AFP AFP Financial Regulations and Compliance 1 — Questions and Answers
Question 1: Which U.S. regulation requires financial institutions to implement Customer Identification Programs (CIP) as part of anti-money laundering efforts?
- Bank Secrecy Act / USA PATRIOT Act (Correct answer)
- Dodd-Frank Act
- Sarbanes-Oxley Act
- Gramm-Leach-Bliley Act
Correct answer: Bank Secrecy Act / USA PATRIOT Act
The Bank Secrecy Act, enhanced by the USA PATRIOT Act, mandates CIP requirements to verify the identity of customers and prevent money laundering.
Question 2: Under Dodd-Frank, which types of OTC derivatives are now required to be centrally cleared?
- Standardized interest rate and credit default swaps (Correct answer)
- All commodity futures
- Exchange-traded options only
- Foreign currency spot transactions
Correct answer: Standardized interest rate and credit default swaps
Dodd-Frank mandates central clearing for standardized OTC interest rate swaps and credit default swaps to reduce systemic risk.
Question 3: What is the primary purpose of Sarbanes-Oxley Section 302 for corporate treasury?
- Requires CEO/CFO to certify the accuracy of financial reports (Correct answer)
- Mandates segregation of investment duties
- Establishes capital adequacy ratios
- Defines AML reporting thresholds
Correct answer: Requires CEO/CFO to certify the accuracy of financial reports
SOX Section 302 requires the CEO and CFO to personally certify that financial statements are accurate and fairly presented.
Question 4: Which regulation governs the reporting of foreign bank accounts held by U.S. persons, relevant to corporate treasury?
- FBAR (FinCEN Form 114) (Correct answer)
- FATCA (Form 8938)
- Form 10-K
- Reg FD
Correct answer: FBAR (FinCEN Form 114)
FBAR requires U.S. persons and entities with foreign financial accounts exceeding $10,000 to report those accounts annually to FinCEN.
Question 5: What does FATCA require of foreign financial institutions with respect to U.S. account holders?
- Report information about U.S. account holders to the IRS (Correct answer)
- Close all U.S.-linked accounts
- Convert all USD balances to local currency
- File quarterly cash flow statements with the SEC
Correct answer: Report information about U.S. account holders to the IRS
FATCA requires foreign financial institutions to identify and report accounts held by U.S. taxpayers to the IRS or face withholding penalties.
Question 6: Which internal control framework is most commonly referenced by AFP treasury professionals for assessing financial reporting controls?
- COSO Internal Control – Integrated Framework (Correct answer)
- ISO 31000
- COBIT
- Basel III
Correct answer: COSO Internal Control – Integrated Framework
The COSO framework provides the widely accepted structure for designing, implementing, and evaluating internal controls over financial reporting.
AFP AFP Financial Regulations and Compliance 1
Which U.S. regulation requires financial institutions to implement Customer Identification Programs (CIP) as part of anti-money laundering efforts?