CFS Money Laundering & AML Compliance 2 — Questions and Answers
Question 1: Under the Bank Secrecy Act, what is the threshold amount that triggers a Currency Transaction Report (CTR) filing requirement?
- $5,000
- $10,000 (Correct answer)
- $25,000
- $50,000
Correct answer: $10,000
Financial institutions must file a CTR for any cash transaction exceeding $10,000 in a single business day.
Question 2: A bank customer deposits $9,500 on Monday and $9,500 on Tuesday to avoid CTR reporting. This behavior is known as:
- Layering
- Integration
- Structuring (smurfing) (Correct answer)
- Placement
Correct answer: Structuring (smurfing)
Structuring, also called smurfing, involves breaking up large cash transactions into smaller amounts to evade reporting thresholds.
Question 3: Which AML program element requires financial institutions to identify and verify the identity of customers opening new accounts?
- Suspicious Activity Reporting
- Customer Due Diligence (CDD) (Correct answer)
- Currency Transaction Reporting
- Trade-based monitoring
Correct answer: Customer Due Diligence (CDD)
Customer Due Diligence requires institutions to collect and verify identifying information about customers to assess money laundering risk.
Question 4: The 'beneficial owner' rule under FinCEN's CDD regulations requires identifying individuals who own what minimum percentage of a legal entity customer?
- 10%
- 15%
- 25% (Correct answer)
- 51%
Correct answer: 25%
FinCEN requires financial institutions to identify and verify any individual who owns 25% or more of a legal entity customer.
Question 5: When a financial institution files a Suspicious Activity Report (SAR), which of the following is true?
- The institution must notify the subject of the SAR
- The SAR is automatically shared with foreign regulators
- The institution is prohibited from disclosing the SAR to the subject (Correct answer)
- The institution must freeze the subject's account immediately
Correct answer: The institution is prohibited from disclosing the SAR to the subject
Federal law prohibits financial institutions from disclosing that a SAR has been filed or the contents of a SAR to the subject of the report.
Question 6: Which money laundering stage involves converting illicit cash into financial instruments or other assets to obscure its criminal origin?
- Integration
- Layering
- Placement (Correct answer)
- Extraction
Correct answer: Placement
Placement is the first stage where illegal cash enters the financial system, often through deposits, currency exchanges, or purchasing monetary instruments.
Question 7: A real estate agent notices a buyer insisting on paying for a $2 million property entirely in cash and refuses to provide the source of funds. Under AML frameworks, this is best described as:
- Normal high-net-worth behavior
- A red flag requiring enhanced due diligence (Correct answer)
- Exempt from reporting since real estate agents are not covered institutions
- A structuring violation
Correct answer: A red flag requiring enhanced due diligence
Insistence on all-cash payment with refusal to disclose funding sources is a recognized AML red flag requiring enhanced scrutiny.
CFS Money Laundering & AML Compliance 2
Under the Bank Secrecy Act, what is the threshold amount that triggers a Currency Transaction Report (CTR) filing requirement?