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Ethics in Banking Flashcards

7 cards from real Banking practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Ethics in Banking flashcards as text

  1. A bank employee discovers that a longtime client is structuring cash deposits just below the $10,000 reporting threshold. What should the employee do?

    Answer: File a Suspicious Activity Report (SAR) with FinCEN

    Structuring deposits to evade CTR requirements is illegal, and bank employees must file a SAR when they suspect such activity.

  2. Under the CFA Institute Code of Ethics, which behavior best demonstrates the duty of loyalty to clients?

    Answer: Placing client interests ahead of personal gain in all transactions

    The duty of loyalty requires placing client interests above personal benefit and institutional interests at all times.

  3. A bank loan officer approves a mortgage for a friend with a weaker credit profile than required, without disclosing the relationship. This is an example of:

    Answer: A conflict of interest

    Approving a loan for a personal acquaintance while hiding the relationship is a textbook conflict of interest that violates ethical and regulatory standards.

  4. Which federal law primarily governs anti-money laundering (AML) compliance obligations for U.S. banks?

    Answer: Bank Secrecy Act (BSA)

    The Bank Secrecy Act requires financial institutions to maintain records and file reports that help detect and prevent money laundering.

  5. What does 'know your customer' (KYC) compliance primarily aim to prevent?

    Answer: Money laundering, fraud, and terrorist financing

    KYC procedures verify client identities and assess risk to prevent the financial system from being used for illicit activities.

  6. A financial advisor recommends an annuity to a retired client primarily because it pays the highest commission. This violates which ethical principle?

    Answer: Suitability

    The suitability standard requires that recommendations be based on the client's needs and risk profile, not the advisor's compensation.

  7. Which of the following actions would be considered a violation of customer confidentiality in banking?

    Answer: Disclosing client balance information to a marketing firm without consent

    Disclosing customer financial data to third parties for marketing without explicit consent violates privacy laws and banking ethics.