General Flashcards

What is 'structuring' (also known as 'smurfing') in the context of banking regulations?

Answer: Breaking up large cash transactions into smaller ones to evade reporting requirements

Structuring involves deliberately splitting deposits or withdrawals into smaller amounts to avoid the $10,000 CTR filing threshold, which is itself a federal crime.

Which of the following is a key function of the Federal Reserve in the U.S. banking system?

Answer: Setting the federal funds rate to influence monetary policy

The Federal Reserve sets the federal funds rate target and uses monetary policy tools to manage inflation and employment.

What is a 'Suspicious Activity Report' (SAR)?

Answer: A confidential report banks file with FinCEN when they detect potentially illegal activity

Banks are required to file SARs with the Financial Crimes Enforcement Network (FinCEN) when they suspect transactions involve money laundering or other illegal activity.

Which of the following credit scores is generally considered the minimum for qualifying for a conventional mortgage?

Answer: 620

Most conventional mortgage lenders require a minimum credit score of 620, though better scores yield lower interest rates.

What does 'escrow' mean in a mortgage context?

Answer: An account held by a third party to manage funds for property taxes and insurance

An escrow account collects portions of each mortgage payment to ensure property taxes and homeowner's insurance are paid on time.

In banking, what is the 'loan-to-value' (LTV) ratio?

Answer: The ratio of the loan amount to the appraised value of the collateral

LTV ratio compares the loan amount to the property's appraised value; lower LTV ratios indicate less risk for the lender.

What is the purpose of the Truth in Lending Act (TILA)?

Answer: Require lenders to disclose the true cost of credit, including APR and loan terms

TILA mandates clear disclosure of credit terms and costs, including the APR, so consumers can compare loan offers accurately.