CBP Compliance, Risk and Regulations 3

Question 1

Which U.S. law requires financial institutions to verify the identity of beneficial owners of legal entity customers?

Accepted Answer

FinCEN Customer Due Diligence Rule

Answer

FinCEN's CDD Rule, effective 2018, requires banks to identify and verify beneficial owners holding 25% or more of a legal entity.

Question 2

What is 'operational risk' as defined under Basel II?

Accepted Answer

Risk of loss from inadequate internal processes, people, systems, or external events

Answer

Basel II defines operational risk as the risk of loss from failed internal processes, human error, system failures, or external events.

Question 3

The Community Reinvestment Act (CRA) was enacted primarily to address which issue?

Accepted Answer

Discriminatory lending practices that denied credit to low-income communities

Answer

The CRA was enacted in 1977 to prevent redlining and ensure banks meet credit needs of all communities, including low- and moderate-income areas.

Question 4

Under the Volcker Rule, which activity is generally prohibited for banking entities?

Accepted Answer

Proprietary trading of securities for the bank's own profit

Answer

The Volcker Rule prohibits banks from engaging in short-term proprietary trading of securities, derivatives, and certain other financial instruments for their own account.

Question 5

What is the primary purpose of a bank's Internal Capital Adequacy Assessment Process (ICAAP)?

Accepted Answer

To ensure the bank holds capital commensurate with its full risk profile

Answer

ICAAP requires banks to assess all material risks and maintain adequate capital beyond minimum regulatory requirements.

(CBP) Certified Banking Professional Practice Test

(CBP) Certified Banking Professional Practice Test

CBP Compliance, Risk and Regulations 3