Banking Exam Anti-Money Laundering Compliance 3 — Questions and Answers
Question 1: The USA PATRIOT Act Section 326 requires financial institutions to implement which specific program?
- Customer Due Diligence (CDD)
- Customer Identification Program (CIP) (Correct answer)
- Enhanced Due Diligence (EDD)
- Know Your Business (KYB)
Correct answer: Customer Identification Program (CIP)
Section 326 of the USA PATRIOT Act mandates that financial institutions establish a Customer Identification Program (CIP) to verify customer identities.
Question 2: When must Enhanced Due Diligence (EDD) be applied to a customer?
- For all customers opening new accounts
- Only for customers with accounts over $1 million
- When a customer presents a higher risk of money laundering (Correct answer)
- Only for foreign nationals opening accounts
Correct answer: When a customer presents a higher risk of money laundering
EDD is required for higher-risk customers, such as PEPs, customers from high-risk jurisdictions, or those with complex or unusual transaction patterns.
Question 3: A bank employee discovers that a colleague helped a customer structure deposits to avoid CTR filing. The employee should FIRST:
- Confront the colleague directly
- Report internally through established compliance channels (Correct answer)
- Contact law enforcement immediately
- Notify the customer that their account will be closed
Correct answer: Report internally through established compliance channels
The employee should follow the institution's established internal reporting procedures, typically by notifying the BSA/AML compliance officer.
Question 4: What is the minimum dollar threshold for filing a Currency Transaction Report (CTR)?
- $5,000
- $7,500
- $10,000 (Correct answer)
- $25,000
Correct answer: $10,000
Financial institutions must file a CTR for cash transactions exceeding $10,000 in a single business day, including multiple transactions by the same person.
Question 5: Which country risk factor would MOST likely trigger enhanced due diligence?
- The customer is from Canada
- The customer sends wire transfers to a FATF blacklisted jurisdiction (Correct answer)
- The customer travels frequently for business
- The customer holds dual citizenship
Correct answer: The customer sends wire transfers to a FATF blacklisted jurisdiction
Transactions involving FATF blacklisted or high-risk jurisdictions require enhanced scrutiny due to significant AML/CFT deficiencies in those countries.
Question 6: What does 'tipping off' refer to in AML compliance?
- Alerting regulators about internal compliance failures
- Notifying a subject that a SAR has been or may be filed about them (Correct answer)
- Providing anonymous tips to law enforcement
- Informing senior management about suspicious activity
Correct answer: Notifying a subject that a SAR has been or may be filed about them
Tipping off is the illegal act of notifying a person that they are the subject of a SAR filing or AML investigation, which is prohibited under BSA.
Question 7: Under FinCEN's CDD Final Rule effective 2018, covered financial institutions must identify beneficial owners who own what minimum percentage of a legal entity customer?
- 10%
- 15%
- 25% (Correct answer)
- 51%
Correct answer: 25%
The CDD Final Rule requires identification of all individuals who own 25% or more of a legal entity customer, plus one individual with significant managerial control.
Banking Exam Anti-Money Laundering Compliance 3
The USA PATRIOT Act Section 326 requires financial institutions to implement which specific program?