Regulatory Compliance & Ethical Standards Flashcards

Which regulatory framework requires financial institutions to implement anti-money laundering (AML) programs and file Suspicious Activity Reports (SARs)?

Answer: Bank Secrecy Act

The Bank Secrecy Act (BSA) requires financial institutions to establish AML programs and report suspicious transactions through Suspicious Activity Reports.

When evaluating a captive insurance arrangement, a risk manager must ensure the structure meets IRS requirements, particularly regarding:

Answer: Risk distribution and risk shifting to qualify as insurance

For a captive to be treated as insurance for tax purposes, IRS requires both risk shifting (transferring risk from the insured to the captive) and risk distribution (pooling multiple independent risks).

RIMS Code of Ethics requires members to avoid actions that create even the appearance of impropriety. This principle is MOST closely aligned with:

Answer: Professionalism and maintaining public trust

Avoiding the appearance of impropriety is central to maintaining public trust and the professional credibility of risk management as a discipline.

A multinational company's risk manager must ensure compliance with the EU General Data Protection Regulation (GDPR). Which of the following data subject rights is MOST unique to GDPR compared to U.S. regulations?

Answer: The right to erasure ('right to be forgotten')

The right to erasure, or 'right to be forgotten,' allows individuals to request deletion of their personal data under certain circumstances, which is a distinctive GDPR provision.

In the context of insurance regulatory compliance, a 'market conduct examination' conducted by state regulators primarily evaluates:

Answer: An insurer's business practices and treatment of policyholders

Market conduct examinations assess how insurers treat policyholders in areas such as underwriting, claims handling, and marketing practices.

The concept of 'whistleblower protection' under Dodd-Frank allows employees who report securities violations to:

Answer: Receive monetary awards and protection from employer retaliation

Dodd-Frank's whistleblower provisions allow qualifying reporters to receive 10-30% of sanctions over $1 million and protect them from employer retaliation.

An organization's risk manager is asked by senior management to omit a material risk from the annual report to avoid alarming investors. The MOST ethical response is to:

Answer: Refuse and explain that omitting material risks violates SEC disclosure requirements

Risk managers have an ethical and legal obligation to ensure material risks are properly disclosed; complying with management's request could constitute securities fraud.