Banking Exam Awareness 5 — Questions and Answers
Question 1: What is 'phishing' in the context of banking security awareness?
- A technique used by banks to fish for new customers via cold calls
- A cyberattack where fraudsters pose as legitimate institutions to steal sensitive information (Correct answer)
- A regulatory audit method used to detect internal fraud
- A method of testing bank employee honesty with fake transactions
Correct answer: A cyberattack where fraudsters pose as legitimate institutions to steal sensitive information
Phishing involves sending fraudulent emails or messages impersonating trusted entities like banks to trick recipients into revealing credentials or personal information.
Question 2: What does 'AML' stand for in banking compliance?
- Asset Management Ledger
- Anti-Money Laundering (Correct answer)
- Automated Mortgage Lending
- Annual Monetary Limit
Correct answer: Anti-Money Laundering
Anti-Money Laundering (AML) refers to laws, regulations, and procedures designed to prevent criminals from disguising illegal funds as legitimate income.
Question 3: Which of the following is a key indicator that a bank transaction may be suspicious?
- A customer depositing their paycheck on a Friday afternoon
- A customer making multiple cash deposits just under the $10,000 reporting threshold (Correct answer)
- A customer requesting a wire transfer to a known relative abroad
- A customer opening a new savings account with a moderate initial deposit
Correct answer: A customer making multiple cash deposits just under the $10,000 reporting threshold
Structuring — making multiple small deposits to stay just under the $10,000 CTR threshold — is a red flag for money laundering and is itself a federal crime.
Question 4: What is the purpose of the Home Mortgage Disclosure Act (HMDA)?
- To set maximum interest rates on home loans
- To require lenders to collect and report data on mortgage applications to detect discriminatory patterns (Correct answer)
- To provide government insurance for FHA-approved mortgages
- To establish minimum down payment requirements for conforming loans
Correct answer: To require lenders to collect and report data on mortgage applications to detect discriminatory patterns
HMDA requires financial institutions to publicly disclose mortgage loan data, enabling regulators and the public to identify potential lending discrimination.
Question 5: What is a 'Suspicious Activity Report' (SAR) in U.S. banking?
- A monthly internal audit report reviewing teller error rates
- A confidential report filed with FinCEN when a financial institution suspects illegal activity (Correct answer)
- A report submitted to the FDIC when a bank suspects insolvency
- A customer complaint form filed with the CFPB
Correct answer: A confidential report filed with FinCEN when a financial institution suspects illegal activity
Banks must file a SAR with FinCEN within 30 days of detecting a transaction that may involve money laundering, fraud, or other criminal activity.
Question 6: What is 'identity theft' in banking contexts?
- A bank employee impersonating a manager to approve unauthorized loans
- The unauthorized use of someone's personal information to open accounts or obtain credit fraudulently (Correct answer)
- A regulatory violation where a bank misrepresents its identity in advertising
- A hacker assuming a bank's digital identity to intercept customer transactions
Correct answer: The unauthorized use of someone's personal information to open accounts or obtain credit fraudulently
Identity theft occurs when someone uses another person's personal information without consent to commit financial fraud, such as opening accounts or taking out loans.
Question 7: What is the significance of the 'Volcker Rule' for U.S. banks?
- It caps executive compensation at federally insured banks
- It prohibits banks from engaging in proprietary trading and limits their investments in hedge funds (Correct answer)
- It requires banks to maintain a minimum leverage ratio of 10%
- It mandates that banks offer basic checking accounts to low-income customers
Correct answer: It prohibits banks from engaging in proprietary trading and limits their investments in hedge funds
The Volcker Rule, part of the Dodd-Frank Act, prevents banks from using customer deposits to make speculative trades for their own profit.
Banking Exam Awareness 5
What is 'phishing' in the context of banking security awareness?