Practice Test Geeks(CCA) Certified Cryptocurrency Auditor Practice Test
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Regulatory and Legal Frameworks Flashcards

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  1. What is the primary purpose of FATF's 'Recommendation 15' as it applies to virtual assets?

    Answer: To require countries to regulate VASPs for AML/CFT purposes

    FATF Recommendation 15 requires member countries to assess and mitigate ML/TF risks associated with virtual assets and to regulate or license VASPs for AML/CFT compliance.

  2. A cryptocurrency mining company in the U.S. that sells mined Bitcoin directly to customers would most likely be required to register as:

    Answer: A money service business (MSB) with FinCEN

    FinCEN's 2013 guidance clarified that miners who sell their mined virtual currency to third parties are acting as money transmitters and must register as MSBs with FinCEN.

  3. Which type of order is an auditor most likely to encounter when a regulatory agency seeks to preserve a crypto company's assets during an investigation?

    Answer: A Temporary Restraining Order (TRO) with asset freeze

    Regulators such as the SEC often seek a Temporary Restraining Order (TRO) with an asset freeze from a federal court to prevent dissipation of funds while enforcement proceedings are underway.

  4. Under IRS guidance, when a taxpayer performs a hard fork that results in new tokens being airdropped to their wallet, those tokens are:

    Answer: Taxable as ordinary income at fair market value when received and dominion and control is established

    Per IRS Rev. Rul. 2019-24, tokens received via a hard fork airdrop are taxable as ordinary income at fair market value at the time the taxpayer has dominion and control over them.

  5. The OCC's 2020 interpretive letter permitting national banks to hold cryptocurrency assets in custody was significant because it:

    Answer: Gave federally chartered banks explicit authority to provide crypto custody services for customers

    OCC Interpretive Letter 1170 (2020) confirmed that national banks and federal savings associations have the authority to provide cryptocurrency custody services for customers, legitimizing institutional crypto custody.

  6. In the context of crypto AML compliance, what is 'chain analysis' primarily used for?

    Answer: Tracing the flow of funds across blockchain transactions to identify illicit activity

    Chain analysis (blockchain analytics) involves tracing the movement of cryptocurrency across wallets and transactions on public blockchains to identify patterns linked to money laundering, sanctions evasion, or other illicit activity.

  7. A crypto exchange that knowingly allows transactions with a wallet address on OFAC's SDN list may face which consequence?

    Answer: Civil penalties up to the greater of $356,579 per violation or twice the transaction value, plus potential criminal prosecution

    OFAC can impose civil penalties up to $356,579 per violation (adjusted for inflation) or twice the transaction value, whichever is greater, and willful violations can also lead to criminal prosecution.