Question 1

Mammoth Enterprises is a new customer to the bank. It is a wholly owned subsidiary of Mammoth Corporation. Which of the following statements, if true, would make Mammoth Enterprises an exempt customer at the bank?

Accepted Answer

Mammoth Enterprises would be an exempt customer at the bank if Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange. This is because the bank exempts customers who are listed on a U.S. national securities exchange, which includes the American Stock Exchange. None of the other options provide information that would make Mammoth Enterprises an exempt customer.

Question 2

Mrs. Evans, a customer of First National Bank, deposits $15,000 in cash to her account. During the transaction, Mrs. Evans explains that she received the money in the mail from her sister in Europe. What responsibility does the bank have?

Accepted Answer

The answer of Mrs. Evans, a customer of First National...

Question 3

ABC Co. signs a contract to export goods to Country G, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires the goods to be shipped on a ship eligible to enter the port of Country G in conformity with its laws and regulations and that the insurer of the goods has an agent in Country G. Country G's laws prohibit blacklisted ships from calling at its ports and blacklisted insurance companies from qualifying agents in Country G. First National Bank confirms the letter of credit. Did the bank's action constitute an agreement to participate in or cooperate with an international boycott, and is it subject to IRS reporting requirements?

Accepted Answer

The bank's confirmation of the letter of credit, which includes terms that comply with the boycotting country's laws, constitutes participation in the boycott. This action is subject to IRS reporting requirements under U.S. anti-boycott laws.

Question 4

In April Lillian Redmond, the teller supervisor for First National Bank, discovers five counterfeit $20 bills in several teller drawers. In May and in June she discovers two additional counterfeit $20 bills. She has no knowledge of criminal activity on the part of any of the bank's employees or customers. She does not suspect any particular person in this transaction. Which of the following statements is true?

Accepted Answer

The answer of In April Lillian Redmond, the teller supervisor...

Question 5

The manager of Main Street branch calls and relates the following information: John Smith purchased a cashier's check for $1,000 cash at 10:00 a. m. on Tuesday. At 11:30 a. m. Mr. Smith returned and purchased a cashier's check for $2,500 cash and deposited traveler's checks totaling $9,000 into his checking account. At 4:00 p.m. Mr. Smith returned and deposited $8,000 cash into his checking account. This deposit was after normal banking hours, so it was recorded as of Wednesday's business date. What action should the bank take?

Accepted Answer

The bank should record the $1,000 and $2,500 transactions on the monetary instrument sales log because the total of these cashier's check purchases exceeds the $3,000 threshold.

Question 6

Which of the following is an accurate statement according to the requirements of the customer identification program regulations?

Accepted Answer

According to the customer identification program regulations, the bank's CIP program must enable it to form a reasonable belief about the identity of the person. This means that the bank must use various methods to verify the customer's identity, which may include documentary verification, non-documentary verification, or a combination of both. The bank cannot waive any part of the CIP requirements unless there is an exception allowed by law or regulation. Also, the bank must obtain the customer's physical address and cannot accept just a post office box.

Question 7

Martha Whitmire, the BSA Compliance Officer for First National Bank, is responsible for monitoring the bank's daily currency activity and wire transfers, for compliance with information retention and reporting requirements. Ms. Whitmire notices during her review on March 10 that, during the previous two weeks, a transaction occurred on the same account several times during the week. The activity appeared at one branch office as cash deposits in dollar amounts under the reporting thresholds. Ms. Whitmire discusses this activity with the branch manager and determines that this same deposit activity occurred several times during the previous six weeks. She then conducts a more extensive examination of the account's activity for several months and discovers that cash deposits were made at one branch office and purchases of bank cashiers checks were made by withdrawals from the same account at a different branch office. All withdrawals and purchases of cashier's checks were for the identical amount as the cash deposits. Which statement best describes Ms. Whitmire's responsibility?

Accepted Answer

Ms. Whitmire's examination of the account's activity suggests a pattern of structuring that meets the regulatory definition of suspicious activity. A SAR (Suspicious Activity Report) should be filed and proper due diligence should be undertaken to establish the legitimacy of the activity. Choice A is incorrect because a CTR (Currency Transaction Report) is required only for transactions exceeding the reporting thresholds, not for structuring. Choice B is incorrect because a late discovery does not exempt the bank from filing a SAR once unlawful activity has been identified. Choice C is incorrect because the line of authority and decision-making for filing a SAR should be more independent of senior management.

Question 8

Which of the following transactions requires completion of FinCEN Form 104, a CTR?

Accepted Answer

Cash transaction over $10,000 triggers the requirement to file CTR, and since the cashing of the $14,000 check exceeds the threshold, a CTR is required to be completed.

Question 9

First National Bank advises Country A, a boycotting country, on various U.S. investments. Country A instructs First National Bank not to recommend for investment any shares of certain blacklisted companies. First National Bank follows this instruction. Has First National Bank participated or cooperated in an international boycott under the IRS regulations by this action?

Accepted Answer

The bank has not participated or cooperated in an international boycott under the IRS regulations by following the instruction of their client not to recommend certain blacklisted companies. The bank has the right to agree or disagree with any investment options based on their client's instruction.

Question 10

A bank is conducting due diligence for a foreign correspondent bank account. Which of the following is NOT required information?

Accepted Answer

While A, B, and D are all necessary information for conducting due diligence on a foreign correspondent bank account, copies of the tax return of the correspondent bank are not typically required.

Question 11

First National Bank is attempting to determine which of the following customers would qualify as exempt persons: • Nationwide Foods, Inc., is a national company with stock listed on the New York Stock Exchange • National Paper Products, is a wholly owned subsidiary of Nationwide Foods, Inc. • Products Incorporated, a depositor for three months, is a regional company whose stock is designated a NASDAQ Capital Markets Company and that sells and leases large boats • Century Enterprises, a local company owning several local restaurants, is a longtime bank customer and frequently makes deposits in excess of $10,000. All of Century's stock is owned by a local family. Which of these customers would qualify as an exempt person?

Accepted Answer

The answer of First National Bank is attempting to determine...

Question 12

Records that must be retained for deposit accounts include which of the following?

Accepted Answer

The answer of Records that must be retained for deposit...

Question 13

Bob Jones, president of ACME bank, has had a banking relationship with Linda O'Reilly, a local real estate agent for several years. Ms. O'Reilly keeps most of her deposit accounts with ACME and also has had several personal loans there. Over a three-month time period, Ms. O'Reilly consistently (two or three times a week) brings to the bank a series of money orders in amounts ranging from $7,000 to $15,000, made payable to her in denominations of $1,000, and asks the teller to take them and issue one cashier's check payable to her. After this activity has continued for three months, Mr. Jones notices the frequency of cashier's checks issued to Ms. O'Reilly on a management report. It catches his attention because he does not know why Ms. O'Reilly would need this number of cashier's checks. On inquiry, the head teller explains the weekly transactions. Which of the following statements best describes Mr. Jones's responsibility?

Accepted Answer

Mr. Jones should ask Ms. O'Reilly why she is conducting these transactions and then determine whether to file a SAR. While it is not necessarily illegal to purchase cashier's checks, the frequent and consistent nature of the transactions may be indicative of suspicious activity. Mr. Jones should gather more information before determining whether a SAR needs to be filed.

Question 14

Fastfood, Inc., a nationwide restaurant chain, opened an account at First National Bank last year. Fastfood is making daily deposits in amounts of $15,000 to $20,000. First National needs to determine if this company is an exempt person. What should the bank do first?

Accepted Answer

The bank should first verify if Fastfood, Inc.'s stock is listed on one of the recognized exchanges, as this would qualify it as an exempt person under the Bank Secrecy Act regulations.

Question 15

For how long must a bank keep records of transactions involving currency in amounts greater than $10,000?

Accepted Answer

Banks are required to keep records of transactions involving currency amounts greater than $10,000 for five years, as per the Bank Secrecy Act.

Question 16

First National Bank has several exempt customers. • Alpha is an exempt person because its stock is listed on a major stock exchange. • Beta is an exempt person because it meets the nonlisted customer requirements. • Zeta is exempt because it is a payroll customer. For which customer(s) must the bank conduct an annual review to determine its continuing eligibility to be exempt from CTR filings?

Accepted Answer

Beta and Zeta must have an annual review to determine their continuing eligibility to be exempt from CTR filings. Alpha is exempt because its stock is listed on a major stock exchange, which does not require an annual review.

Question 17

Which of the following businesses would be eligible to be an exempt person under the requirements of the Bank Secrecy Act?

Accepted Answer

Under the requirements of the Bank Secrecy Act, only certain types of businesses are eligible for exempt status. These include government entities, certain financial institutions, and certain retail and service businesses with low levels of cash transactions. Al Williams Seafood Restaurant may qualify as a retail or service business with low levels of cash transactions, but the other businesses listed (used car dealer, recreational boat dealer, aircraft distributor) are unlikely to meet the criteria for exemption.

Question 18

When conducting a records search pursuant to a FinCEN request, what must a bank search?

Accepted Answer

A bank must search all accounts maintained within the previous 12 months and transaction records for 6 months when conducting a records search pursuant to a FinCEN request. Option A is too broad and Option C is too narrow. Option D is incorrect as searches are not voluntary but required by law.

Question 19

James Walker DBA Walker Enterprises has been a customer of the bank for one month. The company told the bank that it would regularly make deposits in excess of $10,000 because it operates several laundromats in the city. The bank performed a background check on the company before opening the account. For its first 30 days, the company made 12 large cash deposits. Can the bank exempt this company now? Why or why not?

Accepted Answer

The bank conducted a background check on the company before opening the account and has monitored the company's transactions for the first 30 days. It has determined that the company's large cash deposits are legitimate and related to its business operations. Therefore, the bank can exempt this company from further monitoring under the Bank Secrecy Act. Neither being a sole proprietorship nor the length of time the account has been open affects the bank's decision to exempt the company. The fact that it operates in the laundromat industry also does not make it ineligible for exemption as long as its transactions are legitimate.

Question 20

ABC Co. signed a contract to export goods to Country M, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires ABC Co. to certify that none of its directors are nationals of any country boycotted by Country M before ABC can be paid. First National Bank confirms the letter of credit to ABC after determining that all of the documents are in order. Did First National Bank participate in a boycott, and must the bank report the action to the IRS?

Accepted Answer

First National Bank's confirmation of the letter of credit with the boycott-related certification requirement constitutes participation in a boycott, and the bank must report this action to the IRS as per U.S. anti-boycott laws.

Exam 1: Certified Regulatory Compliance Manager