APRP BSA/AML/OFAC Compliance — Questions and Answers
Question 1: Under the Bank Secrecy Act (BSA), a financial institution must file a Suspicious Activity Report (SAR) when a transaction involves at least what dollar threshold AND the institution suspects illegal activity?
- $2,000
- $5,000 (Correct answer)
- $10,000
- $25,000
Correct answer: $5,000
For most transaction types, the BSA SAR filing threshold is $5,000 (or $2,000 for money services businesses in certain situations). The $10,000 threshold applies to Currency Transaction Reports (CTRs) for cash transactions, not SARs. A SAR must be filed within 30 days of detection.
Question 2: OFAC (Office of Foreign Assets Control) sanctions compliance in payment processing PRIMARILY requires institutions to:
- Collect IRS W-9 forms from all business customers before processing payments
- Screen transactions against lists of Specially Designated Nationals (SDNs) and blocked persons or entities (Correct answer)
- File a Currency Transaction Report for all cross-border wire transfers
- Obtain prior Federal Reserve approval for all international ACH transactions
Correct answer: Screen transactions against lists of Specially Designated Nationals (SDNs) and blocked persons or entities
OFAC administers U.S. economic sanctions. Payment processors must screen senders, receivers, and related parties against OFAC's SDN List and other sanctions lists, blocking or rejecting prohibited transactions. W-9s relate to tax compliance; CTRs relate to BSA cash reporting; the Fed does not pre-approve international ACH.
Question 3: What is the PRIMARY objective of a Know Your Customer (KYC) program in the context of payments risk?
- To collect demographic data for targeted product marketing campaigns
- To verify customer identity and assess money laundering risk before and throughout the customer relationship (Correct answer)
- To ensure customers understand their chargeback and dispute rights
- To obtain customer consent for sharing transaction data with third parties
Correct answer: To verify customer identity and assess money laundering risk before and throughout the customer relationship
KYC programs are AML tools designed to verify who customers are and assess the risk they pose for financial crimes such as money laundering or terrorist financing. This is an ongoing obligation — not a one-time marketing or consent activity.
Question 4: A Currency Transaction Report (CTR) must be filed with FinCEN for cash transactions that exceed which threshold in a single business day?
- $5,000
- $7,500
- $10,000 (Correct answer)
- $15,000
Correct answer: $10,000
BSA regulations require financial institutions to file a CTR for any cash transaction (or multiple related cash transactions) exceeding $10,000 in a single business day. This is distinct from the SAR threshold of $5,000. CTRs are mandatory regardless of whether illegal activity is suspected.
Question 5: 'Structuring,' also known as 'smurfing,' is a BSA violation that involves which of the following?
- Using multiple payment processors simultaneously to reduce per-transaction fees
- Breaking large cash transactions into smaller amounts specifically to avoid triggering Currency Transaction Report filing requirements (Correct answer)
- Routing funds through multiple shell companies to conceal the ultimate beneficial owner
- Combining many small consumer payments into a single pooled wire transfer
Correct answer: Breaking large cash transactions into smaller amounts specifically to avoid triggering Currency Transaction Report filing requirements
Structuring is the illegal practice of deliberately breaking up large cash transactions into amounts below the $10,000 CTR reporting threshold to evade detection. It is a federal crime under 31 U.S.C. § 5324 regardless of whether the underlying funds are from illegal activity.
Question 6: Which federal agency is the primary recipient of Suspicious Activity Reports (SARs) filed by financial institutions under the Bank Secrecy Act?
- The Federal Reserve Board (FRB)
- The Office of the Comptroller of the Currency (OCC)
- The Financial Crimes Enforcement Network (FinCEN) (Correct answer)
- The Consumer Financial Protection Bureau (CFPB)
Correct answer: The Financial Crimes Enforcement Network (FinCEN)
FinCEN, a bureau of the U.S. Department of the Treasury, is the financial intelligence unit that collects and analyzes SAR and CTR filings under the BSA. The OCC and FRB are prudential regulators; the CFPB focuses on consumer protection, not financial crimes reporting.
APRP BSA/AML/OFAC Compliance
Under the Bank Secrecy Act (BSA), a financial institution must file a Suspicious Activity Report (SAR) when a transaction involves at least what dollar threshold AND the institution suspects illegal activity?