CBP Banking Operations Management 3 — Questions and Answers
Question 1: A bank discovers that a branch teller has been structuring customer deposits in amounts just under $10,000 to avoid CTR filing. This practice is known as:
- Layering
- Smurfing
- Structuring (Correct answer)
- Integration
Correct answer: Structuring
Structuring — also called smurfing — is the illegal practice of breaking up transactions to evade BSA reporting thresholds, and is itself a federal crime.
Question 2: Under Regulation CC (Availability of Funds), what is the maximum hold period a bank may place on a local check deposit for a non-new account under standard rules?
- 1 business day
- 2 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 2 business days
Regulation CC limits standard holds on local checks to 2 business days for established accounts, with next-day availability for certain items like government checks.
Question 3: The primary purpose of a bank's Asset-Liability Committee (ALCO) is to:
- Approve individual loan applications above branch authority limits
- Manage interest rate risk and balance sheet composition (Correct answer)
- Oversee BSA/AML compliance program effectiveness
- Review and approve the bank's annual marketing budget
Correct answer: Manage interest rate risk and balance sheet composition
ALCO manages the bank's interest rate risk, liquidity position, and the mix of assets and liabilities to optimize profitability within acceptable risk parameters.
Question 4: Which Federal Reserve tool directly influences the cost at which banks borrow reserves from each other overnight?
- Discount rate
- Federal funds rate target (Correct answer)
- Reserve requirement ratio
- Open market purchase limits
Correct answer: Federal funds rate target
The Federal Open Market Committee (FOMC) sets a target range for the federal funds rate, which banks use when lending excess reserves to each other overnight.
Question 5: In check processing operations, MICR stands for:
- Magnetic Ink Character Recognition (Correct answer)
- Multi-Institution Clearing and Reconciliation
- Manual Input Control Register
- Minimum Identified Cash Reserve
Correct answer: Magnetic Ink Character Recognition
MICR uses magnetic ink to encode routing numbers, account numbers, and check amounts at the bottom of checks, enabling high-speed automated processing.
Question 6: A bank's 'core deposits' are best described as:
- Certificates of deposit over $250,000
- Stable, low-cost deposits from local retail and small business customers (Correct answer)
- Brokered deposits sourced through deposit-listing services
- Interbank deposits from correspondent banking relationships
Correct answer: Stable, low-cost deposits from local retail and small business customers
Core deposits are sticky, relationship-based funds from local customers that provide stable, low-cost funding and are less sensitive to interest rate changes than wholesale funding.
Question 7: Which operational risk control technique involves periodically rotating employees across different job functions in sensitive banking roles?
- Mandatory vacation policy
- Job rotation (Correct answer)
- Segregation of duties
- Dual authorization
Correct answer: Job rotation
Job rotation reduces fraud risk by preventing any single employee from developing unchecked expertise and access in a sensitive role over an extended period.
CBP Banking Operations Management 3
A bank discovers that a branch teller has been structuring customer deposits in amounts just under $10,000 to avoid CTR filing.
This practice is known as: