A bank is considering canceling its agreement with a broker to which it currently leases space in its lobby. The new plan would include an agreement with a different broker, but bank employees would complete product sales. What should the compliance manager do FIRST?

Determine the additional compliance risk for the bank as a result of this change

Establish a licensing program for bank employees

Establish a training plan for employees who will be selling the nondeposit investment products

Obtain copies of SEC and NASD rules regarding nondeposit investment products

Determine the additional compliance risk for the bank as a result of this change

Which of the following advertising activities indicate that a bank would NOT be exempt from SEC registration requirements?

Mentioning in a print advertisement that the bank provides accommodation securities trades for its regular custodial accounts

Listing its securities transfer services as a service the bank provides for IRA accounts along with other IRA benefits

Listing its securities services for trust accounts in the bank's extensive trust services brochure

Mentioning in a print advertisement that the bank provides accommodation securities trades for its regular custodial accounts

Stating in an advertisement concerning employee benefit plan services that the bank provides securities brokerage services for employee benefit plan accounts

Which of the following is a high-net-worth customer?

A couple with a net worth of $10 million

An individual with $5 million in assets, including her home

A corporation with $15 million in revenues

A couple with a net worth of $10 million

An individual who is not acting with his spouse, with $1 million in assets and another $3 million in community property

Which of the following is NOT a requirement when a bank pays an employee a fee for referring a high-net-worth or institutional customer to a broker?

The employee must be registered with the bank's regulatory agency

The bank must have a written agreement with the broker

The bank must give a disclosure to the customer

The bank must reasonably believe that the customer is a high net worth or institutional customer

The employee must be registered with the bank's regulatory agency

Country A (a foreign country that is boycotting Country B, another foreign country) has ordered goods from ABC, a U.S. corporation. Country A has opened a letter of credit with Overseas, Inc., a foreign bank. The letter of credit specifies that ABC must certify that it does not do business with Country B. Overseas, Inc., sends a telegram to First National Bank, a U.S. bank, stating the major terms and conditions of the letter of credit and asking First National Bank to confirm the letter of credit. The telegram does not state the boycott provisions. Overseas mails the letter of credit to First National Bank and asks First National Bank to confirm it. What may First National Bank do?

First National Bank may advise ABC of the letter of credit and administer its disposal, but may not confirm it and must report it to the Department of Commerce and the IRS.

First National Bank must confirm it if it previously agreed to do so.

First National Bank may advise ABC of the letter of credit and administer its disposal, but may not confirm it and must report it to the Department of Commerce and the IRS.

First National Bank may do nothing but return the letter of credit to the issuing bank and report to the IRS.

First National Bank must confirm the letter of credit but should also report it to the Department of Commerce.

Issuing Bank, a foreign bank, maintains an account with First National Bank, a U.S. bank. Issuing Bank issues a letter of credit in favor of ABC, Inc., a U.S. corporation. The letter of credit contains a boycott provision. The letter of credit provides that any negotiating bank may obtain reimbursement from Issuing Bank's account at First National Bank by certifying that the conditions of the letter of credit have been met. Issuing Bank does not send First National Bank a copy of the letter of credit. May First National Bank reimburse negotiating banks for the letter of credit when it contains a boycott provision?

Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.

No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.

No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision.

Yes, provided ABC Company is not a participant in the boycott.

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Not implement the letter of credit

Implement the letter of credit because there is no boycott language on its face

Require ABC to indemnify the bank against any potential loss for participation in a boycott

Not implement the letter of credit

Have the letter of credit confirmed by a bank in Country X

First National Bank, a U.S. bank, is contacted by Manufacturing Company, Inc., a U.S. company, to finance its transaction with Country Z, a boycotting country. Payment will be made through a letter of credit in favor of Manufacturing Company at its U.S. address. First National Bank knows that the letter of credit will contain restrictive boycott conditions that would prevent the bank from implementing it. First National Bank suggests to Manufacturing Company, Inc., that it set up a shell corporation in Country Y, a nonboycotting country, and have the shell corporation be the beneficiary of the letter of credit. Does First National Bank have any problem with this transaction?

Yes. The transaction is set up to evade the regulation and First National Bank is liable.

No. The transaction is now not subject to Department of Commerce regulations because the beneficiary is not a U.S. company.

Yes. The transaction is set up to evade the regulation and First National Bank is liable.

No. The transaction is set up to evade the regulation, but First National Bank is not liable because Manufacturing Company, Inc., actually effected the transaction.

No. First National should have Manufacturing Company, Inc., sign a statement accepting full responsibility for the establishment of the shell corporation.

First National Bank advises Country A, a boycotting country, on various U.S. investments. Country A instructs First National Bank not to recommend for investment any shares of certain blacklisted companies. First National Bank follows this instruction. Has First National Bank participated or cooperated in an international boycott under the IRS regulations by this action?

No. The bank may agree not to recommend certain companies.

Yes. The companies are the subject of a boycott.

No. The bank may agree not to recommend certain companies.

Yes, if the companies are part of a boycott.

No, but the bank must report this action to the IRS.

ABC Co. signed a contract to export goods to Country M, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires ABC Co. to certify that none of its directors are nationals of any country boycotted by Country M before ABC can be paid. First National Bank confirms the letter of credit to ABC after determining that all of the documents are in order. Did First National Bank participate in a boycott, and must the bank report the action to the IRS?

Yes. The action was participation in a boycott and the bank must report the action to the IRS.

No. The bank's action was only ministerial.

Yes. The action was participation in a boycott and the bank must report the action to the IRS.

No. Only ABC Co. is required to report to the IRS.

Yes, but no reporting requirements were triggered.

ABC Co. signs a contract to export goods to Country G, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires the goods to be shipped on a ship eligible to enter the port of Country G in conformity with its laws and regulations and that the insurer of the goods has an agent in Country G. Country G's laws prohibit blacklisted ships from calling at its ports and blacklisted insurance companies from qualifying agents in Country G. First National Bank confirms the letter of credit. Did the bank's action constitute an agreement to participate in or cooperate with an international boycott, and is it subject to IRS reporting requirements?

Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements.

Yes. The action is an agreement to participate in a boycott but no, it is not subject to the reporting requirements.

No. Because the bank is not responsible for knowing the laws of Country G, it is not in participation with or in cooperation with a boycott.

No. The confirmation of a letter of credit is not sufficient to be in participation or cooperation with a boycott.

Which of the following businesses would be eligible to be an exempt person under the requirements of the Bank Secrecy Act?

Goldsmith Aircraft Distributors

Fastfood, Inc., a nationwide restaurant chain, opened an account at First National Bank last year. Fastfood is making daily 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?

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.

Because the restaurant is an established depositor, the bank should provide an unlimited exemption for cash deposits and withdrawals.

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 should ask the company if it qualifies as a listed business.

The bank should perform a corporate records check to determine if the company is chartered in the United States.

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 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?

All except for Products Incorporated

All except for Nationwide Foods, Inc.

All except for National Paper Products

All except for Century Enterprises

All except for Products Incorporated

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?

Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.

No. It is a not a corporation, but a sole proprietorship.

No. It has not maintained an account at the bank for 12 months.

No. It operates an ineligible business.

Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.

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?

Complete a CTR and encourage Mrs. Evans to file a CMIR

Complete a Currency Transaction Report (CTR)

Complete a United States Customs form 4790 (CMIR)

Complete both a currency transaction report and a CMIR

Complete a CTR and encourage Mrs. Evans to file a CMIR

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?

Record the $1,000 and $2,500 transactions on the bank's monetary instrument sales log because the total exceeds the $3,000 threshold

None, because no single cash transaction exceeded $10,000

File a Currency Transaction Report (CTR) for $11,500

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

Record the $1,000 and $2,500 transactions on the bank's monetary instrument sales log because the total exceeds the $3,000 threshold

Records that must be retained for deposit accounts include which of the following?

All amounts of currency deposited or withdrawn

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?

Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange.

Mammoth Corporation is a London corporation, trading on the London Stock Exchange.

Mammoth Corporation is a U.S. corporation with unlisted stock.

Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange.

Mammoth Enterprises is a U.S. corporation primarily in the investment banking business.

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?

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

Ms. Redmond must report the counterfeit funds on a SAR and must name the most likely individual(s) on the report.

Ms. Redmond must report the counterfeit funds on a SAR but is not required to name any individual(s) on the report.

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

Ms. Redmond need not report this incident on a SAR because each incident is less than $5,000.

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 cashiers 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?

Report the account activity as suspicious account activity and recommend that a SAR be filed

Complete a CTR for each of the cash activities at the branch office

Make no report of the activities because the transactions were not discovered until after the 15-day reporting deadline

Report the account activity to senior management for further review

Report the account activity as suspicious account activity and recommend that a SAR be filed

Which of the following customers may be exempted under Phase II of the Bank Secrecy Act?

Businesses whose stocks are traded on a national stock exchange

In which of the following circumstances is it LEAST appropriate for a bank to file a SAR regarding Internet activity?

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

Bank determines that one of its customers is the victim of identity theft

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)

Bank discovers that someone has hacked into its data system in order to obtain confidential customer data

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

When completing and filing a SAR, what is the bank NOT required to do?

Submit a copy of the supporting documentation with the SAR

Submit the SAR within 30 days of the initial detection of facts

Report the SAR information to the bank's board of directors

Maintain a copy of the SAR and supporting documentation for 5 years

What should a bank's Bank Secrecy Act compliance program include?

Designation of individuals responsible for day-to-day compliance

The one-year record retention requirements

Designation of individuals responsible for day-to-day compliance

A list of types of loans covered by the Act

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?

The bank's board of directors should discuss the account activity without the affected director being present.

The bank's president should meet with the affected director to discuss the account activity.

The bank should file a CTR, checking the box that indicates the report is for suspicious activity.

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?

The serial numbers of the travelers' checks purchased

The name of the branch where the transaction occurred

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?

Complete the transaction and record available information

Complete the transaction and file a SAR

Complete the transaction and insist that the customer return with the required information

Which of the following is MOST effective in strengthening an anti-money laundering program involving cash transactions?

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

Review all deposits of $25,000 or more

Complete CTR worksheets on all cash transactions of $5,000 or more

Complete SAR worksheets on all cash transactions of $5,000 or more

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

For which of the following is a bank most likely to be in danger of receiving a cease and desist order?

Failure to file suspicious activity reports

Repetition in a BSA examination of a noncritical deficiency reported in a previous BSA examination

Failure to document AML training to its part-time clerical employees

A 2 percent error rate on the bank's CTRs

Failure to file suspicious activity reports

What should a bank do when it receives a request from a customer to transfer funds to an individual in Iraq?

Conduct the transfer if the individual and the financial institution are not on the SDN list

Conduct the transfer as requested

Conduct the transfer if the individual and the financial institution are not on the SDN list

Conduct the transfer and then notify OFAC immediately

ACME Bank is a $600 million institution with 15 branches within three counties. Because of its proximity to Mexico, the bank has many foreign national customers and makes many foreign wire transfers for its customers. Currently the bank's branch managers print the OFAC list of SDNs and place them in strategic places in each branch. The wire transfer department keeps its own copy of the list. The compliance officer has implemented an annual auditing program to check the bank's compliance with OFAC regulations. The findings of this audit are provided to the bank's board of directors annually. The bank's regulatory agency has indicated to management that the bank has a high risk for BSA/AML/OFAC compliance. Of the following actions, which would be the most effective to strengthen the bank's OFAC compliance?

Purchase and implement interdiction software for the wire transfer area

Conduct compliance audits twice a year

Purchase and implement interdiction software for the wire transfer area

As an internal control procedure, require the BSA officer to check the OFAC Web site daily for any changes to the SDN list

Routinely provide account transaction information to federal security agencies so suspicious patterns can be detected

State National Bank is a $250 million community bank. It makes a variety of consumer and commercial loans, regularly transmits funds via wire transfers for its customers, and issues commercial and stand-by letters of credit. Which of the following transactions can State National make without checking the OFAC SDN list and without incurring liability?

None. The bank can be liable for all.

Send a wire transfer via its correspondent bank in New York for a commercial customer.

Sell a cashier's check payable to a third party.

Cash an on-us check over-the-counter for a noncustomer.

None. The bank can be liable for all.

FA presents cash to the bank and seeks to wire it to his spouse, RA, in Cub A . The OFAC list identifies RA as a specially designated national. Under OFAC Regulations, what should the bank do?

Conduct the transfer as requested and take no further action

Conduct the transfer as requested and notify OFAC immediately

Conduct the transfer only if the bank determines that Cuba is not a blocked country

Your institution has identified a transaction by an existing depositor that should be blocked under OFAC requirements. The branch manager contacts you for specific instructions. Before reporting the transaction to OFAC, what should the bank do?

Place the funds in an interest-bearing account

Your bank's president comes back from an industry conference and tells the compliance officer that she attended a presentation about OFAC. She heard the bank could be fined for not adhering to OFAC requirements. Thus, she has directed that every bank transaction be reviewed for OFAC compliance. What is the most appropriate statement the compliance officer could make to the bank president?

The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures

The bank is already in compliance because OFAC checks are performed on all new depositors

The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures

OFAC does not apply because the bank does not conduct business in foreign countries or with foreign nationals

Banks are usually not fined for OFAC violations unless they conduct transactions with SDNs or blocked countries

ABA CRCM Practice Test 11 - Free Online Exam Questions 401-440

Under the Interagency Statement on Retail Sales of Nondeposit Investment Products, what may a bank teller do?

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