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Branch Compliance Officer - Bank study materials
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Branch Compliance Officer - Bank practice questions

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Question 1Regulatory and statutory compliance framework for bank branches

Under the Bank Secrecy Act, a branch teller receives $12,500 in cash from a customer in a single transaction. What is the branch's primary obligation?

  1. File a Suspicious Activity Report because the amount exceeds $10,000
  2. File a Currency Transaction Report for transactions over $10,000 in cash Correct answer.
  3. Record the transaction in the log and take no further action
  4. Report the transaction only if the customer refuses to provide identification

Explanation

The Bank Secrecy Act requires financial institutions to file a Currency Transaction Report for cash transactions exceeding $10,000 in a single business day. The threshold applies to currency, not checks or wire transfers. A SAR is triggered by suspicion, not by the size of a legitimate cash deposit alone.

Question 2Regulatory and statutory compliance framework for bank branches

A customer asks a branch employee to structure several cash deposits to stay below $10,000. How should the employee respond?

  1. Accept the deposits but delay posting them until the next business day
  2. Complete the deposits as requested to preserve the customer relationship
  3. Split the deposits across two branches to reduce reporting burden
  4. Refuse and escalate the matter as potential structuring for SAR review Correct answer.

Explanation

Deliberately structuring transactions to evade the $10,000 reporting threshold is a federal offense, and the institution must not facilitate it. The employee should decline to assist and escalate to the BSA officer for suspicious activity review. Structuring itself is reportable even when the underlying funds are legitimate.

Question 3Regulatory and statutory compliance framework for bank branches

Which customer is automatically exempt from Currency Transaction Report filing for currency transactions above $10,000?

  1. A nonresident alien opening a new savings account
  2. A publicly traded company listed on a national exchange Correct answer.
  3. A retail customer who regularly deposits payroll cash
  4. A local sole proprietor with a business checking account

Explanation

Certain entities, including publicly traded companies and their subsidiaries, may qualify for phase I exemptions from CTR filing under BSA rules. Sole proprietors, individual retail customers, and nonresident aliens do not qualify for automatic exemptions. Exemptions must still be documented and reviewed periodically.

Question 4Regulatory and statutory compliance framework for bank branches

A branch employee notices a customer conducting repeated wire transfers to a high-risk jurisdiction with no apparent business rationale. Which report should the branch consider filing?

  1. A quarterly call report amendment
  2. A Currency Transaction Report
  3. A Suspicious Activity Report Correct answer.
  4. A Foreign Bank Account Report

Explanation

Unexplained wires to high-risk jurisdictions are a classic red flag requiring a Suspicious Activity Report. A SAR documents suspected money laundering, fraud, or other illicit activity regardless of dollar amount once the threshold is met. A CTR applies only to currency transactions and is not the appropriate vehicle here.

Question 5Regulatory and statutory compliance framework for bank branches

What is the general deadline for a bank to file a Suspicious Activity Report after initial detection of suspicious activity?

  1. Within 90 calendar days with no extensions permitted
  2. Within 5 business days with no extensions permitted
  3. Within 180 calendar days after the end of the fiscal year
  4. Within 30 calendar days, extendable to 60 days in limited circumstances Correct answer.

Explanation

Banks generally must file a SAR within 30 calendar days of initial detection. If no suspect is identified, the period may be extended to 60 calendar days. These deadlines are measured from detection, not from the date the transaction posted.

Question 6Regulatory and statutory compliance framework for bank branches

A branch employee must complete a Customer Identification Program check. Which action satisfies the core requirement?

  1. Confirming identity after the first deposit clears
  2. Verifying identity using documentary or non-documentary methods before account opening Correct answer.
  3. Collecting only the customer's signature card at account opening
  4. Relying solely on a verbal statement of name and address

Explanation

The Customer Identification Program requires the bank to verify identity using documentary or non-documentary methods before opening an account. The bank must collect name, date of birth, address, and identification number. Verification must occur at or before account opening, not afterward.

Question 7Regulatory and statutory compliance framework for bank branches

A customer opens an account and the branch cannot verify identity using documents. What is the appropriate next step?

  1. Open the account only if the customer provides a utility bill
  2. Open the account and verify identity at the next annual review
  3. Deny the account unless verification succeeds or file a SAR if warranted Correct answer.
  4. Open the account and waive all future verification requirements

Explanation

If identity cannot be verified through documentary or non-documentary methods, the bank generally must not open the account or must close it, and it should consider whether a SAR is warranted. The bank should not defer verification to a later review. A utility bill is only one possible documentary method and does not resolve failed verification on its own.

Question 8Regulatory and statutory compliance framework for bank branches

Under the Customer Due Diligence rule, which customer must be identified as a beneficial owner of a legal entity account?

  1. Any employee who handles the entity's payroll
  2. Only the entity's registered agent
  3. Each individual owning 25 percent or more of the entity Correct answer.
  4. The entity's largest vendor

Explanation

The CDD rule requires identification of beneficial owners, defined as individuals owning 25 percent or more of the equity interests, plus one individual with significant managerial control. Employees, vendors, and registered agents are not beneficial owners unless they meet those criteria. The threshold is a percentage of ownership, not a role.

Question 9Regulatory and statutory compliance framework for bank branches

A branch receives a grand jury subpoena for customer records. How should the branch respond?

  1. Provide the records only after the customer signs a consent form
  2. Ignore the subpoena until a court order is issued
  3. Notify the customer immediately so they can object
  4. Refer the subpoena to the appropriate internal team and preserve confidentiality Correct answer.

Explanation

Subpoenas should be routed to the bank's legal or subpoena processing team, which verifies validity and responds within the required time. Customer notification may be prohibited or delayed depending on the legal process. The branch should not contact the customer or ignore the demand.

Question 10Regulatory and statutory compliance framework for bank branches

Which activity is a recognized red flag for human trafficking at a branch?

  1. A customer depositing a paycheck from a verified employer each pay period
  2. A long-standing customer withdrawing cash for a vacation
  3. Multiple unrelated individuals depositing to one account controlled by a third party Correct answer.
  4. A business depositing daily receipts from a retail store

Explanation

Third-party control of accounts receiving deposits from multiple unrelated individuals is a recognized indicator of human trafficking and forced labor. Legitimate payroll deposits and ordinary retail receipts do not match this pattern. Red flags should be documented and escalated for review.

Question 11Regulatory and statutory compliance framework for bank branches

A branch employee suspects a customer is a victim of elder financial exploitation. What is the best immediate action?

  1. Close the account without notifying anyone
  2. Escalate internally and follow the bank's elder abuse reporting procedures Correct answer.
  3. Confront the suspected abuser directly at the branch
  4. Continue processing transactions to avoid disrupting the customer

Explanation

Suspected elder financial exploitation should be escalated to the appropriate internal team and reported under the bank's procedures and applicable state law. Confronting a suspected abuser can endanger the victim and compromise any investigation. Continuing transactions without review may allow further losses.

Question 12Regulatory and statutory compliance framework for bank branches

What does the Bank Secrecy Act require regarding records of currency transactions over $10,000?

  1. Records must be destroyed after filing the CTR
  2. Records must be sent to the customer upon request
  3. Records must be retained for at least five years Correct answer.
  4. Records must be retained for at least one year

Explanation

BSA regulations require retention of records supporting currency transaction reports for at least five years from the date of the transaction. This supports audit and law enforcement access. Shorter retention or destruction after filing would violate the rule.

Question 13Regulatory and statutory compliance framework for bank branches

A branch is completing its annual Bank Secrecy Act training. Which element is required of the bank's anti-money-laundering program?

  1. A designated compliance officer, internal controls, training, and independent testing Correct answer.
  2. A marketing plan for new account promotions
  3. Only an annual employee signature acknowledging the policy
  4. A customer satisfaction survey reviewed by the board

Explanation

The four pillars of an AML program are a designated compliance officer, internal controls, ongoing training, and independent testing. A signature alone does not satisfy the training or testing requirements. Marketing and customer satisfaction activities are unrelated to AML program obligations.

Question 14Regulatory and statutory compliance framework for bank branches

A customer attempts to deposit $9,800 in cash three days in a row. What should the branch do?

  1. Accept each deposit without review because each is under $10,000
  2. Refuse all future deposits from the customer permanently
  3. Report the deposits as a CTR because the total exceeds $10,000
  4. Review the pattern and consider filing a SAR for possible structuring Correct answer.

Explanation

Repeated cash deposits just below the reporting threshold are a structuring red flag that warrants review and possible SAR filing. Each individual deposit being under $10,000 does not eliminate the obligation to evaluate the pattern. A CTR is not automatically triggered by aggregated separate-day deposits under the rules.

Question 15Regulatory and statutory compliance framework for bank branches

Which information is required to be collected under the Customer Identification Program for an individual customer?

  1. Name, date of birth, address, and identification number Correct answer.
  2. Name, account balance, and investment goals
  3. Name, employer, and marital status
  4. Name, occupation, and credit score

Explanation

CIP requires the bank to collect a customer's name, date of birth, address, and identification number before opening an account. Occupation and credit information are not CIP-required data elements. These four elements must be verified through documentary or non-documentary means.

Question 16Regulatory and statutory compliance framework for bank branches

A branch employee receives a request from law enforcement to freeze an account based on a verbal instruction. What is the appropriate action?

  1. Notify the customer of the request before acting
  2. Refuse all law enforcement requests at the branch level
  3. Freeze the account immediately based on the verbal request
  4. Verify the request through proper legal channels before taking action Correct answer.

Explanation

Account freezes and restraints require valid legal process, and verbal instructions alone are generally insufficient. The branch should route the request to legal or compliance to verify authority and documentation. Notifying the customer prematurely may violate confidentiality or tip-off restrictions.

Question 17Regulatory and statutory compliance framework for bank branches

Which transaction most clearly warrants enhanced due diligence for a politically exposed person?

  1. A large incoming wire from a foreign government entity to a PEP's personal account Correct answer.
  2. A small cash deposit at a familiar branch
  3. A check deposit from a local employer
  4. A routine utility payment from a long-standing local account

Explanation

Politically exposed persons carry higher money-laundering risk, and large wires from foreign government sources to a personal account warrant enhanced due diligence. Routine local payments and small deposits present lower risk. EDD includes source-of-funds and source-of-wealth analysis.

Question 18Regulatory and statutory compliance framework for bank branches

What is the primary purpose of the Office of Foreign Assets Control sanctions screening at account opening?

  1. To set the customer's interest rate
  2. To confirm the customer's creditworthiness
  3. To determine the customer's tax bracket
  4. To ensure the customer is not a blocked person or entity Correct answer.

Explanation

OFAC screening checks whether a customer or transaction involves a sanctioned individual, entity, or country. The bank must block or reject prohibited transactions and report them. Creditworthiness, tax status, and pricing are unrelated to sanctions compliance.

Question 19Regulatory and statutory compliance framework for bank branches

A branch discovers a potential OFAC match during onboarding. What should happen before the account is used?

  1. Ask the customer to confirm they are not sanctioned
  2. Escalate to compliance and block or reject the transaction as required Correct answer.
  3. Close the branch for the day
  4. Proceed with account opening and resolve the match later

Explanation

A potential OFAC match must be escalated to compliance for review, and prohibited transactions must be blocked or rejected and reported. The bank should not proceed with the account until the match is resolved. Relying on customer self-certification is not an acceptable substitute for screening.

Question 20Regulatory and statutory compliance framework for bank branches

Which practice best supports a branch's compliance with the Gramm-Leach-Bliley Act privacy rules?

  1. Sharing customer data freely with any third party
  2. Providing a clear privacy notice and honoring opt-out rights where applicable Correct answer.
  3. Posting customer account numbers on a public bulletin board
  4. Collecting only the data the branch finds interesting

Explanation

The GLBA requires financial institutions to provide privacy notices and give customers opt-out rights for certain information sharing. Sharing data freely or exposing account numbers violates privacy and safeguarding requirements. Data collection should be limited to legitimate business needs.

Question 21Regulatory and statutory compliance framework for bank branches

A customer requests to opt out of certain information sharing under GLBA. What must the branch do?

  1. Honor the opt-out within the timeframe required by the bank's procedures Correct answer.
  2. Charge a fee for processing the opt-out
  3. Require the customer to close all accounts
  4. Ignore the request because opt-outs are optional

Explanation

When a customer exercises an opt-out right, the bank must record and honor it within the timeframes set by its procedures and applicable rules. Ignoring the request violates GLBA. Requiring account closure or charging a fee is not a permitted condition for honoring opt-out rights.

Question 22Regulatory and statutory compliance framework for bank branches

Under the Fair Credit Reporting Act, what must a branch do when it takes adverse action based on a consumer report?

  1. Keep the reasons confidential from the applicant
  2. Report the applicant to the credit bureau as a defaulter
  3. Deny the application without any notice
  4. Provide an adverse action notice with the reasons and credit bureau information Correct answer.

Explanation

FCRA requires an adverse action notice that identifies the credit reporting agency and explains the applicant's rights when a consumer report contributes to the decision. The applicant is entitled to the reasons for the decision. Silence or misreporting the applicant violates the Act.

Question 23Regulatory and statutory compliance framework for bank branches

A branch employee is asked to accept a third-party check made payable to a business and signed over to an individual. What is the safest compliance-oriented response?

  1. Cash the check immediately without verifying signatures
  2. Follow the bank's endorsement and third-party check policy before accepting Correct answer.
  3. Return the check only if the customer complains
  4. Accept the check without review because it is signed

Explanation

Third-party and specially endorsed checks carry elevated fraud and negotiation risk, so the branch must follow its endorsement and acceptance policy. Accepting or cashing without review can create loss and liability for the bank. The decision should be based on policy, not on customer complaints.

Question 24Regulatory and statutory compliance framework for bank branches

What is the purpose of the branch's suspicious activity monitoring escalation process?

  1. To guarantee that every alert results in a SAR
  2. To allow employees to investigate customers personally
  3. To ensure alerts are reviewed and documented by appropriate personnel Correct answer.
  4. To replace the bank's AML training program

Explanation

Escalation processes ensure alerts reach trained reviewers who document decisions and rationale. Not every alert results in a SAR; many are resolved as not suspicious after review. Employees should not conduct personal investigations outside the established process.

Question 25Regulatory and statutory compliance framework for bank branches

Which document is typically required to verify a legal entity customer's authority to open an account?

  1. A personal utility bill of the signer
  2. The entity's formation documents and board resolution or authorization Correct answer.
  3. A copy of the signer's high school diploma
  4. A letter from a competitor

Explanation

Banks verify a legal entity's existence and authority through formation documents and evidence of authorization for the signer. A personal utility bill verifies an individual's address but not entity authority. Diplomas and competitor letters are irrelevant to account authority.

Question 26Regulatory and statutory compliance framework for bank branches

A branch teller receives a cash deposit of $12,500 from a walk-in customer who is not an established account holder and has no identification. Under the Bank Secrecy Act currency transaction reporting rules, what must the branch do?

  1. File a Suspicious Activity Report instead of a CTR because the customer is unidentified
  2. Accept the deposit and note in the teller log that no report is required for non-customers
  3. Complete a Currency Transaction Report using the identification information the customer can provide, and document that verification was limited Correct answer.
  4. Refuse the deposit entirely because a CTR cannot be filed without a verified taxpayer identification number

Explanation

A financial institution must file a CTR for currency transactions over $10,000, and the report requires identification of the individual conducting the transaction. If full identification is unavailable, the branch still files the report and documents what was obtained, while considering whether the circumstances also warrant a SAR. Refusing the deposit or substituting a SAR for the CTR is not the prescribed treatment.

Question 27Regulatory and statutory compliance framework for bank branches

A branch manager wants to confirm which regulator examines the branch for compliance with consumer protection laws such as the Truth in Savings Act. Which statement best describes the branch's regulatory landscape?

  1. Only the state banking department has authority over consumer compliance at a branch
  2. The branch may be examined by its primary federal prudential regulator for consumer compliance, with additional oversight depending on charter type and activities Correct answer.
  3. The Securities and Exchange Commission supervises deposit-taking branches for consumer compliance
  4. Consumer compliance at branches is self-certified and not subject to routine examination

Explanation

Banks face consumer compliance examination by their primary federal regulator, and the specific agency depends on charter type, membership, and insurance status. State-chartered institutions also answer to state supervisors. No single agency other than the prudential regulators and state authorities holds this role for deposit-taking branches.

Question 28Regulatory and statutory compliance framework for bank branches

A branch is reviewing its recordkeeping obligations under the Bank Secrecy Act. Which statement correctly describes the retention requirement for records that must be kept under the BSA?

  1. Records must be retained for five years after the record is made Correct answer.
  2. Records must be retained for two years after the record is created
  3. Records must be retained only until the next regulatory examination
  4. Records must be retained for ten years after account closure

Explanation

BSA implementing regulations generally require that required records be retained for five years after the record is made. This standard retention period applies to items such as signature cards, statements of account, and currency transaction records. Shorter or longer periods apply only where a specific rule says so.

Question 29Regulatory and statutory compliance framework for bank branches

A branch employee notices that a business customer's account, previously used for modest payroll activity, suddenly receives numerous small incoming wires from unrelated individuals and forwards nearly all funds overseas within hours. What is the most appropriate branch response?

  1. Escalate the activity promptly through the bank's suspicious activity reporting process for investigation Correct answer.
  2. Ask the customer to sign a statement that the activity is legitimate and file it
  3. Close the account immediately and mail the remaining balance to the customer
  4. Continue monitoring for thirty days before taking any action

Explanation

This pattern is consistent with layering or use of the account as a pass-through for third-party funds, which is a recognized money laundering typology. Branch staff should escalate promptly so the BSA officer can investigate and decide whether a SAR is warranted. Closing accounts or obtaining customer attestations unilaterally is not the branch's role.

Question 30Regulatory and statutory compliance framework for bank branches

A customer asks a branch to open a new account for a limited liability company formed in another state. Which document best evidences the entity's authority to open the account and the identity of the person acting on its behalf?

  1. A copy of the company's marketing brochure
  2. A personal credit report of the individual opening the account
  3. A recent utility bill in the company's name
  4. The company's operating agreement or board resolution authorizing the account and designating signers Correct answer.

Explanation

The branch needs documentation showing the entity exists and that the individual is authorized to act for it, such as an operating agreement, partnership agreement, or corporate resolution. These documents support beneficial ownership and control person identification under customer due diligence rules. A utility bill or brochure does not establish authority.

Question 31Regulatory and statutory compliance framework for bank branches

A branch employee is reviewing a customer's request to send a large international wire to a country subject to comprehensive sanctions. What should the branch do before processing the wire?

  1. Ask the customer to confirm in writing that the recipient is not sanctioned
  2. Process the wire if the customer has been with the bank for more than five years
  3. Route the wire through a correspondent bank so the branch is not responsible for screening
  4. Screen the parties and destination against applicable sanctions lists and escalate any potential match before processing Correct answer.

Explanation

Sanctions screening is required before processing transactions involving sanctioned jurisdictions or parties, and a potential match must be resolved or blocked under OFAC rules. Longevity, customer attestations, and use of intermediaries do not displace the bank's screening obligation. The branch should escalate rather than proceed.

Question 32Regulatory and statutory compliance framework for bank branches

A branch employee is asked by a customer to accept a check payable to a corporation and signed over to the customer personally for deposit into an individual account. What is the best branch practice?

  1. Deposit the check into a suspense account and notify the corporation later
  2. Accept the check because the customer has an established relationship with the branch
  3. Accept the check if the customer provides a photo identification
  4. Decline to accept the third-party endorsed check unless the bank's policy permits it and the endorsement is properly verified Correct answer.

Explanation

Third-party checks carry elevated fraud and money laundering risk, and bank policy generally restricts or prohibits them. The branch should follow its institution's endorsement and acceptance rules rather than relying on relationship tenure or identification alone. Placing funds in suspense without authorization is not a proper workaround.

Question 33Regulatory and statutory compliance framework for bank branches

A branch employee is uncertain whether a customer's structured cash deposits should be reported. Which internal resource is designed to make that determination?

  1. The branch teller supervisor, who may close the account without review
  2. The customer's personal banker, who can decide based on the customer's explanation
  3. The branch's BSA officer or compliance escalation channel Correct answer.
  4. The marketing department, which tracks customer transaction patterns

Explanation

Suspicious activity determinations are made by the bank's BSA officer or designated compliance function after the branch escalates its observations. Branch staff are responsible for recognizing and reporting, not for making the final reporting decision. Other functions lack the authority and expertise for this determination.

Question 34Regulatory and statutory compliance framework for bank branches

A branch receives a request from a customer to close an account and transfer the balance to a newly opened account at another institution. The customer asks the branch to keep the closure confidential from a joint account holder. What is the appropriate branch action?

  1. Refuse to close the account because joint accounts cannot be closed by one holder
  2. Transfer the funds but leave the original account open indefinitely
  3. Follow the account agreement and applicable law on joint account authority, and document the request and disclosures Correct answer.
  4. Comply with the confidentiality request and close the account without notifying the joint holder

Explanation

Joint account authority, notice, and disclosure requirements are governed by the account agreement and applicable state law, and the branch should follow those terms while documenting the customer's request. Promising confidentiality that conflicts with the agreement or law is inappropriate. The branch should not simply refuse or improvise.

Question 35Regulatory and statutory compliance framework for bank branches

A branch employee is helping a customer with a home equity line application and must provide required Truth in Lending disclosures. Which principle governs the timing and content of those disclosures?

  1. Disclosures must be provided within the timing required by Regulation Z and reflect the actual terms offered Correct answer.
  2. Disclosures may be summarized verbally if the customer declines paper copies
  3. Disclosures may be provided at closing regardless of when the application was taken
  4. Disclosures are required only if the customer requests them in writing

Explanation

Regulation Z implements the Truth in Lending Act and prescribes both the content and the timing of disclosures for credit products. The branch must deliver accurate disclosures reflecting the terms offered within the required timeframes. Verbal summaries or customer waiver do not replace the required written disclosures.

Question 36Regulatory and statutory compliance framework for bank branches

A branch is updating its procedures for handling subpoenas and other legal process. Which approach best reflects sound compliance practice?

  1. Branch staff should ignore subpoenas addressed to the bank rather than to a specific employee
  2. Branch staff should route legal process to the designated central function that logs, reviews, and responds within required deadlines Correct answer.
  3. Branch staff should determine the legal validity of each subpoena and respond without legal review
  4. Branch staff should provide copies of records to any requester who presents a badge

Explanation

Legal process should be handled through a central function that can verify validity, preserve records, and meet response deadlines, often with counsel involvement. Branch staff should not independently judge legal sufficiency or disclose records informally. Proper logging also supports later verification.

Question 37Regulatory and statutory compliance framework for bank branches

A branch employee is reviewing an elderly customer's request to add a new joint owner who is a recent acquaintance. The customer appears confused about the transaction. What is the most appropriate branch action?

  1. Slow the transaction, ask clarifying questions, and escalate under the bank's elder financial exploitation procedures Correct answer.
  2. Complete the request quickly to avoid embarrassing the customer
  3. Decline to serve the customer and ask them to return another day
  4. Add the joint owner but restrict the account to read-only access

Explanation

Signs of confusion combined with a sudden change in account ownership are recognized indicators of elder financial exploitation. The branch should slow the process, gather information, and escalate under its established procedures, which may include reporting to adult protective services. Rushing or dismissing the customer is inappropriate.

Question 38Regulatory and statutory compliance framework for bank branches

A branch employee is asked to explain why the bank collects certain customer information under its privacy notice. Which statement best describes the Gramm-Leach-Bliley privacy framework as applied at the branch?

  1. The bank must provide privacy notices and honor opt-out rights where required before certain sharing with nonaffiliated third parties Correct answer.
  2. The bank may share nonpublic personal information with nonaffiliated third parties for marketing without any notice or opt-out
  3. Privacy notices are required only for business customers, not individuals
  4. Privacy obligations end once the account is opened

Explanation

The Gramm-Leach-Bliley Act requires financial institutions to provide privacy notices and to give consumers opt-out rights before certain sharing of nonpublic personal information with nonaffiliated third parties. These obligations apply to individual consumers and continue throughout the relationship. Sharing without notice or opt-out where required would violate the framework.

Question 39Regulatory and statutory compliance framework for bank branches

A branch employee is reviewing a customer's account activity and finds a pattern of deposits just below reporting thresholds followed by immediate withdrawals at another branch. What is the most accurate characterization of this activity?

  1. It may constitute structuring, which is a federal offense and must be escalated for suspicious activity review Correct answer.
  2. It is ordinary retail banking and requires no documentation
  3. It requires a currency transaction report for each deposit
  4. It is permissible because each individual deposit is below the threshold

Explanation

Deliberately keeping transactions below reporting thresholds to evade reporting requirements is structuring, which is a federal crime regardless of the source of funds. The branch should escalate the pattern for suspicious activity review. Individual deposits below the threshold do not each trigger a CTR.

Question 40Regulatory and statutory compliance framework for bank branches

A branch employee is asked to accept a check from a non-customer who wants to cash it and then wire the proceeds to a third party. Which consideration is most relevant to the branch's compliance decision?

  1. The branch must cash any valid check presented with identification
  2. The branch may cash the check if the payee verbally confirms the arrangement
  3. The branch should apply its customer identification and negotiable instrument policies, and escalate if the circumstances appear unusual Correct answer.
  4. The check amount determines whether the branch must cash it for a non-customer

Explanation

Cashing checks for non-customers raises identification, fraud, and money laundering risks, and the branch should follow its CIP and negotiable instrument policies. Unusual circumstances, such as immediate wiring of proceeds by a non-customer, warrant escalation. There is no obligation to cash any presented check.

Question 41Know Your Customer (KYC), AML and CFT compliance

A walk-in customer asks to open a savings account and presents a national ID card. Under a standard KYC framework, what is the minimum identity action the branch must complete before the account becomes operational?

  1. Verify the customer's identity using a reliable, independent source and record the identification details Correct answer.
  2. Ask a colleague who knows the customer to sign the form as a witness
  3. Obtain a verbal assurance from the customer that the ID belongs to them
  4. Accept the ID copy without verification and verify later at the next review cycle

Explanation

Customer due diligence requires the bank to identify the customer and verify that identity using reliable, independent source documents, data, or information. Simply collecting a copy or a verbal assurance does not satisfy verification, and a witness signature does not substitute for an independent check.

Question 42Know Your Customer (KYC), AML and CFT compliance

Which party is the beneficial owner of a company account where a holding company owns 60% of the shares and a single individual owns the remaining 40%?

  1. The holding company's registered director
  2. The individual who ultimately controls the company through ownership interests Correct answer.
  3. The individual holding 40% directly, since no one reaches 50%
  4. The branch manager who approves the account opening

Explanation

Beneficial ownership looks through legal structures to the natural persons who ultimately own or control the entity. A 40% direct holder plus control considerations typically qualifies, and the ownership chain must be traced to natural persons, not to corporate directors or bank staff.

Question 43Know Your Customer (KYC), AML and CFT compliance

A customer deposits cash just below the reporting threshold in several transactions across three consecutive days. Which typology does this pattern most closely match?

  1. Structuring to avoid reporting thresholds Correct answer.
  2. Round-tripping of invoices
  3. Trade-based money laundering
  4. Ponzi scheme payout

Explanation

Deliberately splitting transactions to stay under a reporting threshold is structuring, a recognized red flag for money laundering. Trade-based laundering and invoice manipulation involve goods and pricing, while Ponzi schemes involve investment fraud payouts, not cash deposit splitting.

Question 44Know Your Customer (KYC), AML and CFT compliance

During onboarding, a prospective customer refuses to provide information about the source of funds for a large initial deposit. What is the appropriate branch action?

  1. Open the account and note the refusal in the file for later review
  2. Decline to establish the relationship and consider filing an internal report Correct answer.
  3. Open the account with a lower initial deposit to reduce risk
  4. Open the account but restrict it to deposits only

Explanation

The bank cannot conduct adequate customer due diligence if the customer withholds required information, so it should not establish the relationship and should consider whether a suspicious activity report is warranted. Opening the account with restrictions or a smaller deposit still leaves the bank unable to assess the risk.

Question 45Know Your Customer (KYC), AML and CFT compliance

Which document is generally the most reliable independent source for verifying a corporate customer's legal existence and ownership structure?

  1. A signed letter from the company's accountant
  2. The company's latest social media profile
  3. An official company registry extract Correct answer.
  4. The company's own marketing brochure

Explanation

An official registry extract is issued by a public authority and independently confirms legal existence, registration details, and often ownership. Self-produced materials and letters from interested parties are less reliable because they are not independent.

Question 46Know Your Customer (KYC), AML and CFT compliance

A politically exposed person (PEP) applies for a private banking relationship. Which control is typically required beyond standard due diligence?

  1. Senior management approval and enhanced ongoing monitoring Correct answer.
  2. Automatic rejection of the application in all cases
  3. Verification by the customer's personal assistant
  4. A lower transaction limit for the first year only

Explanation

PEP relationships are higher risk and generally require enhanced due diligence, including senior management approval and enhanced ongoing monitoring of the relationship. An automatic blanket rejection is not the standard rule, and reduced limits or third-party verification do not meet the requirement.

Question 47Know Your Customer (KYC), AML and CFT compliance

What is the primary purpose of a sanctions screening check at account opening and during the relationship?

  1. To determine the appropriate interest rate for the product
  2. To calculate the customer's tax residency status
  3. To assess the customer's creditworthiness
  4. To identify whether the customer or related parties appear on applicable sanctions lists Correct answer.

Explanation

Sanctions screening compares customer and related-party details against applicable sanctions and watch lists to prevent prohibited dealings. Credit assessment, tax residency, and pricing are separate processes unrelated to sanctions compliance.

Question 48Know Your Customer (KYC), AML and CFT compliance

A long-standing customer suddenly receives frequent small incoming transfers from multiple unrelated individuals abroad, followed by immediate withdrawals. What should the branch do first?

  1. Ignore the pattern because the customer is long-standing
  2. Increase the customer's transaction limits to accommodate the activity
  3. Escalate the activity for investigation and consider a suspicious transaction report Correct answer.
  4. Close the account immediately without further inquiry

Explanation

Unusual activity inconsistent with the customer's profile should be escalated for investigation, and where suspicion exists a suspicious transaction report should be filed. Immediate closure without inquiry or ignoring the pattern would fail the bank's monitoring obligations, and raising limits increases exposure.

Question 49Know Your Customer (KYC), AML and CFT compliance

Under a risk-based approach, which customer profile would normally warrant simplified due diligence?

  1. A customer introduced from a higher-risk jurisdiction
  2. A cash-intensive retail business with unclear ownership
  3. A trust with undisclosed settlors
  4. A listed company subject to disclosure requirements on a regulated market Correct answer.

Explanation

A listed company on a regulated market is subject to public disclosure and supervision, which generally lowers money laundering risk and can justify simplified measures. Cash-intensive businesses, higher-risk jurisdictions, and opaque trusts present higher risk requiring standard or enhanced measures.

Question 50Know Your Customer (KYC), AML and CFT compliance

What does the acronym CFT refer to in the bank's compliance framework?

  1. Certified Financial Transfer
  2. Customer Financial Transactions
  3. Combating the Financing of Terrorism Correct answer.
  4. Consolidated Fund Tracking

Explanation

CFT stands for Combating the Financing of Terrorism, the set of measures aimed at detecting and preventing funds reaching terrorist organizations. It is closely linked with AML but targets terrorism financing specifically rather than general financial processing terms.