CRM Ethical Standards & Professional Conduct 2 — Questions and Answers
Question 1: Which of the following actions would constitute a breach of client confidentiality under CRM ethical standards?
- Sharing client data in a compliance audit
- Discussing anonymized case studies in training
- Disclosing client financial details to a non-affiliated third party without consent (Correct answer)
- Reporting suspicious activity to regulators
Correct answer: Disclosing client financial details to a non-affiliated third party without consent
Disclosing identifiable client financial information to unaffiliated third parties without consent is a direct breach of the confidentiality obligation.
Question 2: What does 'due diligence' require of a CRM professional when onboarding a new client?
- Processing paperwork as quickly as possible
- Thoroughly verifying the client's identity, financial background, and needs before making recommendations (Correct answer)
- Immediately cross-selling all available products
- Deferring all risk assessments to a third party
Correct answer: Thoroughly verifying the client's identity, financial background, and needs before making recommendations
Due diligence requires a CRM professional to gather complete and accurate information about the client before any recommendation is made.
Question 3: When a CRM professional suspects a client may be involved in money laundering, the CORRECT action under U.S. regulations is to:
- Ask the client directly about the suspicious transactions
- File a Suspicious Activity Report (SAR) with FinCEN without tipping off the client (Correct answer)
- Report to the client's accountant
- Ignore it if the amounts are under $10,000
Correct answer: File a Suspicious Activity Report (SAR) with FinCEN without tipping off the client
U.S. Bank Secrecy Act regulations require filing a SAR with FinCEN and prohibit alerting the client (tipping off) about the report.
Question 4: Professional competency in the CRM framework requires that a relationship manager:
- Only handle clients whose industries they are familiar with
- Continuously update their knowledge and skills through ongoing education (Correct answer)
- Delegate all technical tasks to junior staff
- Rely solely on product brochures for client information
Correct answer: Continuously update their knowledge and skills through ongoing education
Competency is maintained through continuous professional development so that the CRM can provide current, accurate advice to clients.
Question 5: Which regulatory body governs anti-money laundering (AML) compliance for financial institutions and their CRM professionals in the U.S.?
- SEC
- FINRA
- FinCEN (Correct answer)
- CFPB
Correct answer: FinCEN
The Financial Crimes Enforcement Network (FinCEN) enforces AML regulations including SAR filing requirements under the Bank Secrecy Act.
Question 6: A client asks their CRM to make investment decisions without explaining the reasoning. Ethical practice requires the CRM to:
- Follow the client's instruction without question
- Ensure the client understands the basis of every recommendation before proceeding (Correct answer)
- Escalate immediately to senior management
- Refuse to work with the client
Correct answer: Ensure the client understands the basis of every recommendation before proceeding
Ethical CRM practice requires informed consent, meaning clients must understand the rationale behind recommendations before decisions are made.
CRM Ethical Standards & Professional Conduct 2
Which of the following actions would constitute a breach of client confidentiality under CRM ethical standards?