BSACs Exam Prep
To be considered an MSB, the categories of currency dealer or exchanger, check cashers, issuers and sellers of traveler's checks and money orders must engage in such transactions in an amount greater than _______ for any person on any day in one or more transactions.
$1000
What does a Phase I designation exempt?
- credit unions and banks, to the extent of their domestic operations; - government agencies, or departments; - any entity exercising government authority on behalf of the US, any state or political subdivisions; - entities whose common stock is listed on the New York, American or NASDAQ stock exchanges; - any subsidiary of one of the stock exchange listed entities, where at least 51% of its stick is owned by the listed entity.
When are credit unions required to file a SAR?
- criminal violations involving insider abuse in any amount - criminal violations aggregating $5000 or more when a suspect can be identified - criminal violations aggregating $25000 or more regardless of a potential suspect - transactions conducted or attempted by, at, or through the bank and aggregating $5000 or more, if the bank or affiliate knows, suspects, or has reason to suspect that the transaction: (a) may involve potential money laundering or other illegal activity; (b) is designed to evade the BSA or its implementing regulations; (c) has no business or apparent lawful purpose or is not the type of transaction that the particular customer would normally be expected to engage in, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.
For monetary instruments, if a purchaser does NOT have an account with the credit union, the credit union's records of sales must contain what information?
- name and address of the purchaser - SSN or alien identification number of the purchaser - date of birth of the purchaser - date of purchase - types of instruments purchased - serial numbers of each of the instruments purchased - dollar amounts of each of the instruments purchased in currency - specific identifying information for verifying the purchaser's identity
For monetary instruments, if a purchaser has an account with the credit union, the credit union's records of sales must contain what information?
- name of purchaser - date of purchase - types of instruments purchased - serial numbers of each of the instruments purchased - dollar amounts of each of the instruments purchased in currency - specific identifying information, if applicable
What does a Phase II designation exempt?
- non-listed businesses (those not listed on the stock exchange) - payroll members
What should the procedures for indicating when to escalate issues or problems identified as result of repeat SAR filings on accounts include?
- review by senior management and legal staff - criteria for when analysis of the overall member relationship is necessary - criteria for when to close the account - criteria for when to notify law enforcement, if applicable
What must all "transmittor financial institutions" include and send in the transmittal order?
- the transmittor's name, account number, and address; - the identity of the transmittor's financial institution; - the amount of the transmittal order; - the execution date of the transmittal order; and - the identit of the recipient's financial institution.
What transfers are excluded from the BSA funds transfer rule?
- transfer's of less than $3000; - debit transfers; - "electronic funds transfers" as defined by the EFTA, as well as any other funds transfers made through ATM, ACH, and POS systems; - transfers where both the originator and the beneficiary are any of the following: (a) domestic bank; (b) a wholly-owned domestic subsidiary of a domestic bank; (c) a domestic broker or dealer in securities; (d) a wholly-owned domestic subsidiary of a domestic broker or dealer in securities; (e) the united states; (f) a state or local government; (g) a federal, state, or local government agency or instrumentality. - transfers where both (1) the originator and the beneficiary are the same person, and (2) the originator's and beneficiary's financial institution are the same "domestic bank".
What should the credit union's OFAC program include?
-identify high-risk areas -provide for appropriate internal controls for screening and reporting -establish independent testing (audit) for compliance -designate an employee as responsible for OFAC compliance -create training programs for appropriate personnel in all relevant areas o the credit union
What stages does OFAC suggest that accounts be screened?
-upon account opening -upon updating information -periodic screening of existing accounts -distribution of funds
What are the five pillars of an effective BSA/AML compliance program?
1. Designation of a BSA compliance officer by the Board. 2. Provide for a system of internal controls to ensure ongoing compliance 3. Provide for independent testing to be conducted by credit union personnel or outside parties 4. Provide training for appropriate personnel 5. Appropriate risk-based procedures for conducting ongoing member due diligence
What entities are only subject to the control criteria prong in the definition of "beneficial owner"?
1. any legal entity that is established as a non-profit corporation or similar entity and has filed its organizational documents with the appropriate State authority; 2. any legal entity only to the extent that it opens a private banking account subject to BSA requirements; 3. any pooled investment vehicle that is not exempt.
What are the 3 ways a credit union can identify the beneficial owners of business accounts?
1. by obtaining a "Certification Regarding Beneficial Owners of Legal Entity Customers" provided in the rule; 2. by using the credit union's own forms, as long as they meet the requirement in the rule; or 3. by obtaining the required information by any other means - provided the person opening the account and providing the information certifies that it is accurate.
What are the 5 distinct types of financial services providers are considered MSBs, as well as US Postal Service?
1. currency dealers or exchangers 2. check cashers 3. issuers or sellers of traveler's checks or money orders 4. providers of prepaid access 5. money transmitters
What are the two methods a credit union can use to verify identity?
1. documentary 2. non-documentary
Some requirements of the MDD are similar to the CIP requirements. What additional requirements does MDD require credit unions to do?
1. gain an understanding of the nature and purpose of member relationships and under your member's normal and expected transaction activity, based on their occupation or business operations, so that you can better determine if something is suspicious, and whether a SAR needs to be filed; 2. keep an eye out for indicators of potential changes in the member's risk profile, for example a change in employment, a change in business operations, or unexpected account activity; 3. include procedures to periodically monitor your member's information 4. on a risk basis, maintain and update member information - including information regarding the beneficial owners of legal entity members.
What does the credit union's CIP procedures have to describe?
1. how the identity will be verified 2. when documentary methods, non-documentary methods, or a combination of both methods will be used; and 3. what documents and non-documentary information the credit union will accept.
Section 326 of the USA Patriot Act requires financial institutions to:
1. implement reasonable procedures to verify the identity of any person seeking to open an account 2. maintain records of the information used to verify the person's identity 3. determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the FI by any government agency 4. provide the member opening a new account with notice of the information collection requirement.
A financial institution's CIP should be tailored to:
1. it's size 2. location 3. types of accounts offered 4. methods of opening accounts; and 5. any other risk factors the FI believes affects its CIP procedures
What are the 4 criteria a non-listed business must meet under Phase II designation?
1. must have maintained a transaction account with the credit union for at least 2 months, or a member may be eligible in less than 2 months if the credit union chooses to conduct a risk-based analysis to form a reasonable belief that the member has a legitimate business purpose for conducting frequent or regular large currency transactions; 2. must frequently (5 or more reportable transactions) engage in transactions in currency with the credit union in excess of $10,000; 3. must be organized or incorporated under the federal or state law of the US; and 4. must not derive more than 50% of its gross revenues from any "ineligible" business activity.
What are the 3 criteria a payroll customer must meet under Phase II designation?
1. must have maintained a transaction account with the credit union for at least 2 months, or a member may be eligible in less than 2 months if the credit union chooses to conduct a risk-based analysis to form a reasonable belief that the member has a legitimate business purpose for conducting frequent or regular large currency transactions; 2. operate a firm that regularly withdraws more than $10,000 in order to pay its employees in currency; 3. incorporated or organized under the federal or state law of the US
What four pieces of information are credit union's required to collect on each new member?
1. name 2. address 3. date of birth 4. identification number
What should be included in the verification of beneficial owners procedures?
1. when the credit union should no open an account 2. the terms under which a legal entity member may use an account while the CU attempts to verify the beneficial owner's identity 3. when you will close an account, after attempts to verify a member's identity have failed; and 4. when you should file a SAR
Both blocked and rejected transactions must be reported to OFAC within _____ business days of occurrence.
10
How many days must a CTR be filed within after the day of the transaction?
15
How long do credit unions have from the transmission date of the request to respond to 314(a) requests?
2 weeks
How many days does BSA regulations require that a SAR be filed no later than from the date of the initial detection of facts that may constitute a basis for filing a SAR?
30
What is an administrative subpoena or summons?
A demand issued by a federal agency that compels document production or witness testimony.
What is a "funds transfer"?
A series of transactions, beginning with the originator's payment order, made for the purpose f making payment to the beneficiary of the order.
What is the control criteria under the definition of beneficial owner?
A single individual with significant responsibility to control, manage, or direct the legal entity, such as CEO, CFO, VP or other member of the senior management team or a person that regularly performs similar functions.
When can FI's file SARs for continuing activity?
After a 90 day review with the filing deadline being 120 days after the date of the previously related SAR filing.
What parties to an ACH transaction are subject to the requirements of OFAC?
All parties
How often must the credit union review the granted exemptions for both Phase I and Phase II exemptions?
Annually - to make sure the exemption is still appropriate
How often must the credit union notify their board of directors of SAR filings?
At least monthly
Why must a CTR for deposits must list all joint owners on the account and not for withdrawals?
Because all joint owners have access to the funds at the moment they are deposited.
Why is the Member Due Diligence (MDD) process a critical part of any effective BSA compliance program?
Because it assists FI's in performing risk assessments of their customers/members
Must the credit union verify identity before the member opens an accounts or can this be done when the member comes in to conduct his first transaction?
Before is a best practice but is not required in the regulation.
In which of the following situations would a credit union need to verify an existing member's identity? a. Opening a VISA credit card or adding a Money Market account b. Adding Home Banking or Voice response service c. Adding ACH or Bill Payment services D. None of the above - credit union do have to verify existing member's identity
D. None of the above - credit union do have to verify existing member's identity
What are the ownership criteria under the definition of the beneficial owner?
Each individual, if any, who directly or indirectly, through any contract arrangement, understanding, or otherwise, owns 25% or more equity in the legal entity
How often does BSA training need to be conducted?
Every 12 to 18 months
When will the credit union's designated person(s) receive notification from FinCEN that there are new postings to FinCEN's secure Web site?
Every two weeks (or more frequently if an emergency request is transmitted)
True/False: A credit union must file a CTR if a member purchases $15,000 worth of traveler's checks with money from their checking account.
False
True/False: If the purchaser cannot provide the required information at the time of the transaction or through the credit union's own previously verified records, the transaction should still be allowed
False
True/False: If you are a small credit union it is acceptable to have the BSA officer determine when a CTR is necessary, fil out the CTRs, and determine who is eligible for a CTR exemption.
False
What the two types of licenses that OFAC may permit certain transactions?
General licenses Specific licenses
What is a General License that OFAC may permit certain transactions?
General licenses authorize categories of transactions without the need for case-by-case authorization from OFAC
What happens when a credit union blocks a transaction?
It accepts the funds and freezes them so that the individual or entity cannot obtain or recover possession of the funds
Who all is required to receive BSA/AML training?
New staff, BSA Compliance Officer, Board of Directors, and all appropriate personnel
Does the CIP rule prohibit a minor from opening an account?
No
Does the credit union have any CIP obligations with respect to the underlying clients whose funds are being held in the IOLTA or escrow accounts?
No
Is a credit union considered an MSB?
No
Must a credit union verify the accuracy of all of the identifying information it collects during the CIP process?
No
Are credit union's required to file a SAR for a robbery or burglary as long as it is reported to the local law enforcement authorities?
Not required
What are the two prongs that the CDD/MDD rules defines as "beneficial owner"?
Ownership criteria and Control criteria
What are the two categories of exempt persons for CTRs?
Phase I and Phase II
What is the credit union required to do when the list new lists under 314(a) are posted?
Query their records for data matches, including accounts maintained by the name subject during the preceding 12 months and transactions conducted within the last 6 months.
What records of the BSA training program do credit unions need to keep?
Records of training and testing materials, the dates of training sessions and attendance records.
What does the BSA's "Travel Rule" require?
Requires a credit union to include certain information in payment orders relating to transmittals of funds of $3000 or more whether or not currency is involved.
What is 314(b)?
Section 314(b) of the USA Patriot Act allows financial institutions or associations of financial institutions to share information with each other regarding individuals, entities, organizations, and countries for purposes of detecting, identifying, or reporting activities that the financial institution or association suspects may involve possible money laundering or terrorist activities.
What is a Specific License that OFAC may permit certain transactions?
Specific licenses are any person having an interest in a transaction or proposed transaction may file an application for a license authorizing the transaction and are issued on a case-by-case basis.
What does SDN list stand for?
Specifically Designated Nationals and Blocked Persons list
What is strucutring?
Structuring occurs when a person breaks up a transaction for the purpose of evading the BSA reporting and recordkeeping requirements.
What further action(s) (after reporting) should the credit union take when they have a positive match to the 314(a) requests?
Take no further action
What must the credit union do in order to get a member a CTR exemption?
The credit union must file a one-time Designation of Exempt Person (DOEP) form with FinCEN within 30 days after the first transaction in currency that the credit union member wants to exempt.
Does the original information obtained during account opening have to be retained or can the credit union satisfy the recordkeeping requirement by just keeping updating information about the member?
The original information obtained during account opening has to be retained
How does the CDD/MDD rules define "legal entity"?
The rule defines a "legal entity" as a corporation, LLC, or other entity that is created by the filing of public document with a Secretary of State or similar office; a general partnership or similar entity.
True/False: BSA/AML training should be tailored to the person's specific responsibilities
True
True/False: If no suspect can be identified on a SAR, the time period for filing a SAR is extended to 60 days.
True
True/False: OFAC regulations require credit unions to block property and payment of any funds transfers or transactions involving any country, entity, or individual appearing on OFAC's SDN List.
True
True/False: Some OFAC-administered programs will require a credit union to reject the transaction altogether, rather than accept and freeze funds.
True
True/False: The credit union's board of directors is ultimately responsible for the credit union's BSA compliance?
True
True/False: for deposits into joint accounts, a CTR must list all joint owners on the account.
True
True/False: providing financial records that are not requested or required by the subpoena or summons may subject the credit union to liability for violating a member's privacy rights.
True
True/False: the credit union must provide an adverse action notice if it refuses to open an account based on a consumer report
True
True/False: the credit union should treat the attorney opening an IOLTA account as the beneficial owner of the legal entity account.
True
True/False: the funds transfers governed by Regulation E or the Automated Clearinghouse rules are not covered by the Travel Rule
True
True/False: through a licensing process, OFAC may permit certain transactions that would otherwise be prohibited under its regulations.
True
Up to how many number of individuals can be identified as beneficial owners under the ownership and control prongs?
Up to 4 individuals under the ownership prong Only one individual under the control prong
When does the time period for filing a SAR start?
When the credit union, during its review or because of other factors, knows or has reason to suspect that the activity or transactions under review meet one ore more of the definitions of suspicious activity.
Are 314(a) requests confidential?
Yes
Are purchases of different types of monetary instruments totaling $3,000 or more are treated as one purchase?
Yes
Are purchases of multiple monetary instruments made during one business day totaling $3,000 or more are treated as one purchase?
Yes
Can FI's file SARs on continuing activity earlier than the 120-day deadline if the institution believes the activity warrants earlier review by law enforcement?
Yes
Can a credit union rely on information in its possession to fulfill the identification and verification requirements of a beneficial owners that is an existing member of the CU?
Yes
If the credit union obtains more than the required identifying information during the account opening process, does it have to keep this additional information for five years too?
Yes
Is the credit union permitted to require a lower ownership threshold (less than the 25%), thus making it more likely for an owner to meeting the beneficial ownership criteria?
Yes; it is encouraged for higher-risk entities
Must the credit union identify and verify a members beneficial ownership for each account when a legal entity members opens multiple accounts at the CU?
a credit union can rely on the information obtained in the Certification Form to fulfill the beneficial ownership requirement for subsequent accounts, provided the member certifies or confirms that such information is up-to-date and accurate at the time each subsequent account is opened and the credit union has no knowledge of facts that would reasonable call into question the reliability of such information.
Fill in the blanks: All holders of blocked property are required to file a comprehensive _______ _______ on blocked property held as of June 30 by ___________ ______ each year.
annual report; September 30th
What property is subject to blocking?
anything of value
The identification and verification rules do NOT apply to which of the following? a. Joint owners b. Beneficiaries c. Co-borrowers d. Non-resident aliens
b. Beneficiaries
Regulators recommend that independent test of your BSA program should be done: a. Annually b. Every 12 to 18 months c. Whenever necessary d. Before each exam
b. Every 12 to 18 months
Who is automatically exempt from CTR reporting and is not required to file the Designation of Exempt Person form?
credit unions, banks, government agencies or entities exercising government authority.
Which of the following products and services could possibly pose a higher risk for illegal activities? a. Wire transfers b. Monetary instruments c. Traveler's checks d. All of the above
d. All of the above
The BSA Officer must be knowledgeable of: a. BSA, and related regulations b. The credit union's products and services c. The credit union's members d. The credit union's neighborhoods e. a&b f. All of the above
f. all of the above
When would the credit union file a Marijuana Limited SAR?
if the institution reasonably believes (based on CDD) that the marijuana-related business does not violate state law or implicate one of the DOJ's enforcement priorities.
When would the credit union file a Marijuana Priority SAR?
if the institution reasonably believes (based on CDD) the business being conducted implicates one of the DOJ enforcement priorities or violated state law.
When would the credit union file a Marijuana Termination SAR?
if the institution terminates a member for reasons related to its anti-money laundering compliance program.
What are considered NOT legal entities?
sole proprietorships, unincorporated associations, or natural persons opening accounts on their own behalf
How should credit unions report all positive matches to the 314(a) requests?
via the Secure Information Sharing System (SISS)
