OIC Financial Crimes & Fraud Investigation 1 — Questions and Answers
Question 1: Which federal law requires financial institutions to report cash transactions exceeding $10,000 to help detect money laundering?
- The Patriot Act
- The Bank Secrecy Act (Correct answer)
- The Financial Crimes Enforcement Act
- The Money Laundering Control Act
Correct answer: The Bank Secrecy Act
The Bank Secrecy Act (BSA) of 1970 mandates that financial institutions report cash transactions over $10,000 via a Currency Transaction Report (CTR) to help identify and deter money laundering.
Question 2: What is 'structuring' in the context of financial crimes?
- Organizing the hierarchy of a criminal enterprise
- Breaking large cash deposits into smaller ones to avoid reporting thresholds (Correct answer)
- Creating shell companies to hide assets
- Filing false tax returns across multiple years
Correct answer: Breaking large cash deposits into smaller ones to avoid reporting thresholds
Structuring (also called 'smurfing') is the illegal practice of breaking large sums of cash into smaller deposits—typically below $10,000—to evade mandatory Currency Transaction Reporting requirements.
Question 3: What is a Suspicious Activity Report (SAR) used for?
- Documenting use-of-force incidents by officers
- Reporting suspected financial crimes to FinCEN (Correct answer)
- Recording surveillance observations in the field
- Notifying supervisors of officer misconduct
Correct answer: Reporting suspected financial crimes to FinCEN
A SAR is filed by financial institutions with the Financial Crimes Enforcement Network (FinCEN) when they detect transactions that may indicate money laundering, fraud, or other financial crimes.
Question 4: Which of the following best describes money laundering?
- Counterfeiting currency to introduce it into circulation
- The process of making illegally obtained funds appear legitimate (Correct answer)
- Forging financial documents to obtain credit
- Stealing funds electronically from bank accounts
Correct answer: The process of making illegally obtained funds appear legitimate
Money laundering is the process by which criminals disguise the origin of illegally obtained money to make it appear as though it came from a legitimate source.
Question 5: During the 'placement' stage of money laundering, what does the criminal typically do?
- Creates shell companies in offshore jurisdictions
- Introduces illegal cash into the financial system (Correct answer)
- Converts laundered funds into luxury assets for personal use
- Transfers funds through multiple international accounts
Correct answer: Introduces illegal cash into the financial system
Placement is the first stage of money laundering where illicit cash is introduced into the financial system, often through bank deposits, currency exchanges, or cash-intensive businesses.
Question 6: What federal offense does 18 U.S.C. § 1344 define?
- Wire fraud
- Bank fraud (Correct answer)
- Securities fraud
- Mail fraud
Correct answer: Bank fraud
18 U.S.C. § 1344 defines bank fraud, making it a federal crime to knowingly execute a scheme to defraud a financial institution or to obtain money from a financial institution under false pretenses.
Question 7: Which agency is the primary federal agency responsible for investigating financial crimes such as bank fraud and money laundering?
- The Drug Enforcement Administration (DEA)
- The Securities and Exchange Commission (SEC)
- The Federal Bureau of Investigation (FBI) (Correct answer)
- The Internal Revenue Service Criminal Investigation Division (IRS-CI)
Correct answer: The Federal Bureau of Investigation (FBI)
While multiple agencies may share jurisdiction, the FBI is the primary federal law enforcement agency responsible for investigating financial crimes including bank fraud, money laundering, and corporate fraud.
OIC Financial Crimes & Fraud Investigation 1
Which federal law requires financial institutions to report cash transactions exceeding $10,000 to help detect money laundering?