Compliance, Risk and Regulations Flashcards

Under the Bank Secrecy Act (BSA), what is the threshold above which a Currency Transaction Report (CTR) must be filed?

Answer: $10,000

The BSA requires banks to file a CTR for any cash transaction exceeding $10,000 in a single business day.

Which regulatory framework establishes the three pillars of minimum capital requirements, supervisory review, and market discipline for banks?

Answer: Basel II Accord

Basel II introduced three pillars: Pillar 1 (minimum capital), Pillar 2 (supervisory review), and Pillar 3 (market discipline).

A bank's compliance officer discovers that a branch has been filing SARs but not retaining copies. Which BSA requirement has been violated?

Answer: Recordkeeping requirement

BSA regulations require banks to retain SAR filings and related documentation for a minimum of five years.

What does the term 'regulatory capital' primarily refer to in banking?

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.

Which of the following best describes 'model risk' in banking?

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.

Under Regulation Z (Truth in Lending Act), what must lenders disclose to consumer borrowers?

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.

A bank wishes to open a new account for a high-risk customer. Which enhanced AML measure is most appropriate?

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.