Treasury Enforcement Agent Exam Risk Assessment & Management 4 — Questions and Answers
Question 1: A Treasury Enforcement Agent is reviewing a casino's AML program. Which customer activity would MOST warrant a closer review under a risk-based approach?
- A regular patron buying $500 in chips with a credit card
- Multiple individuals pooling cash to purchase chips exceeding $10,000 collectively (Correct answer)
- A patron redeeming chips for a check after a documented gambling session
- A first-time visitor playing table games for two hours
Correct answer: Multiple individuals pooling cash to purchase chips exceeding $10,000 collectively
Multiple individuals collectively purchasing chips exceeding $10,000 in cash is a classic structuring and aggregation scenario that triggers CTR and SAR review obligations.
Question 2: The concept of 'know your customer' (KYC) is fundamentally a risk management tool because it:
- Maximizes revenue by identifying high-value clients
- Enables institutions to identify and verify customers and assess their risk profile (Correct answer)
- Ensures compliance with consumer privacy laws exclusively
- Replaces the need for transaction monitoring systems
Correct answer: Enables institutions to identify and verify customers and assess their risk profile
KYC allows financial institutions to understand who their customers are, establish a risk baseline, and detect anomalies that may indicate illicit activity.
Question 3: A risk-based approach to AML compliance requires financial institutions to allocate their compliance resources based on:
- Equal distribution across all customer segments regardless of risk
- Higher allocation to customers and transactions presenting greater risk (Correct answer)
- Regulator-prescribed fixed percentages for each risk category
- The size of the compliance department relative to total staff
Correct answer: Higher allocation to customers and transactions presenting greater risk
The risk-based approach directs proportionally more resources, scrutiny, and controls toward higher-risk customers, products, and geographies.
Question 4: Which of the following is an example of a 'red flag' indicating potential terrorist financing rather than traditional money laundering?
- Large cash deposits inconsistent with known income
- Small, frequent wire transfers to conflict-affected regions with no apparent business purpose (Correct answer)
- Multiple currency exchanges to obscure fund origins
- Purchasing high-value assets with cash then quickly reselling them
Correct answer: Small, frequent wire transfers to conflict-affected regions with no apparent business purpose
Small transfers to conflict regions without a legitimate business rationale are a hallmark terrorist financing indicator, as such funds are often used rather than laundered for profit.
Question 5: An inherent risk assessment at a financial institution should be conducted:
- Only once during the institution's initial BSA examination
- Before considering existing controls, to measure the raw level of risk (Correct answer)
- After all controls have been implemented and tested
- Simultaneously with the control effectiveness review
Correct answer: Before considering existing controls, to measure the raw level of risk
Inherent risk is assessed without regard to controls to establish the baseline risk level before mitigation measures are factored in.
Question 6: A Treasury agent discovers that a bank's Board of Directors has not reviewed the AML program in three years. This finding PRIMARILY indicates a failure of:
- Transaction monitoring technology
- Board-level governance and oversight (Correct answer)
- Front-line teller training protocols
- Core banking system integration
Correct answer: Board-level governance and oversight
Board oversight and governance of the AML program is a foundational requirement; lack of periodic board review indicates a systemic governance failure.
Question 7: Which analytical technique do Treasury agents use to identify networks of individuals or entities potentially involved in financial crimes?
- Linear regression analysis
- Link analysis / network analysis (Correct answer)
- Monte Carlo simulation
- Time-series forecasting
Correct answer: Link analysis / network analysis
Link analysis maps relationships and connections between individuals, accounts, and entities to reveal networks that may be collaborating in financial crime.
Treasury Enforcement Agent Exam Risk Assessment & Management 4
A Treasury Enforcement Agent is reviewing a casino's AML program.
Which customer activity would MOST warrant a closer review under a risk-based approach?