Treasury Enforcement Agent Exam Risk Assessment & Management 2 — Questions and Answers
Question 1: A Treasury Enforcement Agent notices that a money services business has been processing large volumes of transactions just below the $10,000 Currency Transaction Report threshold. This pattern is best described as:
- Layering
- Structuring (smurfing) (Correct answer)
- Integration
- Placement
Correct answer: Structuring (smurfing)
Structuring, also known as smurfing, is the deliberate breaking up of large transactions into smaller amounts to avoid CTR filing requirements.
Question 2: When conducting a risk-based examination of a financial institution, which factor would MOST increase the institution's money laundering risk rating?
- High volume of domestic wire transfers to verified businesses
- Significant cash-intensive business clientele in high-risk geographic areas (Correct answer)
- Large number of federally insured deposit accounts
- Extensive use of standardized transaction monitoring software
Correct answer: Significant cash-intensive business clientele in high-risk geographic areas
Cash-intensive businesses combined with high-risk geographic locations significantly elevate money laundering risk because cash transactions are harder to trace and certain regions have higher rates of financial crime.
Question 3: Under FinCEN guidance, a Suspicious Activity Report (SAR) must generally be filed within how many days of detecting a suspicious transaction?
- 15 calendar days
- 30 calendar days (Correct answer)
- 45 calendar days
- 60 calendar days
Correct answer: 30 calendar days
FinCEN regulations require financial institutions to file a SAR within 30 calendar days of initially detecting a suspicious transaction.
Question 4: A risk matrix in financial crime investigations typically plots which two dimensions?
- Transaction volume and account age
- Likelihood of occurrence and potential impact (Correct answer)
- Customer net worth and geographic location
- Frequency of audits and regulatory penalties
Correct answer: Likelihood of occurrence and potential impact
A risk matrix maps likelihood of a risk occurring against its potential impact to prioritize investigative and mitigation resources.
Question 5: Which of the following best describes the 'layering' stage of money laundering?
- Introducing illicit funds into the financial system through deposits
- Moving funds through complex transactions to obscure their illegal origin (Correct answer)
- Integrating cleaned money back into the legitimate economy
- Using shell companies to hold criminal proceeds
Correct answer: Moving funds through complex transactions to obscure their illegal origin
Layering involves creating complex layers of financial transactions to distance illicit funds from their source and obscure the audit trail.
Question 6: A Treasury agent is assessing the risk posed by a cryptocurrency exchange operating without AML controls. Which risk category does this PRIMARILY represent?
- Credit risk
- Operational risk
- Compliance/regulatory risk (Correct answer)
- Market risk
Correct answer: Compliance/regulatory risk
Operating without AML controls constitutes a compliance and regulatory risk, exposing the institution to enforcement actions, penalties, and legal liability.
Question 7: When prioritizing which financial institutions to examine first, Treasury enforcement agents would apply which risk management principle?
- Random sampling to ensure equal treatment
- Risk-based prioritization focusing resources on higher-risk entities (Correct answer)
- Chronological scheduling based on last examination date only
- Alphabetical ordering of institution names
Correct answer: Risk-based prioritization focusing resources on higher-risk entities
Risk-based prioritization directs limited enforcement resources toward institutions that pose the greatest risk of financial crime or regulatory non-compliance.
Treasury Enforcement Agent Exam Risk Assessment & Management 2
A Treasury Enforcement Agent notices that a money services business has been processing large volumes of transactions just below the $10,000 Currency Transaction Report threshold.
This pattern is best described as: