Banking Operations and Services Flashcards

Under the Bank Secrecy Act, a Currency Transaction Report (CTR) must be filed for cash transactions exceeding:

Answer: $10,000

Banks must file a CTR with FinCEN for any cash transaction exceeding $10,000 in a single business day.

A bank's prime rate is most closely tied to which benchmark?

Answer: The Federal funds target rate

The prime rate is typically set 3 percentage points above the federal funds target rate and is used to price many consumer and business loans.

Which type of endorsement restricts the check to deposit only into a specific account?

Answer: Restrictive endorsement

A restrictive endorsement, such as 'For deposit only,' limits how the check can be negotiated, directing funds to a specific account.

In trade finance, a documentary letter of credit protects the buyer by:

Answer: Requiring the seller to present compliant shipping documents to receive payment

Under a documentary LC, the issuing bank only pays when the seller presents documents that strictly comply with the LC terms.

A teller notices a customer makes several cash deposits just below $10,000 over consecutive days. This pattern is known as:

Answer: Structuring (smurfing)

Structuring, or smurfing, is the illegal practice of breaking large cash amounts into smaller deposits to evade CTR filing requirements.

Which settlement method does the Automated Clearing House (ACH) network use?

Answer: Deferred net settlement

ACH uses deferred net settlement, batching transactions and settling the net positions between financial institutions at defined times.

A bank's efficiency ratio is calculated as:

Answer: Non-interest expense divided by net revenue

The efficiency ratio shows what percentage of revenue is consumed by operating expenses; lower ratios indicate better operational efficiency.