CBA Regulatory Compliance and AML 3

Question 1

Under OFAC regulations, what must a bank do when a transaction matches a name on the SDN (Specially Designated Nationals) list?

Accepted Answer

Block the transaction, hold the funds, and report to OFAC within 10 business days

Answer

OFAC requires institutions to block transactions involving SDN-listed parties, hold the funds in a segregated account, and file a report with OFAC within 10 business days.

Question 2

What does 'layering' refer to in the three stages of money laundering?

Accepted Answer

Creating complex financial transactions to obscure the audit trail

Answer

Layering is the second stage where criminals conduct complex, multi-step transactions to distance the funds from their illegal source and obscure the audit trail.

Question 3

Which regulation requires financial institutions to establish Customer Due Diligence (CDD) procedures, including identifying beneficial owners of legal entity customers?

Accepted Answer

FinCEN CDD Rule effective May 2018

Answer

FinCEN's CDD Rule (effective May 11, 2018) added a fifth pillar to BSA compliance requiring identification of beneficial owners who own 25% or more of a legal entity customer.

Question 4

Under the FinCEN CDD Rule, a bank must identify and verify beneficial owners of a legal entity customer who own what minimum percentage of equity interests?

Accepted Answer

25%

Answer

The CDD Rule requires identifying all individuals who own 25% or more of a legal entity, plus one control prong individual regardless of ownership.

Question 5

A politically exposed person (PEP) is subject to enhanced due diligence because they:

Accepted Answer

Pose higher AML risk due to potential for corruption and abuse of public positions

Answer

PEPs are considered higher risk because their public positions of trust create vulnerability to corruption, bribery, and misappropriation of public funds.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Regulatory Compliance and AML 3