Bank Secrecy Act Quiz 2010
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Most people have put a huge amount of their money in banks. The bank secrecy act was put in place by the government so that it can easily get information on a bank account they suspect is being used for money laundering. Test your understanding of the Act by taking this test.
- 1.
The BSA policy is required to be in writing and approved by the Board of Directors.
- A.
TRUE
- B.
FALSE
Correct Answer
A. TRUEExplanation
The statement is true because the BSA policy must be documented in writing to ensure clarity and consistency. Having a written policy allows for easy reference and understanding by all members of the organization. Additionally, the policy must be approved by the Board of Directors to ensure that it aligns with the organization's goals and objectives. This approval process helps to ensure that the policy is well-thought-out and meets the necessary standards.Rate this question:
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- 2.
Which action is NOT part of the four basic components of BSA compliance?
- A.
Designating an individual to be responsible for overseeing the BSA program
- B.
Providing annual training for all employees as well as the Board of Directors
- C.
Testing of internal controls
- D.
Advertising or notifying the public that the bank is in compliance with the BSA requirements
Correct Answer
D. Advertising or notifying the public that the bank is in compliance with the BSA requirementsExplanation
The action of advertising or notifying the public that the bank is in compliance with the BSA requirements is not part of the four basic components of BSA compliance. The four basic components include designating an individual to oversee the BSA program, providing annual training for employees and the Board of Directors, testing internal controls, and conducting independent testing of BSA compliance. Advertising or notifying the public is not a specific action required for BSA compliance, but rather a potential outcome or result of successfully implementing the four basic components.Rate this question:
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- 3.
What are the three fundamental components of risk assessment?
- A.
Monitor, Advise and Document
- B.
Assess, Document, and Inform
- C.
Detect, Deter and Report
- D.
Question, Follow-Through and Enforce
Correct Answer
C. Detect, Deter and ReportExplanation
The three fundamental components of risk assessment are detect, deter, and report. Detecting risks involves identifying potential hazards or threats. Deterrence refers to taking preventive measures to minimize or eliminate those risks. Reporting involves communicating the identified risks to relevant parties, such as management or authorities, in order to take appropriate action.Rate this question:
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- 4.
What are two reasons why detecting terrorist financing is difficult?
- A.
Terrorist transactions are often not complex and do not involve large sums of money
- B.
Terrorist often finance their activities through both legitimate and unlawful sources
- C.
Terrorists do not use the same money laundering techniques as other criminals use
- D.
Terrorists do not open bank accounts so banks do not have to be concerned about them
Correct Answer(s)
B. Terrorist often finance their activities through both legitimate and unlawful sources
C. Terrorists do not use the same money laundering techniques as other criminals useExplanation
Detecting terrorist financing is difficult for two reasons. Firstly, terrorist transactions are often not complex and do not involve large sums of money, making them harder to detect among legitimate financial activities. Secondly, terrorists often finance their activities through both legitimate and unlawful sources, making it challenging to distinguish between the two. Additionally, terrorists do not use the same money laundering techniques as other criminals, further complicating the detection process.Rate this question:
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- 5.
Money laundering is...
- A.
A method of independent testing that is conducted to locate funding of criminal activities.
- B.
The criminal practice of filtering money through a bank and involves placement, layering and integration.
- C.
Another name for check fraud and wire scams.
- D.
Removing damaged or "dirty" cash from circulation.
Correct Answer
B. The criminal practice of filtering money through a bank and involves placement, layering and integration.Explanation
Money laundering is the process of making illegally obtained money appear legal by passing it through a legitimate financial institution. This involves three stages: placement, where the money is introduced into the financial system; layering, where the money is moved through various transactions to obscure its origin; and integration, where the money is reintroduced into the economy as legitimate funds. This practice allows criminals to enjoy the proceeds of their illegal activities without raising suspicion.Rate this question:
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- 6.
Bank employees are expected to adhere to specific actions to be in compliance with the BSA. Which of the following is NOT a part of maintaining the quality of our BSA compliance?
- A.
File Currency Transaction Reports for cash transactions over $10,000.
- B.
File Suspicious Activity Reports for any transaction that appears suspicious.
- C.
Keep all BSA records for a period of at least five years
- D.
Form a reasonable belief as to the identity of customers at account opening
- E.
Conduct a follow-up call with clients after a CTR has been filed.
Correct Answer
E. Conduct a follow-up call with clients after a CTR has been filed.Explanation
Bank employees are expected to adhere to specific actions to maintain the quality of BSA compliance. These actions include filing Currency Transaction Reports for cash transactions over $10,000, filing Suspicious Activity Reports for suspicious transactions, keeping all BSA records for at least five years, and forming a reasonable belief about the identity of customers at account opening. However, conducting a follow-up call with clients after a CTR has been filed is not a part of maintaining BSA compliance.Rate this question:
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- 7.
The Bank, Board of Directors and employees can face serious consequences if they fail to follow procedures or adhere to the BSA requirements. All but one of the following can be a consequence of non-compliance.
- A.
Cease and Desist Orders
- B.
Restrictions on mergers, acquisitions and branching
- C.
Terminate institutions deposit insurance
- D.
Personal fines and jail time for employees, and Officers of the bank
- E.
Restrict new account openings and deposit amounts
Correct Answer
E. Restrict new account openings and deposit amountsExplanation
Failure to follow procedures or adhere to BSA requirements can result in serious consequences for the Bank, Board of Directors, and employees. These consequences can include Cease and Desist Orders, restrictions on mergers, acquisitions, and branching, termination of the institution's deposit insurance, personal fines and jail time for employees and Officers of the bank. The only consequence that is not mentioned as a potential result of non-compliance is the restriction of new account openings and deposit amounts.Rate this question:
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- 8.
What is the fundamental part of BSA that has procedures in place that help you identify your customer and assist the bank in monitoring both normal and unusual activity?
- A.
Customer Identification Program (CIP)
- B.
Red Flag
- C.
USA Patriot Act
- D.
Risk Assessment
Correct Answer
A. Customer Identification Program (CIP)Explanation
The Customer Identification Program (CIP) is the fundamental part of BSA that has procedures in place to help identify customers and assist the bank in monitoring both normal and unusual activity. The CIP is a requirement under the USA Patriot Act, which aims to prevent money laundering and terrorist financing. It ensures that banks have a process to verify the identity of their customers and collect necessary information, such as name, address, and identification documents. By implementing a CIP, banks can better assess the risk associated with each customer and detect any suspicious or unusual transactions.Rate this question:
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- 9.
If an individual is opening a new account and you cannot form a reasonable basis that you know the customer's true identity, you should...
- A.
Open the account and ask them to produce more proof in a 24 hour period.
- B.
Contact your Manager to approve opening the account
- C.
Do not open the account and provide an adverse action notice
- D.
Open the account but place a warning on the system and holds on all deposits until a relationship is established
Correct Answer
C. Do not open the account and provide an adverse action noticeExplanation
If an individual is opening a new account and you cannot form a reasonable basis that you know the customer's true identity, you should not open the account and provide an adverse action notice. This is because opening an account without proper identification can pose a risk of fraud or money laundering. By providing an adverse action notice, the individual is informed of the decision and the reason behind it. This helps maintain transparency and ensures compliance with regulations.Rate this question:
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- 10.
Prior to opening an account, we are required to run an OFAC (Office of Foreign Asset Control) scan for matches to the Specially Designated Nationals and Blocked Persons (SDN) list.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Prior to opening an account, it is necessary to run an OFAC scan to check for any matches to the Specially Designated Nationals and Blocked Persons (SDN) list. This is a requirement to ensure compliance with the Office of Foreign Asset Control regulations and to prevent any potential involvement with individuals or entities that are prohibited or restricted due to their involvement in illegal activities or national security concerns.Rate this question:
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- 11.
Banks are required by BSA to keep records of certain transactions. Which option describes records BSA requires banks to keep?
- A.
Wire transfers of $1,000 or more
- B.
Currency transactions exceeding $5,000
- C.
Negotiable instrument sales for cash in amounts of $3,000 to $10,000
- D.
List of individuals in the US illegally
Correct Answer
C. Negotiable instrument sales for cash in amounts of $3,000 to $10,000Explanation
The Bank Secrecy Act (BSA) requires banks to keep records of negotiable instrument sales for cash in amounts of $3,000 to $10,000. This means that when customers sell negotiable instruments such as money orders, traveler's checks, or cashier's checks for cash within this specified range, the bank must maintain records of these transactions. This requirement helps to prevent money laundering and other illicit financial activities by ensuring transparency and traceability of high-value cash transactions involving negotiable instruments.Rate this question:
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- 12.
Which scenario best describes a multiple transaction requiring a CTR under the BSA?
- A.
A new customer deposits $7,500 cash in a Money Market account and $500 cash into a checking account
- B.
A well established customer makes three separate cash deposits on the same day at three different locations. A $4,570 deposit into a savings account, $4,020 into a Money Market account and $1,120 into a regular checking account.
- C.
A customer deposits a $5,000 check, a $4,000 check and $7,000 cash into the same account.
- D.
A business owner deposits $5,000 cash in the night depository and comes in later that same day to deposit $6,202 in cash to a different account.
Correct Answer
D. A business owner deposits $5,000 cash in the night depository and comes in later that same day to deposit $6,202 in cash to a different account.Explanation
This scenario fits the criteria for a multiple transaction requiring a Currency Transaction Report (CTR) under the Bank Secrecy Act (BSA). The business owner makes two separate cash deposits on the same day, one in the night depository and another to a different account. The total cash deposited exceeds the threshold amount, which triggers the requirement for a CTR to be filed.Rate this question:
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- 13.
Who is required to complete the CTR form when the criteria is meet?
- A.
Deposit Operations
- B.
Teller or employee conducting the transaction
- C.
BSA or Alternate BSA Officer
- D.
Manager of the location where the transaction took place
Correct Answer
B. Teller or employee conducting the transactionExplanation
The correct answer is the teller or employee conducting the transaction. The Currency Transaction Report (CTR) form is required to be completed by the individual who is directly involved in the transaction. This is because they have firsthand knowledge of the details and can accurately report the necessary information regarding the transaction. The other options listed, such as Deposit Operations, BSA or Alternate BSA Officer, and Manager of the location, may have oversight or supervisory roles, but they are not directly involved in the transaction itself.Rate this question:
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- 14.
Bankers must complete a Suspiciou Activity Report (SAR) in certain situations. What is one situation in which you should consider completing a SAR?
- A.
The customer is unknown at the bank
- B.
The amount of the transaction is reduced by the customer to avoid a CTR
- C.
Customer leaves the bank angry because ID was requested to cash a check
- D.
Amount of transaction is over $10,000 in cash
Correct Answer
B. The amount of the transaction is reduced by the customer to avoid a CTRExplanation
If a customer intentionally reduces the amount of a transaction to avoid triggering a Currency Transaction Report (CTR), it may indicate suspicious activity that should be reported in a Suspicious Activity Report (SAR). This behavior could be an attempt to evade reporting requirements and could potentially be linked to illegal activities such as money laundering or tax evasion. Reporting such activity helps banks and authorities identify and investigate potential financial crimes.Rate this question:
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- 15.
You must inform the customer when a Suspicious Activity Report (SAR) is filed.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
It is not necessary to inform the customer when a Suspicious Activity Report (SAR) is filed. SARs are typically filed by financial institutions to report any suspicious or potentially illegal activities observed in customer transactions. Informing the customer about the filing may compromise the investigation or alert the individual involved, thus defeating the purpose of reporting suspicious activity. Therefore, the statement that the customer must be informed when a SAR is filed is incorrect.Rate this question:
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- 16.
There are three key points to communicate to customers if they ask why a CTR is being completed. Which of the following would NOT be an appropriate communication point.
- A.
Why the report is being completed for this particular transaction
- B.
What the BSA requirement is for completing the report
- C.
How completing the report will/will not affect the transaction
- D.
Explain how the report helps to catch criminal activities
Correct Answer
D. Explain how the report helps to catch criminal activitiesExplanation
Explain how the report helps to catch criminal activities would NOT be an appropriate communication point because it goes beyond the scope of the question. The question asks for the communication points to explain why a CTR is being completed, not how it helps catch criminal activities. The other options provided are all relevant to explaining the purpose and requirements of completing the report for a particular transaction.Rate this question:
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- 17.
Since the reporting of certain types of transactions such as regular or frequent currency transactions with legitimate businesses is not likely to be useful to law enforcement agencies, the bank is allowed to grant appropriate reporting exemptions to designated types of transactions and customers.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement suggests that reporting certain types of transactions with legitimate businesses is not useful for law enforcement agencies. Therefore, the bank has the authority to exempt designated types of transactions and customers from reporting requirements. This implies that the statement is true.Rate this question:
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- 18.
All of the following statements are true concerning CTR exemptions except one. Mark the incorrect statement.
- A.
Exemptions must be reviewed annually for exemption renewal
- B.
BSA Officer must approve and review exemption requests
- C.
Auto Sales and Leasing is an eligible business for exemption
- D.
Customer must have a "transaction account"
Correct Answer
C. Auto Sales and Leasing is an eligible business for exemptionExplanation
The statement "Auto Sales and Leasing is an eligible business for exemption" is incorrect. The other statements are true, including the requirement for exemptions to be reviewed annually for renewal, the need for the BSA Officer to approve and review exemption requests, and the requirement for the customer to have a "transaction account". However, Auto Sales and Leasing is not eligible for exemption.Rate this question:
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- 19.
It is Signature Banks policy to sell monetary instruments (Official Check, Money Order, Traveler's Checks, etc) to non-customers.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Signature Bank's policy is not to sell monetary instruments to non-customers.Rate this question:
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- 20.
The bank realizes the risks associated with exposure with sharing information. The BSA Officer will handle all requests and Signature Bank has opted NOT to share information with other financial institutions at this time.
- A.
True
- B.
Flase
Correct Answer
A. TrueExplanation
The statement suggests that the bank is aware of the risks involved in sharing information and has made the decision not to share information with other financial institutions currently. Therefore, the correct answer is true, indicating that the bank has opted not to share information.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Mar 30, 2010Quiz Created by
Tvivian
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