CBP Compliance, Risk and Regulations 2 — Questions and Answers
Question 1: Under the Bank Secrecy Act (BSA), what is the threshold above which a Currency Transaction Report (CTR) must be filed?
- $5,000
- $10,000 (Correct answer)
- $25,000
- $50,000
Correct answer: $10,000
The BSA requires banks to file a CTR for any cash transaction exceeding $10,000 in a single business day.
Question 2: Which regulatory framework establishes the three pillars of minimum capital requirements, supervisory review, and market discipline for banks?
- Dodd-Frank Act
- Basel II Accord (Correct answer)
- Sarbanes-Oxley Act
- Glass-Steagall Act
Correct answer: Basel II Accord
Basel II introduced three pillars: Pillar 1 (minimum capital), Pillar 2 (supervisory review), and Pillar 3 (market discipline).
Question 3: A bank's compliance officer discovers that a branch has been filing SARs but not retaining copies. Which BSA requirement has been violated?
- Customer Identification Program
- Recordkeeping requirement (Correct answer)
- Currency Transaction Reporting
- Enhanced due diligence
Correct answer: Recordkeeping requirement
BSA regulations require banks to retain SAR filings and related documentation for a minimum of five years.
Question 4: What does the term 'regulatory capital' primarily refer to in banking?
- Cash held in vault
- Capital required by regulators to absorb losses (Correct answer)
- Total deposits held by the bank
- Interest income earned on loans
Correct answer: Capital required by regulators to absorb losses
Regulatory capital is the minimum amount of capital that regulators require banks to hold as a buffer against potential losses.
Question 5: Which of the following best describes 'model risk' in banking?
- Risk from hiring unqualified staff
- Risk that a financial model produces inaccurate outputs used in decision-making (Correct answer)
- Risk from regulatory model examinations
- Risk of losing a banking license
Correct answer: Risk that a financial model produces inaccurate outputs used in decision-making
Model risk is the risk of adverse consequences from decisions based on incorrect or misused mathematical models.
Question 6: Under Regulation Z (Truth in Lending Act), what must lenders disclose to consumer borrowers?
- Credit score used in underwriting
- Annual Percentage Rate (APR) and finance charges (Correct answer)
- Internal risk rating of the loan
- Projected default probability
Correct answer: Annual Percentage Rate (APR) and finance charges
Regulation Z requires clear disclosure of the APR and all finance charges so consumers can compare credit costs.
Question 7: A bank wishes to open a new account for a high-risk customer. Which enhanced AML measure is most appropriate?
- Simplified due diligence
- Enhanced due diligence (EDD) (Correct answer)
- Waiving KYC requirements
- Filing a CTR immediately
Correct answer: Enhanced due diligence (EDD)
Enhanced due diligence requires banks to gather additional information about high-risk customers to better assess and monitor money laundering risks.
CBP Compliance, Risk and Regulations 2
Under the Bank Secrecy Act (BSA), what is the threshold above which a Currency Transaction Report (CTR) must be filed?