Treasury Enforcement Agent Exam Risk Assessment & Management 5 — Questions and Answers
Question 1: Under 31 CFR Part 1010, financial institutions must retain records of funds transfers of $3,000 or more for a minimum of:
- 2 years
- 5 years (Correct answer)
- 7 years
- 10 years
Correct answer: 5 years
BSA regulations require financial institutions to retain records of funds transfers of $3,000 or more for five years from the date of the transaction.
Question 2: A risk assessment framework that evaluates threats, vulnerabilities, and consequences is most closely aligned with which approach?
- SWOT analysis
- Threat-Vulnerability-Consequence (TVC) framework (Correct answer)
- Cost-benefit analysis
- Net Present Value (NPV) modeling
Correct answer: Threat-Vulnerability-Consequence (TVC) framework
The Threat-Vulnerability-Consequence framework specifically assesses what threats exist, how vulnerable a system is to them, and what the impact would be if exploited.
Question 3: A Treasury Enforcement Agent reviewing a nonbank financial institution finds no written AML policies or procedures. Under the BSA, this deficiency:
- Is permissible for institutions under $1 billion in assets
- Constitutes a significant violation requiring mandatory corrective action (Correct answer)
- Is only a concern if a SAR was never filed
- Is addressed solely through informal guidance with no enforcement consequences
Correct answer: Constitutes a significant violation requiring mandatory corrective action
Written AML policies and procedures are a mandatory BSA requirement for covered financial institutions, and their absence constitutes a significant compliance deficiency subject to enforcement.
Question 4: When assessing geographic risk for a financial institution's customer base, which factor is LEAST relevant?
- Proximity to international borders with known smuggling routes
- Concentration of customers in FATF-identified high-risk jurisdictions
- Number of customers who use mobile banking apps (Correct answer)
- Percentage of transactions involving offshore accounts in secrecy havens
Correct answer: Number of customers who use mobile banking apps
Mobile banking app usage is a product-type consideration unrelated to geographic risk, which focuses on location-based factors like border proximity, high-risk jurisdictions, and secrecy havens.
Question 5: A financial institution's AML compliance officer discovers that an employee has been deliberately not filing SARs to protect a relationship with a high-revenue client. This situation MOST likely constitutes:
- A minor procedural error with no criminal implications
- Willful violation of BSA requirements potentially constituting a federal crime (Correct answer)
- An internal HR matter with no regulatory consequences
- A documentation gap requiring only retraining
Correct answer: Willful violation of BSA requirements potentially constituting a federal crime
Deliberately suppressing SAR filings is a willful violation of the BSA, which can constitute a federal crime carrying criminal penalties for both the employee and the institution.
Question 6: The practice of using multiple bank accounts, nominees, and front companies to move illicit funds before introducing them into legitimate businesses is characteristic of which money laundering stage?
- Placement
- Layering (Correct answer)
- Integration
- Structuring
Correct answer: Layering
Using complex webs of accounts, nominees, and front companies to obscure the origin of funds defines the layering stage of money laundering.
Question 7: A Treasury agent conducting a risk assessment assigns numerical scores to different risk factors and multiplies likelihood by impact. This methodology is known as:
- Delphi method
- Quantitative risk scoring (Correct answer)
- Qualitative judgment assessment
- Benchmarking analysis
Correct answer: Quantitative risk scoring
Quantitative risk scoring assigns numerical values to risk factors, multiplying likelihood and impact scores to produce a composite risk rating for comparison and prioritization.
Treasury Enforcement Agent Exam Risk Assessment & Management 5
Under 31 CFR Part 1010, financial institutions must retain records of funds transfers of $3,000 or more for a minimum of: