CBP Banking Regulations and Compliance 3 — Questions and Answers
Question 1: A bank is required to file a Currency Transaction Report (CTR) when a customer conducts a cash transaction in excess of:
- $5,000
- $7,500
- $10,000 (Correct answer)
- $25,000
Correct answer: $10,000
Banks must file a CTR for any cash transaction exceeding $10,000, whether a deposit, withdrawal, exchange, or other payment.
Question 2: The Home Mortgage Disclosure Act (HMDA) requires lenders to collect and report data primarily to help identify:
- Borrower default risk across income brackets
- Potential discriminatory lending patterns and credit gaps (Correct answer)
- Optimal mortgage pricing by geographic market
- Prepayment speeds on existing mortgage portfolios
Correct answer: Potential discriminatory lending patterns and credit gaps
HMDA data is used by regulators and the public to detect discriminatory lending, assess whether institutions serve community needs, and identify lending gaps.
Question 3: Under the Truth in Lending Act (TILA) and Regulation Z, the Annual Percentage Rate (APR) disclosure is designed to:
- Show the total amount a borrower will repay over the loan term
- Allow borrowers to compare the true cost of credit across lenders (Correct answer)
- Reflect only the interest rate charged on the outstanding balance
- Disclose the lender's cost of funds plus a standard markup
Correct answer: Allow borrowers to compare the true cost of credit across lenders
APR expresses the total cost of credit (interest plus fees) as a yearly rate, enabling meaningful comparisons across different loan products and lenders.
Question 4: Which supervisory action allows a federal regulator to require a bank to stop an unsafe or unsound practice immediately, even before a formal hearing?
- Memorandum of Understanding (MOU)
- Consent Order
- Temporary Cease and Desist Order (Correct answer)
- Prompt Corrective Action directive
Correct answer: Temporary Cease and Desist Order
A Temporary Cease and Desist Order (TCDO) can be issued before a hearing when regulators determine an immediate halt is necessary to protect depositors.
Question 5: Under Prompt Corrective Action (PCA) framework, a bank is classified as 'Critically Undercapitalized' when its tangible equity to total assets ratio falls below:
- 2% (Correct answer)
- 4%
- 6%
- 8%
Correct answer: 2%
A bank is critically undercapitalized when its tangible equity ratio falls below 2%, triggering the most severe PCA restrictions including mandatory closure timelines.
Question 6: The Fair Debt Collection Practices Act (FDCPA) primarily regulates:
- Internal bank collection departments collecting their own debts
- Third-party debt collectors pursuing consumer debts on behalf of creditors (Correct answer)
- Loan workout departments restructuring commercial loans
- Credit bureaus reporting delinquent accounts
Correct answer: Third-party debt collectors pursuing consumer debts on behalf of creditors
The FDCPA applies to third-party debt collectors and prohibits abusive, deceptive, or unfair practices when collecting consumer debts owed to another party.
Question 7: Which of the following is a key requirement under the Bank Secrecy Act's 'beneficial ownership' rule for legal entity customers?
- Banks must obtain a personal guarantee from at least one owner of every business account
- Banks must identify natural persons owning 25% or more of the legal entity and one controlling person (Correct answer)
- Banks must file a CTR for every cash deposit made by a legal entity above $1,000
- Banks must verify business tax returns for all commercial loan applicants
Correct answer: Banks must identify natural persons owning 25% or more of the legal entity and one controlling person
FinCEN's beneficial ownership rule requires banks to identify natural persons owning 25%+ equity interest and at least one individual with significant control of the entity.
CBP Banking Regulations and Compliance 3
A bank is required to file a Currency Transaction Report (CTR) when a customer conducts a cash transaction in excess of: