Risk Management & Fraud Prevention Flashcards

A customer reports that someone made several small test charges on their debit card before a large unauthorized purchase. This pattern is known as:

Answer: Card testing fraud

Card testing fraud involves making small transactions to verify a stolen card is active before committing larger fraudulent purchases.

Under the Bank Secrecy Act, financial institutions must file a Currency Transaction Report (CTR) when a customer conducts cash transactions totaling more than:

Answer: $10,000 in a single day

CTRs must be filed for cash transactions exceeding $10,000 in a single business day, whether in one or multiple transactions.

Which risk management framework component involves identifying potential losses before they occur and assigning probability ratings?

Answer: Risk assessment

Risk assessment is the process of identifying, analyzing, and evaluating potential risks and their likelihood of occurrence.

A retail banker notices a longtime customer suddenly requesting large wire transfers to overseas accounts. The BEST first step is to:

Answer: Ask the customer questions to understand the purpose of the transfers

Bankers should gather additional information through customer due diligence before escalating, as there may be a legitimate explanation.

The concept of 'tipping off' in AML compliance refers to:

Answer: Informing a customer that a SAR has been or may be filed about them

Tipping off is illegal under the BSA and occurs when a bank employee alerts a customer that their activity has triggered a SAR filing.

Which type of operational risk event involves a bank employee deliberately circumventing internal controls for personal gain?

Answer: Internal fraud

Internal fraud involves intentional acts by bank employees to defraud or circumvent controls, such as embezzlement or unauthorized account access.

Regulation E primarily protects consumers by governing:

Answer: Electronic fund transfers and debit card liability limits

Regulation E establishes the rights and liabilities of consumers and financial institutions for electronic fund transfers, including error resolution procedures.