquartered in Colorado and has branches in Nebraska and Wyoming that it acquired two years ago. Each year the federal regulatory agencies publish the host state loan-to-deposit ratios for each state, which are used to determine if banks with interstate branches are in compliance with the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. To comply with the Act, the National Bank must:
A. Have a loan-to-deposit ratio in each state that equals or exceeds the published ratio for the state in which the branches are located
B. Have an average loan-to-deposit ratio for all combined offices of the National Bank in all states that equals or exceeds the published ratio for the state in which the bank's headquarters is located
C. Have a loan-to-deposit ratio in each state that equals or exceeds 50% of the highest loan-to-deposit ratio of any host state in which the bank has a branch
D. Have a loan-to-deposit ratio in each state that equals or exceeds 50% of the loan-to-deposit ratio of each host state
When reviewing exemptions for continued eligibility under the Bank Secrecy Act, a review of which of the following is LEAST helpful?
A. Suspicious Activity Reports (SARs)
B. Currency Transaction Reports (CTRs)
C. Customer organizational documents
D. Reports of International Transportation of Currency or Monetary Instrument Reports (CMIRs)
John Doe applies for a mortgage loan to purchase a duplex townhome. He intends to rent the duplex and use it as a tax shelter for his full-time employment income. He states on the application that the purpose of the loan is investment, adding that the property will not be his primary residence. Which of the following laws or regulations does NOT apply to this transaction?
A. Regulation Z
D. The Fair Housing Act
You have recently joined a financial institution and are asked to review the products and services for compliance. You discover that one of the lobby brochures for a deposit product does not include important required disclosures. Which of the following actions should you take FIRST?
A. Draft revisions to the notice to bring it into compliance.
B. Notify management of the problem with the brochure and the risks involved with its use.
C. Notify management that use of this brochure must be discontinued immediately.
D. Notify management that corrected brochures need to be sent to affected customers as soon as possible.
The bank made a purpose loan to a customer secured by margin stock. Now the customer wants to sell that stock and provide a substitution. The withdrawal and substitution is permitted under which of the following circumstances?
A. the borrower completes a new FR-U-1
B. the loan is converted to an unsecured loan
C. the withdrawal and substitution will not cause the existing loan to exceed the maximum 50% loan to collateral value
D. the withdrawal/substitution is not permitted
A customer presented $13,000 in cash for deposit to her account. She withheld $4,000 from the transaction when the teller began to complete a CTR. In this situation, the bank must ____________.
A. file the appropriate SAR form with respect to the structured transaction
B. make an entry in its log of cash sales of monetary instruments
C. file a CTR for the $13,000 transaction
D. refuse the transaction
Your bank has just found out that there may have been a breach of confidential information affecting debit cards. You should advise senior management to FIRST ____________.
A. inform all bank customers
B. close existing cards and reissue new cards
C. close all affected accounts, reopening with new account numbers
D. perform due diligence on the extent of the security breach
ABC Bank was informed by its examiners that a bank practice was potentially unfair because it met ALL BUT which of the following standards of unfairness under UDAAP in the Dodd-Frank Act?
A. the practice is likely to cause substantial injury to consumers
B. the practice is prohibited by regulation
C. the injury to the consumer is not reasonably avoidable by the consumer
D. the injury is not outweighed by a counterveiling benefit to the consumer
Your examiner tells you that your bank is straining its resources by not exempting any of its commercial account holders from CTR filing. The examiner notes that many of these customers are publicly traded and could be exempted. Which of the following actions is in the bank's BEST interest?
A. Exempt all commercial customers by the end of the month
B. Hire more staff to handle the volume of CTRs generated by your bank.
C. Provide your commercial customers with an exemption request form
D. Determine whether granting exemptions is a manageable risk for the bank.
The bank is beginning e-banking and wants to deliver a full range of consumer electronic services. The compliance manager is a member of the project team. Which of the following functions is MOST appropriate for the compliance manager during the INITIAL stages of this project?
A. Drafting the content of the electronic disclosures
B. Setting reasonable and competitive fees for the services offered
C. Determining which products to include in the electronic delivery system
D. Identifying the consumer protection regulatory provisions on liability and error resolution
Which one of the following policies would be prohibited under the Americans with Disabilities Act?
A. Charging employees who use service animals at work a reasonable fee to cover carpet cleaning
B. Prohibiting smoking in all public areas
C. Requiring a medical examination of a job applicant for a job requiring a medical examination
D. Conducting random drug testing/screening
In which of the following situations may customers be told that information about their accounts has been requested by a federal government agency?
A. The bank is asked to provide additional information about an IRS Form 1099.
B. The Secret Service is conducting its protective functions and furnishes a compliance certificate.
C. A customer's records relating to a crime against another bank are subpoenaed by a federal grand jury.
D. The government is engaging in an authorized foreign intelligence activity and furnishes a compliance certificate.
The PRIMARY purpose of the Right to Financial Privacy Act is to ____________.
A. require a financial institution to keep customers informed of inquiries about their accounts by federal government agencies
B. establish specific procedures for federal government agencies seeking information about a customer's financial records
C. establish a process by which a customer may object to a financial institution releasing his account information to federal government agencies
D. prohibit a financial institution from providing customer information to anyone without the customer's permission
Which of the following types of customers are NOT eligible to have a NOW account?
B. Two individuals in a joint account
C. Limited Liability Corporation
D. Municipal Water District
Your bank was criticized in an examination because it did not have an Identity Theft Red Flags Program in place in accordance with the Fair Credit Reporting Act (Regulation V). What is the FIRST step you should take to initiate such a program?
A. Prepare an annual report to the board of directors
B. Write detailed procedures for notifying law enforcement of reported incidents of identity theft
C. Identify all the types of covered accounts the bank offers
D. train all staff on how to respond to customers who are victims of identity theft
A consumer reporting agency notifies your bank that an individual is disputing the accuracy of her credit report regarding information about a delinquent loan that your bank reported. Your bank is required to FIRST ____________.
A. promptly cease reporting any information regarding the account in question
B. investigate the issue and report the results back to the consumer reporting agency
C. contact the individual directly and ask her to complete a dispute form
D. immediately update bank records to avoid further furnishing of inaccurate information.
RESPA prohibits which of the following bank practices?
A. Paying referral fees to its employees
B. Paying fees to its affiliate's employees for loan referrals if the employees performed a sufficient number of settlement services
C. Paying fees to brokers for loan referrals if the brokers performed a sufficient number of settlement service
D. Receiving complimentary flood certifications for its real estate portfolio when contracting for future flood determination services
The examiners criticized your bank at the last examination for failing to conduct a BSA/AML risk assessment of its operations. You have been asked to complete the assessment. Which of the following categories is NOT suggested by the FFIEC Examination Manual for your risk assessment?
A borrower, whose loan is subject to flood insurance because the collateral is located in a Special Flood Hazard Area as determined by the banks flood service provider, refuses to obtain and pay for flood insurance. The borrower claims that although the building is located in a SFHA, the building is above the base flood elevation and therefore, not subject to flood insurance. What should/could the bank do on this loan?
A. Let the borrower know that he could request a Letter of Map Amendment from FEMA to remove the property from the SFHA
B. Waive the flood insurance for the loan until the borrower obtains an exemption from FEMA for the property
C. Obtain a survey of the property and submit the information to the flood determination service and request a reconsideration of the determination
D. Submit a formal Letter of Map Amendment request to FEMA and waive the flood insurance until FEMA make a final determination
First National Bank provided a Loan Estimate disclosure to Mary and Bill Johnson with their mortgage loan application. The Loan Estimate was based on the 1003 application provided by the Johnsons. Two weeks later, the bank is sending the Johnsons a Revised Loan Estimate. Under which of the following changed circumstances is the bank permitted to issue a revised Loan Estimate?
A. The customer had originally requested a rate lock, but the bank had neglected to disclose the rate lock fee.
B. The bank disclosed $200 for an appraisal fee, but the affiliated appraiser that the bank usually uses is not available and the only appraiser that will conduct the appraisal charges $350.
C. The borrower subsequently decides to lock the rate when the advertised rates fall 20 basis points.
D. The bank provided the original estimate based on an application that did not include the property address, and now that the borrower has provided the property address, a revised estimate is necessary.
When reviewing ATM dispute files for compliance with Regulation E provisions, you should determine whether __________.
A. the bank completed its investigation within 90 days after receiving the error notice
B. the bank notified the customer in writing when an error occurred
C. errors were corrected not later than one business day after determination that an error occurred
D. notifications to customers that no error occurred included a telephone number for the customer to call for additional inquiries