CHCP Wire Transfer & Fraud Prevention 4 — Questions and Answers
Question 1: Under federal law, a Suspicious Activity Report (SAR) filed with FinCEN must remain confidential. What is the consequence of disclosing that a SAR has been filed?
- A civil fine of up to $1,000
- Criminal penalties including fines and imprisonment under the Bank Secrecy Act (Correct answer)
- Mandatory license suspension
- A 60-day reporting suspension
Correct answer: Criminal penalties including fines and imprisonment under the Bank Secrecy Act
Disclosing the existence or contents of a SAR ('tipping off') is a federal crime under the BSA, punishable by significant fines and up to five years in prison.
Question 2: A closing professional notices a cash buyer is using multiple cashier's checks in amounts just below $10,000 to fund a purchase. This pattern is known as:
- Layering
- Structuring (smurfing) (Correct answer)
- Integration
- Placement
Correct answer: Structuring (smurfing)
Structuring, also called smurfing, involves deliberately breaking transactions into sub-$10,000 amounts to avoid the federal Currency Transaction Report (CTR) filing requirement.
Question 3: What is a 'dual control' procedure in the context of wire transfer security?
- Requiring two forms of ID from the wire recipient
- Requiring two separate authorized individuals to initiate and approve a wire transfer (Correct answer)
- Sending wires through two different banks simultaneously
- Confirming wire receipt with both the buyer and seller
Correct answer: Requiring two separate authorized individuals to initiate and approve a wire transfer
Dual control requires one person to initiate a wire and a second authorized person to approve it, reducing the risk of unauthorized or fraudulent transfers.
Question 4: FIRPTA withholding in a real estate closing is primarily designed to prevent which type of financial crime or tax issue?
- Wire fraud by foreign buyers
- Tax evasion by foreign sellers failing to report U.S. capital gains (Correct answer)
- Money laundering through offshore accounts
- Identity theft of foreign nationals
Correct answer: Tax evasion by foreign sellers failing to report U.S. capital gains
FIRPTA requires buyers to withhold a percentage of the sale price from foreign sellers and remit it to the IRS to ensure U.S. capital gains taxes on the sale are collected.
Question 5: Which element is NOT typically required in a valid domestic wire transfer instruction set provided to a buyer?
- Receiving bank name and ABA routing number
- Beneficiary account name and account number
- SWIFT/BIC code (Correct answer)
- Reference or memo line identifying the transaction
Correct answer: SWIFT/BIC code
SWIFT/BIC codes are required for international wire transfers but are not needed for domestic U.S. wire transfers, which use ABA routing numbers instead.
Question 6: A buyer wires funds and receives a confirmation number from their bank. Does this guarantee the funds will reach the title company's escrow account as instructed?
- Yes, a bank confirmation number means the wire was delivered successfully
- No, the confirmation only means the wire was initiated; it can still be misdirected or reversed (Correct answer)
- Yes, because wires are irrevocable once a confirmation is issued
- No, but only if the amount exceeds $1 million
Correct answer: No, the confirmation only means the wire was initiated; it can still be misdirected or reversed
A bank confirmation number confirms the wire was sent by the originating bank but does not guarantee delivery to the correct account, especially if fraudulent instructions were used.
Question 7: What is the recommended timeframe for a closing professional to implement a wire recall after discovering fraud?
- Within 72 hours
- Within 30 days
- As immediately as possible — ideally within hours of discovery (Correct answer)
- Within 5 business days
Correct answer: As immediately as possible — ideally within hours of discovery
Wire recall success rates drop dramatically with time; immediate action — within hours — gives the best chance of recovering funds before they are moved or withdrawn.
CHCP Wire Transfer & Fraud Prevention 4
Under federal law, a Suspicious Activity Report (SAR) filed with FinCEN must remain confidential.
What is the consequence of disclosing that a SAR has been filed?