Bank Secrecy Act (BSA, AML, Kyc) Quiz

1. All employees are responsible for compliance with the BSA/AML/KYC policy, must refrain from breaches of this policy and must promptly report all discovered breaches to their manager, the Compliance Officer or Senior Management.

True

False

The statement is true because it states that all employees are responsible for compliance with the BSA/AML/KYC policy. It also states that employees must refrain from breaches of this policy and must promptly report all discovered breaches to their manager, the Compliance Officer, or Senior Management. This implies that all employees have a duty to comply with the policy and report any breaches they come across.

Explanation

The statement is true because it states that all employees are responsible for compliance with the BSA/AML/KYC policy. It also states that employees must refrain from breaches of this policy and must promptly report all discovered breaches to their manager, the Compliance Officer, or Senior Management. This implies that all employees have a duty to comply with the policy and report any breaches they come across.

2. Examples of possible money laundering in a mortgage transaction include:

Repeated cash out refinances

Property flipping - higher prices each time, with no improvements to property

Paying off the loan shortly after funding

All of the above

All of the examples listed in the question are possible indicators of money laundering in a mortgage transaction. Repeated cash out refinances can be a way to launder money by repeatedly taking out loans and using the funds to legitimize illicit funds. Property flipping with higher prices each time, without any improvements to the property, can also be a way to launder money by artificially inflating the value of the property. Paying off the loan shortly after funding can be another indicator of money laundering, as it may be an attempt to legitimize the funds used to pay off the loan.

Explanation

All of the examples listed in the question are possible indicators of money laundering in a mortgage transaction. Repeated cash out refinances can be a way to launder money by repeatedly taking out loans and using the funds to legitimize illicit funds. Property flipping with higher prices each time, without any improvements to the property, can also be a way to launder money by artificially inflating the value of the property. Paying off the loan shortly after funding can be another indicator of money laundering, as it may be an attempt to legitimize the funds used to pay off the loan.

3. All customers must be positively identified through the verification of certain identifying documents prior to funding a loan.

True

False

In order to ensure the security and legitimacy of the loan process, it is necessary for all customers to be positively identified. This is done by verifying certain identifying documents, such as identification cards or passports, before providing the loan funds. By doing so, the lender can confirm the identity of the borrower and reduce the risk of fraud or identity theft. Therefore, the statement "All customers must be positively identified through the verification of certain identifying documents prior to funding a loan" is true.

Explanation

In order to ensure the security and legitimacy of the loan process, it is necessary for all customers to be positively identified. This is done by verifying certain identifying documents, such as identification cards or passports, before providing the loan funds. By doing so, the lender can confirm the identity of the borrower and reduce the risk of fraud or identity theft. Therefore, the statement "All customers must be positively identified through the verification of certain identifying documents prior to funding a loan" is true.

4. Loans may not be closed if any of the parties to the loan appear on the Office of Foreign Assets Control (OFAC) banned list.

True

False

The statement is true because the Office of Foreign Assets Control (OFAC) maintains a list of individuals, organizations, and countries that are subject to economic and trade sanctions. If any of the parties involved in a loan transaction appear on this list, the loan may not be closed due to legal and regulatory restrictions. This is to ensure compliance with international sanctions and prevent financial transactions with prohibited entities.

Explanation

The statement is true because the Office of Foreign Assets Control (OFAC) maintains a list of individuals, organizations, and countries that are subject to economic and trade sanctions. If any of the parties involved in a loan transaction appear on this list, the loan may not be closed due to legal and regulatory restrictions. This is to ensure compliance with international sanctions and prevent financial transactions with prohibited entities.

5. Many of our investors maintain banned lists. It is okay to fund a loan, even if a party to the loan is on one of these banned lists.

True

False

The statement is false because if a party to the loan is on one of the banned lists maintained by the investors, it is not okay to fund the loan. This implies that the investors have specific criteria or restrictions in place, and if any party involved in the loan is on the banned list, it would violate those criteria or restrictions, making it unacceptable to fund the loan.

Explanation

The statement is false because if a party to the loan is on one of the banned lists maintained by the investors, it is not okay to fund the loan. This implies that the investors have specific criteria or restrictions in place, and if any party involved in the loan is on the banned list, it would violate those criteria or restrictions, making it unacceptable to fund the loan.

6. Internal departments, such as Accounting and Human Resources have no responsibility to identify or prevent illegal transactions.

True

False

All departments must be aware of circumstances in which fraud may occur or may be detected within their department.

Explanation

All departments must be aware of circumstances in which fraud may occur or may be detected within their department.

7. Particular care must be taken to ensure that third parties involved in the transaction (such as closing agents, brokers, correspondents) have been thoroughly reviewed and approved.

True

False

The statement is true because when conducting a transaction, it is important to review and approve all third parties involved, such as closing agents, brokers, and correspondents. This ensures that these parties are trustworthy and reliable, reducing the risk of fraud or other issues during the transaction process. By thoroughly reviewing and approving these third parties, the parties involved can have confidence in the transaction's integrity and security.

Explanation

The statement is true because when conducting a transaction, it is important to review and approve all third parties involved, such as closing agents, brokers, and correspondents. This ensures that these parties are trustworthy and reliable, reducing the risk of fraud or other issues during the transaction process. By thoroughly reviewing and approving these third parties, the parties involved can have confidence in the transaction's integrity and security.

8. Known or suspected violations of law must be reported to the Compliance Officer, who may file a Suspicious Activity Report (SAR) with FinCEN.

True

False

The statement is true because it is a legal requirement to report any known or suspected violations of law to the Compliance Officer. The Compliance Officer then has the authority to file a Suspicious Activity Report (SAR) with FinCEN (Financial Crimes Enforcement Network). This reporting is crucial in preventing and detecting financial crimes such as money laundering, terrorist financing, and other illicit activities.

Explanation

The statement is true because it is a legal requirement to report any known or suspected violations of law to the Compliance Officer. The Compliance Officer then has the authority to file a Suspicious Activity Report (SAR) with FinCEN (Financial Crimes Enforcement Network). This reporting is crucial in preventing and detecting financial crimes such as money laundering, terrorist financing, and other illicit activities.

9. It is the policy of Sierra Pacific Mortgage to actively prevent fraud, money laundering and any act that may facilitate money laundering, the funding of terrorist activity or other ciminal activiities and to report such activity we may uncover in our daily operations.

True

False

The given statement states that Sierra Pacific Mortgage has a policy in place to actively prevent fraud, money laundering, and any activity that may facilitate money laundering or terrorist funding. They also commit to reporting any such activity that they may uncover in their daily operations. The answer "True" indicates that the statement accurately represents the policy of Sierra Pacific Mortgage.

Explanation

The given statement states that Sierra Pacific Mortgage has a policy in place to actively prevent fraud, money laundering, and any activity that may facilitate money laundering or terrorist funding. They also commit to reporting any such activity that they may uncover in their daily operations. The answer "True" indicates that the statement accurately represents the policy of Sierra Pacific Mortgage.

10. Financial exploitation tends to be more prevalent amongst individuals who are (check all that apply)

Over 60 years of age

Are professionals

LIve in a residential care facility, assisted living facility or nursing home

Have physical or other disabilities that require them to have a caregiver

Financial exploitation tends to be more prevalent amongst individuals who are over 60 years of age because they may be more vulnerable to manipulation and coercion due to factors such as declining cognitive abilities or limited social support. Additionally, living in a residential care facility, assisted living facility, or nursing home may increase the risk of financial exploitation as there may be less oversight and control over their finances. Having physical or other disabilities that require them to have a caregiver also increases the likelihood of financial exploitation as they may be dependent on others for their financial management.

Explanation

Financial exploitation tends to be more prevalent amongst individuals who are over 60 years of age because they may be more vulnerable to manipulation and coercion due to factors such as declining cognitive abilities or limited social support. Additionally, living in a residential care facility, assisted living facility, or nursing home may increase the risk of financial exploitation as there may be less oversight and control over their finances. Having physical or other disabilities that require them to have a caregiver also increases the likelihood of financial exploitation as they may be dependent on others for their financial management.

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