BSA/AML Literacy Test 1 Please Note: The Basic Training consists of three videos approximately 15 minutes each, and should be viewed first. A lot of the following material is also to be found in the Basic Training. You also may be tested on material in the Basic Training. 1. What are the main goals of the BSA, and the AML statutes? (List as many as you can.) Congress passed the Bank Secrecy Act in 1970 as the first laws to fight money laundering in the United States. The BSA requires businesses to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters. The documents filed by businesses under the BSA requirements are heavily used by law enforcement agencies, both domestic and international to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion or other unlawful activity. 2 As amended over the years, the BSA's main purpose is to combat financial crime and protect the integrity of the financial system. Drug money and tax evasion were especially targeted. The cash economy was untaxed. Government developed the strategy of reining in the cash economy by using financial institutions as 'choke points' (s/b "Checkpoints.") The BSA made financial institutions responsible for recordkeeping and reporting on customer transactions over certain thresholds, especially those done in cash. Thus, all large payments in cash and large movements of money across US Borders were to be reported. To deprive criminals of anonymity, ID was to be taken. What was also targeted, were any transactions that might not be going through people's bank accounts. Beyond financial institutions, every US person was obliged to: report balances over $10,000 in foreign bank accounts, report receiving or paying cash over $10,000 in any trade or business, and report any cross border movements of money (the customs report). 2. What are the main dollar thresholds of the BSA applicable to the MSB industry? $1,000, $2,000, $3,000, $10,000 3. What vital pieces of customer information are required at each level? Five pieces of info: Name, Address, TIN, DOB, and ID - at $10k, add Occupation 4. In two words, what are the main requirements of the BSA? Recordkeeping and Reporting. 5. Why was it nicknamed the Bank Secrecy Act? Which banks? What secrets? This refers to foreign bank accounts US persons were holding, secret from the US government. 1 Applies to the United States, Only. 2 Taken from the IRS website.
6. What were the two major things missing from the BSA, which were added in 1986? Money laundering was made a federal crime for the first time, and structuring was prohibited.later, prohibitions on Unlicensed (state) and Unregistered (Federal) activity were added. 7. What are the main citations for the Bank Secrecy Act, "the AML statutes and FinCEN s Regs (Can you find them on the web?) BSA = 31USC 5311 et seq. AML Statutes = 18 USC 1956 et seq. FinCEN Regs = 31 CFR Chapter X (31CFR1000.00) 8. What is the "cite" (citation) for the law that prohibits unlicensed activity, and what are its three prongs? 18 USC 1960 state licensing, federal registration, and any criminal activity. (1) the term unlicensed money transmitting business means a money transmitting business which affects interstate or foreign commerce in any manner or degree and (A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable; (B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or (C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity; 9. What are the 4 pillars of a compliance program and what section of what law do they come from? Briefly discuss the requirements of each one. Written policies and procedures Must be adequate and must reflect the compliance program that is actually followed. Officer - Must be knowledgeable and empowered Review Must be independent, i.e. not done by the same person who designed the program or the one who is responsible for administering it, day-to-day.
Training - Must keep training log that can be produced upon request, that shows who was trained and when, the content of the course, the name and qualifications of the instructor, and test score results, if any. 10. What is the recently added Fifth Pillar? Briefly describe it. See FinCEN's Final Rule on Customer Due Diligence 05/11/2016 It refers to legal entities, and relies on a customer self-certification. 11. What are the time limits for filing CTRs? SARs? MSB Registration? CTR - 15 days from the date of the transaction. SAR - 30 days from discovery of the suspicious activity. FinCEN Registration - 180 days from the start of the business. 12. What AML documents should be kept in a book of corporate documents? Corporate resolutions, re-adopted yearly, which include 1) Adoption of a General Statement of AML Policy, 2) Adoption of the AML compliance manual, and 3) The appointment of the Compliance Officer. 13. What are some other important documents a compliance officer should keep in a centralized location? The Training Log Suspicious Activity Reports A record of internal conversations about possible suspicious activity, and decisions taken. 14. What types of businesses are considered MSBs? Currency Dealers/Exchangers Check Cashers Money Transmitters and Issuers of checks, money orders etc. Prepaid Access providers and sellers, including plastic, mobile, internet Virtual Currencies 15. What are the differences in usage among the terms CIP, CDD, EDD, KYC and KYCC? CIP - Customer Identification Program: The term derives from Section 326 of the Patriot Act, technically applies only to depositories, and refers to taking ID and checking against OFAC list. CDD Customer Due Diligence is a broad term, similar to KYC. It is now used to describe the Fifth Pillar, FinCEN's "CDD" Rules. EDD Enhanced Due Diligence is what you must do on risky clients or transactions.
KYC A broad term which refers to the obligation every FI has to know their customer. KYCC Know your Customer's Customer, when you provide facilities to another FI. 16. To what extent is a financial institution responsible for knowing its customers? To an extent commensurate with the amount of the transaction, and the riskiness of the customer, type of transaction and relevant geography. 17. According to the BSA, what info is needed for a $3,500 transaction? Five pieces of info: Name, address, DOB, ID, SSN or TIN 18. What is the Travel Rule? Occurs at the $3,000 level. States that the originator's and beneficiary's FIs must take ID; all FIs in the chain must pass along all info; must respond if asked for the info by another FI in the chain. 19. What is the 120-hour rule? "Not later than 120 hours after receiving a request by an appropriate Federal banking agency for information related to anti-money laundering compliance by a covered financial institution or a customer of such institution, a covered financial institution shall provide to the appropriate Federal banking agency, or make available at a location specified by the representative of the appropriate Federal banking agency, information and account documentation for any account opened, maintained, administered or managed in the United States by the covered financial institution." - From Section 319(b)(2) of Title III of the USA Patriot Act. - Also see 1010.520(b) re 314(a) FinCEN to specify time frame. 20. What is the primary federal requirement for MSBs, besides recordkeeping and reporting requirements of the BSA (note: this could be considered a type of report)? FinCEN MSB Registration. 21. What are the main requirements for the Risk-Based Approach? That a company should identify and evaluate its risks, prioritize them and take appropriate measures and dedicate adequate resources to mitigate and manage them. 22. According to the Risk-Based Approach, what are the 3 (or 4) major types of risk? Customer, Geographic, and Product (+ Operational Risk.) 23. What is the proper thing to do when a red flag is seen?
Ask more questions, do further investigation with appropriate follow-up action. 24. Is 18USC1960 considered a money laundering law? Yes. 25. What is the basic business model of Hawala? What is a parallel market? (MVTS or IVTS) "You pay my orders, I pay yours." Transactions done outside the formal financial system, where ID and records are optional. 26. What is the FinCEN Guidance on Foreign Agents and Counterparties? FinCEN's (Binding) Industry Guidance 2004-1 27. What are the 3 main Bibles of our compliance? The FFIEC BSA Exam Manual Its Core section, Expanded section, and Appendices The FinCEN/IRS Exam Manual + Workbook FATF's RBA for MSBs (or MVTSs ) 28. If you need to brush up on SAR capabilities, where do we find the instructions? Go to the e-filing section of the Fincen.gov website, and look for SAR Instructions. Also see various FinCEN Guidances and FAQs on the Topic. 29. What areas does the AML Compliance review cover? What does it seek to accomplish? Checking the company's Risk Assessment. Checking adequacy of the previous review and adequacy of the recommended follow-up actually done. Checking transaction records for compliance with the BSA, including quality of records and written materials. Checking all other elements of compliance with the BSA. Checking adequacy of management involvement, KYC policies and IT controls. Checking OFAC compliance. Checking adequacy of the Five Pillars. Checking adequacy of agent supervision and knowledge of foreign counterparty.
30. Why is the Dept of Treasury important? (The main reason for MSBs.) FinCEN is a bureau of the Treasury. 31. What are considered the Federal functional regulators? The Federal Reserve The Office of the Comptroller of the Currency The Federal Deposit Insurance Corporation The National Credit Union Administration The Securities Exchange Commission The U.S. Commodity Futures Trading Commission 32. Briefly explain the following important sections of the Patriot Act: Sections 311-312, Section 352, Section 326. ANSWER MISSING. 33. Outside of the BSA, what are some of the main bodies of federal and state law we must study? ANSWER MISSING. 34. Name some of the important FinCEN Guidances, Final Rules and other Issuances. ANSWER MISSING. 35. What is "aggregation?" See 31CFR1010.313 "(a) Multiple branches. A financial institution includes all of its domestic branch offices, and any recordkeeping facility, wherever located, that contains records relating to the transactions of the institution's domestic offices, for purposes of the transactions in currency reporting requirements in this chapter. (b) Multiple transactions. In the case of financial institutions other than casinos, for purposes of the transactions in currency reporting requirements in this chapter, multiple currency transactions shall be treated as a single transaction if the financial institution has knowledge that they are by or on behalf of any person and result in either cash in or cash out totaling more than $10,000 during any one business day (or in the case of the U.S. Postal Service, any one day). Deposits made at night or over a weekend or holiday shall be treated as if received on the next business day following the deposit." The concept of aggregation appears in the basic Training. The aggregation period for CTR purposes is one business day for almost all financial institutions, one calendar day for the Post Office, and 24 hours for casinos.
Sometimes, when doing an exam, the IRS will look at a customer s 30-day cumulative transactions. The 2002 Western Union fine was suffered for not aggregating across agent locations. The only other aggregation period in the BSA relates to the Form 8300 (12 months, if the FI has knowledge they are related transactions). A company s aggregation policies have to draw together customer transactions from all business lines and channels, etc. Food for Thought: What are your company s time and amount thresholds to aggregate a customer's transactions over time? Has this been addressed in the Risk Assessment? 36. Define the following acronyms: AML ANPR BSA CIP CMIR CTR CTR EDD EIN FBAR FDL FFI Foreign Financial Institution FI Financial Institution FinCEN FIU GTO HIFCA/HIDTA IVTS Informal Value Transfer Services KYC KYCC MSB MSB-SAR MVTS - Monetary Value Transfer Services NPR OFAC PEP RA Risk Assessment RBA SAR SSN STR SUA
TIN UBO UBO USA Patriot Act - (This is an acronym.) 37. Define the following terms: Backing Down Compliance program Counseling Hawala Indictment Money laundering Offshore Refers to tax haven jurisdictions Paper Trail Program violation Red flag Risk Risk-Based Approach Smurfing Structuring Structuring Tipping off Transparency