FREE CBA Regulatory Compliance and AML Questions and Answers

Question 1

An auditor reviewing a bank's marketing materials for a new credit card finds the headline "0% APR for One Year!" The disclosure that this rate only applies to balance transfers—and not to new purchases, which accrue interest at 24.99%—is located in a small-font footnote. This practice is most likely a violation of which of the following?

Accepted Answer

Truth in Lending Act (TILA) and Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)

Answer

This is a classic example of a deceptive practice under UDAAP, where a representation is likely to mislead the consumer. The prominent "0% APR" claim is materially misleading because a key limitation (it not applying to new purchases) is obscured. Additionally, TILA (Regulation Z) requires that credit advertising disclosures be clear and conspicuous.

Question 2

A Certified Bank Auditor is assessing the independent testing pillar of a bank's BSA/AML compliance program. Which of the following is the MOST critical area for the auditor to evaluate to ensure the program's foundation is sound?

Accepted Answer

The adequacy and completeness of the bank's BSA/AML risk assessment.

Answer

According to the FFIEC BSA/AML Examination Manual, the independent audit should be risk-based. Therefore, the most critical starting point is to evaluate the bank's own BSA/AML risk assessment. If the risk assessment is flawed or incomplete, the entire compliance program—including internal controls, monitoring, and training—will not be properly aligned to mitigate the bank's actual risks.

Question 3

During an audit, it is discovered that a wire transfer was processed for a customer whose name was a near-match to an individual on the OFAC Specially Designated Nationals (SDN) list. The bank's interdiction software generated an alert, but the operations clerk, citing a minor spelling difference, cleared the alert and processed the payment without further investigation or escalation. This represents a critical failure in which component of the OFAC compliance program?

Accepted Answer

Internal controls for alert review and escalation.

Answer

The software performed its function by generating an alert. The failure occurred when the employee did not follow a proper procedure for investigating and escalating a potential match. An effective OFAC compliance program's internal controls must include clear, enforced procedures for handling alerts to determine if they are false positives or true matches, which was not done here.

Question 4

The primary purpose of the Customer Due Diligence (CDD) rule's requirement to identify and verify the beneficial owners of legal entity customers is to:

Accepted Answer

Prevent the use of anonymous shell companies to obscure the identities of individuals engaged in money laundering or terrorist financing.

Answer

The FinCEN CDD Final Rule was explicitly designed to enhance financial transparency and combat the misuse of legal entities. By requiring the identification of natural persons who own or control legal entities, the rule aims to make it more difficult for criminals and other illicit actors to hide their identities behind corporate structures.

Question 5

An auditor reviews a customer's account activity and notes a pattern of five separate cash deposits of $9,000 on five consecutive days at different branches. While no Currency Transaction Report (CTR) was triggered, this activity is a significant red flag. The bank's primary regulatory responsibility in this situation is to:

Accepted Answer

Evaluate the activity for suspicion of structuring and file a Suspicious Activity Report (SAR) if deemed necessary.

Answer

This pattern is a classic example of structuring—designing transactions to evade the CTR filing requirement. While no individual transaction met the >$10,000 threshold for a CTR, the bank is required to file a SAR if it knows, suspects, or has reason to suspect that the transactions were designed to evade BSA requirements.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

FREE CBA Regulatory Compliance and AML Questions and Answers