CRB Risk Management & Fraud Prevention 3 — Questions and Answers
Question 1: A bank's risk appetite statement most accurately describes:
- The maximum loss the bank has experienced historically
- The types and amounts of risk the bank is willing to accept to achieve its objectives (Correct answer)
- The minimum capital ratio required by regulators
- The list of prohibited banking activities
Correct answer: The types and amounts of risk the bank is willing to accept to achieve its objectives
A risk appetite statement formally defines the level and types of risk a bank is willing to take in pursuit of its strategic and financial goals.
Question 2: Which fraud scheme involves criminals convincing bank employees to bypass security procedures through phone calls impersonating regulators or executives?
- Phishing
- Vishing
- Pretexting (Correct answer)
- Smishing
Correct answer: Pretexting
Pretexting involves creating a fabricated scenario to manipulate employees into disclosing information or bypassing controls, often impersonating authority figures.
Question 3: A customer opens multiple accounts with small balances and gradually builds up deposits before conducting a large fraudulent withdrawal. This structuring behavior related to fraud is best described as:
- Layering (Correct answer)
- Placement
- Integration
- Smurfing
Correct answer: Layering
Layering is the second stage of money laundering where funds are moved through complex transactions to obscure their origin.
Question 4: Under Basel III requirements, the Liquidity Coverage Ratio (LCR) is designed to ensure banks can withstand:
- A 90-day period of market stress
- A 30-day period of significant liquidity stress (Correct answer)
- A 12-month period of reduced profitability
- A 7-day period of operational disruption
Correct answer: A 30-day period of significant liquidity stress
The LCR requires banks to hold enough high-quality liquid assets to cover total net cash outflows over a 30-day stress scenario.
Question 5: When a fraudster uses a stolen identity to open new credit accounts, this is categorized as:
- Account takeover fraud
- New account fraud (Correct answer)
- Synthetic identity fraud
- Bust-out fraud
Correct answer: New account fraud
New account fraud involves opening accounts in another person's name using stolen personally identifiable information.
Question 6: The primary purpose of a bank's Business Continuity Plan (BCP) in the context of risk management is to:
- Reduce the bank's tax liability during downturns
- Ensure critical operations can continue or quickly resume after a disruption (Correct answer)
- Satisfy minimum capital requirements during stress events
- Document employee roles for normal daily operations
Correct answer: Ensure critical operations can continue or quickly resume after a disruption
A BCP outlines procedures and systems to maintain or rapidly restore critical business functions following unexpected disruptions.
Question 7: Which control is MOST effective at preventing check kiting schemes?
- Requiring two signatures on checks over $10,000
- Placing holds on deposited checks until they clear (Correct answer)
- Limiting daily ATM withdrawal amounts
- Requiring photo ID for all teller transactions
Correct answer: Placing holds on deposited checks until they clear
Check kiting exploits float between accounts, and placing holds on deposited checks prevents funds from being withdrawn before the check clears.
CRB Risk Management & Fraud Prevention 3
A bank's risk appetite statement most accurately describes: