2020 CRCM Exam Practice Questions

On which of the following loans must a bank maintain records under the Bank Secrecy Act? A. All loans exceeding $5,000 and secured by real property B. All loans exceeding $5,000, but not secured by real property C. All loans exceeding $10,000 and secured by real property D. All loans exceeding $10,000, but not secured by real property

D. All loans exceeding $10,000, but not secured by real property

This is a loan term or an arrangement that modifies a loan term under which a bank agrees to cancel all or part of a customer"™s loan obligation on the occurrence of a specified event. It may be included as a part of the loan documents, or it may be a separate agreement. What is it? A. Debt suspension agreement (DSA) B. Anti-dying C. Debt cancellation contract (DCC) D. ALLL

C. Debt cancellation contract (DCC)

How must most banks submit loan application registers to their federal supervisory agencies? A. In machine-readable format B. On the standard LAR form C. In three copies with the required transmittal D. In a separate package for each branch loan application

A. In machine-readable format

When completing and filing a SAR, what is the bank NOT required to do? A. Submit a copy of the supporting documentation with the SAR B. Submit the SAR within 30 days of the initial detection of facts C. Report the SAR information to the bank"™s board of directors D. Maintain a copy of the SAR and supporting documentation for 5 years

A. Submit a copy of the supporting documentation with the SAR

Any of the following foreign correspondents for which the Federal Reserve maintains an account EXCEPT: A. A foreign bank B. A foreign banker"™s Lessee C. A foreign state D. A foreign correspondent or agency

B. A foreign banker"™s Lessee

The maximum amount of credit that a bank may extend to all of its insiders is known as the ______________and is equal to 100 percent of its unimpaired capital and surplus. A. Aggregate lending limit B. Loan filliping C. Equity stripping D. Tangible economic benefit

A. Aggregate lending limit

Practice/s addressed in the guidance of OCC advisory on credit card practices-AL-2004- 10 is/are: A. "Up-to" marketing B. Promotional rate marketing C. Repricing of accounts and other changes in credit terms D. Lending to insiders

A. "Up-to" marketing, and B. Promotional rate marketing, and C. Repricing of accounts and other changes in credit terms

Which of the following is/are NOT limitations on liability in EFT? A. $150 liability limit if consumer notifies the institution within two business days of discovery of loss or theft of access device, not including the day the consumer learns of the loss or theft B. If state law has more generous limitations of liability for the consumer, the state laws will govern C. Full liability (up to the amount of the unauthorized transfer) may be imposed if the consumer does not notify the institution within 30 days of the institution"™s transmission of the statement on which the first unauthorized transfer appears (to raise the liability limit, the institution must first establish that the unauthorized transfers would not have occurred if the consumer had notified the institution within the 30 days). The unlimited liability applies only to the transactions that occur D. Extenuating circumstances (such as hospital confinements, travel, and so forth) may extend the liability time periods

A. $150 liability limit if consumer notifies the institution within two business days of discovery of loss or theft of access device, not including the day the consumer learns of the loss or theft, and D. Extenuating circumstances (such as hospital confinements, travel, and so forth) may extend the liability time periods

Electronic funds transfers"™ requirements say that transfers that vary in amount must be communicated to the designated payee within _______________ before the scheduled transfer or may give the consumer the option of receiving notice only when a transfer falls outside a specified range of amounts. A. 10 days B. 20 days C. 30 days D. 15 days

A. 10 days

A routine review of account records reveals that suspicious activity involving foreign currency has occurred in the account of one of the bank"™s directors. Which of the following actions should be taken FIRST? A. A SAR should be filed. B. The bank"™s board of directors should discuss the account activity without the affected director being present. C. The bank"™s president should meet with the affected director to discuss the account activity. D. The bank should file a CTR, checking the box that indicates the report is for suspicious activity.

A. A SAR should be filed.

Predatory lending practices can adversely affect: A. A bank"™s CRA rating B. Equity shipping C. Loan quality control reviews D. Truth in Lending Act

A. A banks CRA rating

Short-form disclosures are required in advertisements and promotional materials unless the advertisements and promotional materials are of: A. A general nature describing or listing the products or services offered by the bank B. A specific nature describing or listing the products or services offered by the bank C. A general nature describing or special services offered by the bank D. A general nature describing competitive advantage of the bank

A. A general nature describing or listing the products or services offered by the bank

It is not required for accounts where the only EFT allowed is a preauthorized transfer to an account. If the account is a passbook account, the bank updates the passbook on presentation; if not, the bank it at least quarterly. A. A periodic statement B. Change in terms notice C. Unauthorized transfers D. Error resolution notice

A. A periodic statement

For what do ECOA and Regulation B extend coverage? A. All types of credit B. Only consumer credit C. Only consumer credit of $25,000 or less D. Only consumer and business credit with gross revenues of $1 million or less

A. All types of credit

Any person in one of the following category can be debt collector: A. A person operating a business whose principal purpose is to collect debts B. A person who regularly collects or attempts to collect debts owed to another (this includes outside counsel who collects debts on behalf of the financial institution) C. A creditor who collects its own debts using a name other than its own, giving the impression that a third party is collecting it D. A creditor who collects its own debts because of his forefathers

A. A person operating a business whose principal purpose is to collect debts, and B. A person who regularly collects or attempts to collect debts owed to another (this includes outside counsel who collects debts on behalf of the financial institution), and C. A creditor who collects its own debts using a name other than its own, giving the impression that a third party is collecting it

__________________ is a transfer that is authorized in advance to occur at substantially regular intervals. Payments that require the consumer to take specific actions to initiate them (such as by entering instructions on a touch-tone telephone or on the Internet) are not such type of EFTs. A. A preauthorized EFT B. A postauthorized EFT C. A standard format EFT D. A customized EFT

A. A preauthorized EFT

Which of the following loans would First National report on its loan application register? A. A refinancing of the balance of a home purchase loan made five years earlier, both loans will be secured by dwellings B. A loan made to a couple, secured by their home, to pay for their children"™s education C. A bridge loan made to a newly transferred executive of a local company D. A loan made to construct a principal dwelling

A. A refinancing of the balance of a home purchase loan made five years earlier, both loans will be secured by dwellings

A Reserve Bank makes the following warranties when it handles ___________: "¢ For all items, the Reserve Bank warrants that the returned checks bear all endorsements by all parties that previously handled the checks "¢ For all electronic items, the Reserve Bank warrants all of the "¢ Regulation CC warranties as though they were paper checks "¢ For electronic items that are not representations of substitute checks, the Reserve Bank warrants the following to the bank to which it sends the item:(a) The electronic portion of the item accurately represents all of the information on the front and back of the check as of the time the check was truncated(b) All MICR line information is contained on the item(c) The item conforms to the technical standards set forth in the operating circular(d) No person will receive a transfer, presentment, or return, or otherwise be charged for the item such that the person will be asked to make payment based on an item he or she has already paid A. A returned item B. A returning pay check C. Clearing the payments D. Under Regulation Z

A. A returned item

One of the check collection requirements is sending items to Reserve Banks. In this requirement: A. A sender other than a Reserve Bank may send any item to the Reserve Bank with which it maintains an account B. The following parties are deemed to have handled items, in this order: "¢ The initial sender "¢ The initial sender"™s administrative Reserve Bank "¢ The Reserve Bank that receives the item from the initial sender "¢ Any other Reserve Bank that receives the item from a Reserve Bank C. Reserve Banks must receive cash items and other items (checks) at par D. A foreign bank that maintains reserves under the International Banking Act of 1978

A. A sender other than a Reserve Bank may send any item to the Reserve Bank with which it maintains an account, and B. The following parties are deemed to have handled items, in this order: "¢ The initial sender "¢ The initial sender"™s administrative Reserve Bank "¢ The Reserve Bank that receives the item from the initial sender "¢ Any other Reserve Bank that receives the item from a Reserve Bank, and C. Reserve Banks must receive cash items and other items (checks) at par

Initial disclosure under Electronic funds transfer act includes: A. A summary of the consumer"™s liability for unauthorized transfers B. Telephone number and address of person or office to be notified in case of any authorized transfer C. The type of EFT the consumer may make and any limitations on EFTs D. A summary of institution"™s liability to consumer for failure to make or stop transactions

A. A summary of the consumer"™s liability for unauthorized transfers, and C. The type of EFT the consumer may make and any limitations on EFTs, and D. A summary of institution"™s liability to consumer for failure to make or stop transactions

Which one of the following should be included in an early termination notice in case of the termination from consumer leasing agreement? A. A warning to the consumer that a substantial charge may result from early termination (required only in a motor vehicle lease) B. A statement of the conditions under which the lessee or lessor may terminate the lease prior to the end of the lease term C. The purchase option at the end of the lease term D. The amount of any penalty or other charge for early termination (the penalty must be reasonable)

A. A warning to the consumer that a substantial charge may result from early termination (required only in a motor vehicle lease), and B. A statement of the conditions under which the lessee or lessor may terminate the lease prior to the end of the lease term, and D. The amount of any penalty or other charge for early termination (the penalty must be reasonable)

Which of the following usually comes under the heading of abusive lending? A. Abusive lending usually is defined by a variety of lending practices B. It is the excessive and hidden fees in the amount financed C. A fundamental characteristic is aggressive marketing of credit to prospective borrowers who cannot repay it on the terms offered D. Typically, such loans are underwritten on the liquidation value of the collateral rather than the creditworthiness of the borrower

A. Abusive lending usually is defined by a variety of lending practices, and C. A fundamental charateristic is agressive marketing of credit to prospective borrowers who cannot repay it on the terms offered, and D. Typically, such loans are underwritten on the liquidation value of the collateral rather than the creditworthiness of the borrower

These are the definitions of _____________: The refusal to grant credit in substantially the amount or on substantially the terms requested in an application (and the applicant uses or expressly accepts the credit offered) A termination of the account or an unfavorable change in the terms of an account, unless the change affects substantially all of the lender"™s accounts of that type. A refusal to increase the amount of credit available to an applicant who has made an application for an increase A. Adverse action-12 CFR 202.2(c) B. Special-purpose credit-12 CFR 202.8 C. Refusals- 12 CFR 202.8 D. security agreements-12 CFR 202.2(c)

A. Adverse action-12 CFR 202.2(c)

Definition of completed application""12 CFR 202.2(f) is: A. An application for which the bank has received all the information it regularly considers in evaluation, including credit reports, verifications, and so forth B. The creditor must be reasonably diligent in collecting information to complete the application (for example, ordering credit bureau reports) C. An inquiry becomes an application when the creditor evaluates information and decides to grant or decline the credit D. Requests for written preapprovals to be issued by the lender are considered applications

A. An application for which the bank has received all the information it regularly considers in evaluation, including credit reports, verifications, and so forth, and B. The creditor must be reasonably diligent in collecting information to complete the application (for example, ordering credit bureau reports)

Which of the following items is considered a low-quality asset? A. An asset in a nonaccrual status B. An asset on which interest is past due 15 days C. An asset that will be transferred to the workout area within the next 60 days so that the terms can be renegotiated D. None of the above

A. An asset in a nonaccrual status

Federal regulations define special-purpose credit-12 CFR 202.8 to include: A. Any credit assistance program authorized by federal or state law for the benefit of an economically disadvantaged class of persons B. Any credit assistance program offered by a not-for-profit organization for the benefit of its members or for the benefit of an economically disadvantaged class of person C. A special-purpose credit program must not discriminate on a prohibited basis; however, it can require its participants to share a particular characteristic (such as race or sex) provided the requirement was not established to evade the requirements of the ECOA. If the participants must share a common characteristic, the bank may collect information on that characteristic to determine eligibility D. If the program includes financial need as a criterion, the creditor can never request and consider information regarding the applicant

A. Any credit assistance program authorized by federal or state law for the benefit of an economically disadvantaged class of persons, and B. Any credit assistance program offered by a not-for-profit organization for the benefit of its members or for the benefit of an economically disadvantaged class of person, and C. A special-purpose credit program must not discriminate on a prohibited basis; however, it can require its participants to share a particular characteristic (such as race or sex) provided the requirement was not established to evade the requirements of the ECOA. If the participants must share a common characteristic, the bank may collect information on that characteristic to determine eligibility

Banks must establish and maintain effective risk management and control processes over its DCCs and DSAs, including: A. Appropriate recognition and financial reporting of income, expenses, assets, and liabilities B. Appropriate treatment of losses associated with these products C. Assessment of the adequacy of its internal controls and risk mitigation activities D. Before entering into a contract, the bank must obtain the customer"™s written affirmative election to enter into the contract and written acknowledgement of the receipt of the disclosures

A. Appropriate recognition and financial reporting of income, expenses, assets, and liabilities, and B. Appropriate treatment of losses associated with these products, and C. Assessment of the adequacy of its internal controls and risk mitigation activities

Which of the following actions is acceptable under the financial reporting regulations? A. Attaching a narrative explanation by management of the reasons for a cease and desist order as a part of the annual disclosure B. Attaching a copy of the bank"™s last safety and soundness examination to the annual disclosure C. Including a statement that indicates that the bank"™s regulatory agency has reviewed the financial information D. Using an unaudited financial statement for the past two years as an annual disclosure statement

A. Attaching a narrative explanation by management of the reasons for a cease and desist order as a part of the annual disclosure

If the institution offers both full and reduced documentation loans and there is a pricing premium attached to the reduced documentation loan, the consumer should: A. Be alerted to this fact B. Not be alerted to this fact C. Provide consumers with a clear statement of the options available D. Not lead consumers with payment option ARMs to choose a non-amortizing or negatively amortizing payment

A. Be alerted to this fact

A financial institution may provide a customer with a short form initial notice at the same time as it delivers an opt-notice. The short form notice must: A. Be clear and conspicuous B. State that a privacy notice is available on request C. Explain a reasonable means by which the consumer may obtain that notice Reasonable D. May be disclosed to the affiliates

A. Be clear and conspicuous, and B. State that a privacy notice is available on request, and C. Explain a reasonable means by which the consumer may obtain that notice Reasonable

FA presents cash to the bank and seeks to wire it to his spouse, RA, in Cub A. The OFAC list identifies RA as a specially designated national. Under OFACRegulations, what should the bank do? A. Block the transfer B. Conduct the transfer as requested and take no further action C. Conduct the transfer as requested and notify OFAC immediately D. Conduct the transfer only if the bank determines that Cuba is not a blocked country

A. Block the transfer

When returning items to a Reserve Bank, the paying and returning banks: A. Cannot disclaim the warranties, authorizations, and agreements whether or not the returned check bears an endorsement of the paying bank or returning bank B. Authorize the Reserve Bank to handle the item in accordance with Regulation J and the operating circulars C. Warrant that the check bears all endorsements applied by all parties that handled the check in paper or electronic form D. will not be liable for the failure of a paying bank, collecting bank, or a nonbank payer to pay for an item

A. Cannot disclaim the warranties, authorizations, and agreements whether or not the returned check bears an endorsement of the paying bank or returning bank, and B. Authorize the Reserve Bank to handle the item in accordance with Regulation J and the operating circulars, and C. Warrant that the check bears all endorsements applied by all parties that handled the check in paper or electronic form

It must provide in writing to consumer at least 21 days before the effective date of any change in a term or condition disclosed in the initial disclosure statement if the change results in: "¢ Increased fees "¢ Increased liability for the consumer "¢ Fewer types of available EFTs "¢ Stricter limitations on frequency or dollar amount of EFTsWhat is it? A. Change-in-terms notice B. Error resolution notice C. Unauthorized transfers D. Return items document

A. Change-in-terms notice

Time to bring action against a Reserve Bank: A. Claims against Reserve Banks for failure to act in good faith or exercise ordinary care must be brought within two years B. Claims against Reserve Banks for warranties given on electronic items that are not substitute checks must be brought within one year C. Claims against Reserve Banks for guarantees given on electronic items that are not substitute checks must be brought within one year D. Claims against Reserve Banks for failure to act in good faith or exercise ordinary care must be brought within three years

A. Claims against Reserve Banks for failure to act in good faith or exercise ordinary care must be brought within two years, and B. Claims against Reserve Banks for warranties given on electronic items that are not substitute checks must be brought within one year

Subprime borrowers are those with weakened credit histories or reduced repayment capacity. Loans to these borrowers historically have had a higher delinquency rate. Many lenders have expanded their lending programs and added subprime products as a method of meeting their _______________ by providing greater credit access to lower-income consumers. A. Community Reinvestment Act (CRA) responsibilities B. Fraudulent marketing tactics C. FTC Act D. Predatory Lending

A. Community Reinvestment Act (CRA) Responsibilities

Following mentioned are the responsibilities of:1. Must notify the bank, either orally or in writing, of error within 60 days: "¢ Of the institution"™s transmission of a statement or other documentation on which the error first appears or "¢ Of receiving additional information or clarification provided pursuant to the consumer"™s request2. Consumer"™s notification should include the following items "¢ Consumer"™s name and account number or information that allows the institution to identify the consumer"™s name or account number "¢ Consumer"™s belief and reasons for the belief that an error exists and, if possible, the type, date, and amount of the error (this information does not have to be given if the consumer is simply requesting further information or clarification) A. Consumer B. Financial institution C. Reserve Bank D. A third party

A. Consumer

The act limited balloon payments in consumer leases and enabled consumers to compare lease terms with credit terms where appropriate. The act was implemented by Regulation M (Consumer Leasing). It requires disclosures to consumers before consummation of the lease agreement. This act is: A. Consumer leasing act B. Risk disclosure act C. ALLL D. None of these

A. Consumer leasing act

Validation of debt says: A. Consumer must be sent debt validation in writing within five calendar days of initial communication unless information is contained in initial communication or unless consumer pays the debt B. If consumer disputes a debt in writing within 60 days, all collection activity must stop until the debt is verified C. If consumer disputes a debt in writing within 15 days, all collection activity must stop until the debt is verified D. If a consumer owes multiple debts and makes any multiple payments, debt collector must apply to debt in accordance with the consumer"™s direction

A. Consumer must be sent debt validation in writing within five calendar days of initial communication unless information is contained in initial communication or unless consumer pays the debt

Below mentioned is the necessary information that should be included in the ___________. Risk of payment shock""potential payment increases; how the new payment will be calculated when the introductory rate expires Ramifications of prepayment penalties""how they will be calculated, when they will be imposedRamifications of balloon payments Ramifications of the lack of escrowing for taxes and insurance""who is responsible for paying taxes and insurance and the fact that their costs may be substantial Cost of reduced documentation loans""whether there is a pricing premium required A. Consumer protection principles B. Underwriting standards C. Workout arrangements D. None of these

A. Consumer protection principles

An oral or written request for credit made in accordance with the creditor"™s procedures for the type of credit requested. Information entered into and retained by a computer system qualifies as a written application. It is called: A. Credit Application B. Credit completed application C. Initial credit approach D. None of these

A. Credit Application

Under collateral requirements-12CFR 221.7, maximum loan value of margin stock is: A. Currently 50 percent of the current market value B. Currently 70 percent of the current market value C. Subject to change by the Federal Reserve D. Subject to change by the Equity Reserve

A. Currently 50 percent of the current market value, and C. Subject to change by the Federal Reserve

This is a loan term or an arrangement that modifies a loan term under which a bank agrees to suspend all or part of a customer"™s loan obligation on the occurrence of a specified event. It May be a part of the loan itself or a separate agreement. Does not include a loan payment deferral arrangement where the borrower or the bank can unilaterally defer a payment. What is it? A. Debt suspension agreement (DSA) B. Anti-dying C. Debt cancellation contract (DCC) D. ALLL

A. Debt suspension agreement (DSA)

The OCC has determined that a national bank may not assume that, simply because a consumer"™s PIN or ATM card was used in a transaction, that transaction is authorized. Banks are required to take reasonable steps to determine whether the transaction was authorized. Such steps might include the bank"™s review of: A. Documentation or written, signed statements provided by the consumer B. Historical information on the customer"™s pattern of use (such as time, location, types of transactions, and so on) C. Problems reported by regular customers regarding the access device or ATM D. Legal reports

A. Documentation or written, signed statements provided by the consumer, and B. Historical information on the customer"™s pattern of use (such as time, location, types of transactions, and so on)

Which of the following is NOT a corporate practice required of bank holding companies? A. Each bank subsidiary must file a notice with the Federal Reserve before offering a new product. B. Each bank subsidiary must conduct its operations in a safe and sound manner. C. Each bank subsidiary must be insured by the FDIC. D. Each bank subsidiary must file a notice with the Federal Reserve before purchasing any of its own securities.

A. Each bank subsidiary must file a notice with the Federal Reserve before offering a new product.

Which of the following employment practices is NOT legal under ADA? A. Establishing a policy that prohibits hiring alcoholic applicants B. Establishing a policy that prohibits smoking at any time at work C. Holding employees who are certified alcoholics to the same performance standards as other employees D. Refusing to hire an employee who currently uses illegal drugs

A. Establishing a policy that prohibits hiring alcoholic applicants

The following mentioned points are actually _______________."¢ Reserve Banks may rely on numbers given in a payment order to identify an intermediary or beneficiary bank "¢ Reserve Banks, when acting as beneficiary"™s bank, may rely on the number in the payment order that identifies the beneficiary A. Fedwire transfers B. Interdistrict transfers C. Intradistrict transfers D. Any one of these

A. Fedwire transfers

In Compliance regulation and risk assessment key performance indicators usually include: A. Fines or penalties B. Customer complaints C. Regulatory criticism from a regulator or internal or external auditors D. None of these

A. Fines or penalities, and B. Customer complaints, and C. Regulatory criticism from a regulator or internal or external auditors

First State Bank, a state nonmember institution, plans to purchase a company that would be a financial subsidiary of the bank. First State will send a notice to theFDIC of its proposed acquisition. Of the following factors, which one would NOT be relevant to the FDIC"™s consideration of the bank"™s acquisition? A. First State Bank"™s asset size B. Whether First State Bank is well capitalized C. First State Bank"™s CRA rating D. The impact of the acquisition on First State Bank"™s safety and soundness

A. First State Bank"™s asset size

In Advertising-12 CFR 213.7, if a percentage rate is used in an advertisement, it cannot be more prominent than any other disclosure, EXCEPT: A. For the warning regarding the limitation of the rate as a measurement of cost B. For beginning at least 3 days before and ending at least 10 days after the broadcast C. For required disclosures in advertisements D. For an advertisement accessed in electronic form

A. For the warning regarding the limitation of the rate as a measurement of cost

What may a creditor do in response to an application for credit from a business with gross revenues of $1 million or less? A. Give a disclosure of the applicant"™s right to receive a statement of reasons at the time of the application instead of at the time of the adverse action B. Mention adverse action notices only if requested by the applicant C. Omit the ECOA statement on all notices NOTES D. Provide only the ECOA statement to the applicant

A. Give a disclosure of the applicant"™s right to receive a statement of reasons at the time of the application instead of at the time of the adverse action

Reserve Banks must issue operating circulars, which, together with Regulation J, govern the details of handling items through the Reserve Bank, including A. Handling of government items and foreign instruments B. Handling of foreign instruments C. Handling of government items D. Handling of clearing instruments

A. Handling of government items and foreign instruments

The banking agencies issued two guidances to caution depository institutions about risks involved in funding non-depository lenders that engage in predatory lending. Predatory and abusive practices include: A. High-pressure sales B. Excessive fees and interest rate including fees for unnecessary products C. Balloon payments that may never cause foreclosures D. Excessive refinancing with fees included in the new loan

A. High Pressure sales, and B. Excessive fees and interest rate including fees for unnecessary products

A bank has been criticized by an examiner for less than satisfactory CRA performance. The bank must show improvement in its commitment to CRA. For the examiner, what would be LEAST effective in demonstrating the change? A. Informing the examiner that the bank does not plan to acquire or merge with another bank, so CRA is not a priority B. Giving the examiner an updated CRA public file C. Showing the examiner a list of community groups with which the bank has met in the past 24 months to discuss credit needs D. Showing the examiner results of the bank"™s most recent geocoding analysis, indicating parity in the number of loans made in each census tract

A. Informing the examiner that the bank does not plan to acquire or merge with another bank, so CRA is not a priority

Government credit - A. It is credit extended to governments or government agencies, instrumentalities, or subdivisions B. It has no finance charge C. It has Records retention requirements D. Only the general rule against discrimination applies to government credit

A. It is credit extended to governments or government agencies, instrumentalities, or subdivisions, and D. Only the general rule against discrimination applies to government credit

It is an instrument or promise or order to pay money (whether negotiable or non negotiable) sent by a sender and payable in a Federal Reserve District or sent to and collectible in funds acceptable to a Reserve Bank. An electronic image of this document together with electronic information describing that item in an approved format will be considered a valid instrument. A. Item B. Debt collection form C. Validation form D. Correspondent check

A. Item

A sender and any prior collecting banks grant a security interest to the sender"™s administrative Reserve Bank in all of their respective assets in the possession of the Reserve Bank to secure any of their obligations to the Reserve Bank. This security interest attaches when any warranty is breached or any obligation to theReserve Bank is incurred. The Reserve Bank may take any action under applicable law to enforce its security interest; including exercising its right to set off amounts against any funds it holds. This situation holds true when: A. Item is sent to a Reserve Bank B. Reserve Bank recovers C. Bank makes for a substitute check D. Sender identifies liability to Reserve Bank

A. Item is sent to a Reserve Bank

A Reserve Bank may present a noncash item for payment if instructed to do so by the sender and if the: A. Item provides that it must be presented for acceptance B. Item is payable elsewhere than at the residence or business of the payor C. Item sent directly to the paying bank or the nonbank payor D. Date of payment of the item depends on presentment for acceptance

A. Item provides that it must be presented for acceptance, and B. Item is payable elsewhere than at the residence or business of the payor, and D. Date of payment of the item depends on presentment for acceptance

Under HMDA, what is the threshold for reporting the interest rate spread for first lien mortgage loans? A. Over 3 percentage points B. Over 5 percentage points C. Over 7 percentage points and when the loan is subject to the Home Ownership and Equity Protection Act D. Less than 8 percentage points but greater than 5 percentage points

A. Over 3 percentage points

First National Bancshares, Inc., a bank holding company, filed an application with its Federal Reserve Bank on March 1 to acquire a subsidiary bank. On March 15 the Federal Reserve Board asked First National for more information. On April 1 the Federal Reserve Bank received the completed application and accepted it.On April 5 the Federal Reserve Bank notified First National of the April 1 acceptance and referred the application to the Federal Reserve Board. Under the normal rules, by what date must the Federal Reserve Board act on the application? A. June 1 B. April 30 C. June 5 D. July 1

A. June 1

Which of the following actions is NOT a custodial requirement of the Government Securities Act? A. Keeping possessory government securities in a vault with dual control access B. Segregating government securities from bank assets C. Keeping government securities free of liens, claims, and charges. D. Issuing safekeeping receipts for securities

A. Keeping possessory government securities in a vault with dual control access

______________ is frequent refinancing that do not benefit the borrower. This practice can result in borrower injury from the fees imposed and from the fact that it decreases home equity and increases the consumer"™s debt burden, thus increasing the chance of foreclosure. A. Loan flipping B. Loan refinancing C. Securitization D. Subprime loans

A. Loan flipping

Examples of unfair practices mentioned in guidelines against Predatory and Abusive Lending includes loan flipping and loan equity stripping. It is said that: A. Loan flipping may be unfair because it increases the chances of foreclosure by decreasing home equity and increasing debt burden B. Equity stripping is the practice of making loans secured by the consumer"™s home but with high, up-front fees that are financed and secured by the home C. Loan flipping is the practice of making loans secured by the consumer"™s home but with high, up-front fees that are financed and secured by the home D. Equity stripping may be unfair because it increases the chances of foreclosure by decreasing home equity and increasing debt burden

A. Loan flipping may be unfair because it increases the changes of foreclosure by decreasing home equity and increasing debt burden, and B. Equity stripping is the practice of making loans secured by the consumer's home but with high, up-front fees that are financed and secured by the home

What are holders of unclaimed property required to do? A. Mail a notification to customers whose accounts may escheat to the state B. Charge customers "inactive/unclaimed" fees for accounts that are dormant C. Publish in a local paper the owners"™ names of accounts that will escheat D. Discontinue paying interest on dormant accounts

A. Mail a notification to customers whose accounts may escheat to the state

An exempted borrower is a member of a national securities exchange or a registered broker or dealer who: A. Maintains at least 1,000 active accounts annually for persons other than brokers, dealers, and persons associated with brokers and dealers B. Earns at least $10 million in gross revenues on an annual basis from transactions with persons other than brokers, dealers, and persons associated with brokers and dealers, or C. Earns at least 10 percent of its gross revenues on an annual basis from transactions with persons other than brokers, dealers, and persons associated with brokers and dealers D. None of these

A. Maintains at least 1,000 active accounts annually for persons other than brokers, dealers, and persons associated with brokers and dealers, and B. Earns at least $10 million in gross revenues on an annual basis from transactions with persons other than brokers, dealers, and persons associated with brokers and dealers, or, and C. Earns at least 10 percent of its gross revenues on an annual basis from transactions with persons other than brokers, dealers, and persons associated with brokers and dealers

The risk trend shows the direction of risk and probable change to risk over the next 12 months. A trend toward increasing risk means that A. Management may want to take additional action through more controls or increased reviews B. Risk may prompt a decrease in controls and improved efficiencies C. Controls currently in place are appropriate to succeed in keeping risks within management"™s established risk-tolerance level D. Risk measurements exceed management"™s tolerance for risk

A. Management may want to take additional action through more controls or increased reviews

Which of the following are included in unfair practices during debt practices? A. May collect only amount legally owed B. Postdated checks a. May not solicit for purpose of instituting criminal action b. May not deposit before date on check c. If a check is postdated longer than 5 days, must notify consumer of deposit at least 3 days and no more than 10 days before depositing C. May possibly communicate regarding a debt by postcard D. May use any language or symbol other than collector"™s address on any envelope except debt collector may use business name if it does not indicate it is a debt collection business.

A. May collect only amount legally owed, and B. Postdated checks a. May not solicit for purpose of instituting criminal action b. May not deposit before date on check c. If a check is postdated longer than 5 days, must notify consumer of deposit at least 3 days and no more than 10 days before depositing

Which of the following is true regarding extensions of credit to executive officers, directors, and principal shareholders? A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank"™s capital and surplus, not exceeding $500,000 B. Must be approved in advance by the board of directors if the credit is greater than $50,000 or 5 percent of the bank"™s capital and surplus C. May not exceed $100,000 in the aggregate, regardless of approvals D. May not exceed $250,000 in the aggregate, regardless of approvals

A. Must be approved in advance by the board of directors if the aggregate credit is more than the greater of either $25,000 or 5 percent of the bank"™s capital and surplus, not exceeding $500,000

Below mentioned list shows the significant risks of _______________. Borrowers with cash-flow difficulties Borrowers with no lower-cost credit alternatives Minimal analysis of borrower"™s ability to repay the loan Minimal review of borrower"™s credit history Credit is usually unsecured - A. Payday lending B. Loan flipping C. Equity stripping D. None of these

A. Payday lending

A ____________ must settle for an item with its administrative bank, whether or not it received the item from that bank. Settlement with its administrative bank is deemed to be settlement with the Reserve Bank that sent the item. A. Paying bank B. Clearing Agent C. Regulation J D. Regulation CC

A. Paying bank

During a EFT, if the institution determines that no error has occurred or that an error occurred in a manner or amount different than the alleged error, it: A. Must notify the consumer in writing of the date and amount of the debit to account and the fact that the institution will continue to honor checks and preauthorized transfers payable to third parties for seven business days B. Must promptly provide on request copies of documentation on which institution relied on to determined that no error occurred C. Must pay only items that the institution would have paid if the provisionally credited funds had not been debited D. Any of these

A. Must notify the consumer in writing of the date and amount of the debit to account and the fact that the institution will continue to honor checks and preauthorized transfers payable to third parties for seven business days, and B. Must promptly provide on request copies of documentation on which institution relied on to determined that no error occurred, and C. Must pay only items that the institution would have paid if the provisionally credited funds had not been debited

Information reports must include which of the following details? A. Name, address, and TIN of the borrower B. Purpose of the loan C. Address of the property securing the mortgage D. Fair market value of the property at the time of the loan

A. Name, address, and TIN of the borrower

Debt Cancellation Contracts and Debt Suspension Agreements coverage includes: A. National banks that issue debt cancellation contracts and debt suspension agreements with borrowers in connection with loans for personal, family, or household purposes B. A national bank may not engage in any practice, including advertising, which would cause a reasonable person to be misled with respect to DSAs and DCCs C. A bank must provide the long-form disclosures in writing before the customer completes the purchase of a contract. If the solicitation occurs in person, the long-form disclosures must be provided at that time D. A bank must make the short-form disclosures orally at the time the bank first solicits the contract

A. National banks that issue debt cancellation contracts and debt suspension agreements with borrowers in connection with loans for personal, family, or household purposes

A bank has a stand-alone ATM in a high crime area. Due to concerns for the safety of individuals using the ATM, management decides to close it. According to branch closing policy statements issued by federal regulators, which of the following actions should the bank take? A. No action is required because an ATM is not, by definition, a branch. B. Post a notice at the ATM at least 30 days before the intended closing date. C. Notify the bank's federal regulatory agency at least 90 days before the intended closing date. D. Mail a notice to all customers at least 90 days before the intended closing date.

A. No action is required because an ATM is not, by definition, a branch.

ABC National Bank regularly purchases mortgage loans from ACME Mortgage Company, a local mortgage broker. ACME places a mandatory arbitration clause in each of its mortgage documents. ACME believes this clause is necessary because of state laws governing arbitration. Is this clause a problem for ABC National? A. No, unless other predatory or abusive lending practices are evident in the loans sold by ACME. B. Yes, the clause is a sign of an abusive lender, and the bank should not purchase the loans. C. Yes, the bank should make ACME strike the clause from future loans. D. No, this is a common practice and the bank can ignore it.

A. No, unless other predatory or abusive lending practices are evident in the loans sold by ACME.

Martin Taylor, a loan officer at First National Bank, is a long-time friend of Bill Evans, a local homebuilder. Bill would like a line of credit at the bank and discusses the potential loan with Martin. During the discussion, Martin expresses his desire to build a house one day and Bill offers to build him one "at cost plus 5 percent."If Martin accepts Bill"™s offer, can he continue to act as his loan officer? A. No. The value of the gift is too great. B. Yes, if Martin discloses this fact to the bank. C. Yes, if Martin does not let the discount on the house affect his decision making process. D. Yes, if the bank"™s code of conduct allows such activity.

A. No. The value of the gift is too great.

ACME National Bank has a Web site that lists the bank"™s products and services. On its consumer loan page it lists debt cancellation contracts as an available product. What other disclosure must the bank place on this Web page? A. None. Because it only lists the product, nothing else is required. B. The short-form disclosures must be on the page. C. The short-form disclosures must be available by a conspicuous link on the page. D. The long-form disclosures must be on the page.

A. None. Because it only lists the product, nothing else is required.

Which of the following countries are currently subject to the Office of Foreign Assets Control Regulations? A. North Korea B. Jordan C. Bahrain D. Russia

A. North Korea

Under Renegotiations, extensions, and assumptions-12 CFR 213.5; any lease that is renegotiated or extended by longer than six months is considered to be a new lease, subject to new disclosure requirements, except when: A. One or more payments are deferred, whether or not there is a charge for the deferral B. Lease property is substituted with property of substantially equivalent or greater value, if no other lease terms are changed C. In a multiple-item lease, property is added, deleted, or substituted provided the average periodic payment does not change by more than 35 percent D. There is an agreement resulting from a pre-order

A. One or more payments are deferred, whether or not there is a charge for the deferral, and B. Lease property is substituted with property of substantially equivalent or greater value, if no other lease terms are changed

The compliance program should address plans to verify adherence to applicable regulations through: A. Ongoing monitoring to evaluate the program, self monitoring and corrective action B. Self monitoring C. Periodic reviews D. Ongoing monitoring to evaluate the program, self monitoring and periodic reviews

A. Ongoing monitoring to evaluate the program, self monitoring and corrective action.

For which of the following business activities must a bank holding company obtain prior approval of the Federal Reserve Board? A. Operating an auto club service B. Serving as a safe deposit company C. Operating as a management consulting firm for financial institutions D. Selling installment loan data processing

A. Operating an auto club service

It means a direction by the consumer that the financial institution not discloses nonpublic personal information about the consumer to a non-affiliated third party, except as permitted by the regulation. What is it? A. Opt-out B. Re-disclosure C. Non-affiliated D. Both B and C

A. Opt-out

Which one of the following is out of the FIRREA penalties included in the enforcement section of Adjusted Mortgage Regulation (12 CFR 34)? A. Penalties up to $7,500 per day for violations of laws and regulations B. Penalties up to $47,500 per day if violations or unsafe or unsound practices are engaged in recklessly or are part of a pattern of misconduct that causes more than a minimal loss to the bank or any pecuniary gain to the parties involved C. Penalties up to $1,375,000 per day against persons who knowingly commit a violation and knowingly or recklessly cause a substantial loss to the bank or a substantial benefit to the party D. Penalties up to $6,500 per day for violations of laws and regulations

A. Penalities up to $7,500 per day for violations of law and regulations, and C. Penalities up to $1,375,000 per day against persons who knowlingly commit a violation and knowingly or recklessly cause a substantial loss to the bank or a substantial benefit to the party

Under Consumer Leasing Act Enforcement-15 USC 1667d section FIRREA penalties include: A. Penalties up to $8,500 per day for violations of laws and regulations B. Penalties up to $37,500 per day if violations or unsafe or unsound practices are engaged in recklessly or are part of a pattern of misconduct that causes more than a minimal loss to the bank or any pecuniary gain to the parties involved C. Penalties up to $1,375,000 per day against persons who knowingly commit a violation and knowingly or recklessly cause a substantial loss to the bank or a substantial benefit to the party D. Penalties up to $9,500 per day for violations of laws and regulations

A. Penalties up to $8,500 per day for violations of laws and regulations, and B. Penalties up to $37,500 per day if violations or unsafe or unsound practices are engaged in recklessly or are part of a pattern of misconduct that causes more than a minimal loss to the bank or any pecuniary gain to the parties involved

If a bank receives a request for financial disclosure, how may the bank fulfill this request? A. Provide copies of the call reports covering the current and previous year B. Provide a copy of its statement of condition covering the year immediately preceding the request C. Provide a copy of its most recent, unaudited financial statement D. Provide copies of its Uniform Bank Performance Reports for three consecutive years

A. Provide copies of the call reports covering the current and previous year

Second National has decided to close one of its less profitable neighborhood branches. Which of the following actions is NOT required of the bank under federal law? A. Publish a notice of the closing in the local newspaper B. Send a notice to its regulatory agency C. Send notices to the branch customers D. Post a notice at the branch

A. Publish a notice of the closing in the local newspaper

In Receiver"™s agreement-12 CFR 210.28 it is clearly mentioned that: A. Receiving bank authorizes the Reserve Bank to credit the receiving bank"™s account B. An off-line bank warrants to the Reserve Bank that it does not act as an intermediary bank or a beneficiary"™s bank for payment orders received for a beneficiary that is a bank, unless the off-line bank notifies the Reserve Bank in writing C. A Reserve Bank has rights of a creditor to recover an overdraft, including the right of set off D. Reserve Banks, when acting as beneficiary"™s bank, payment order that identifies the beneficiary

A. Receiving bank authorizes the Reserve Bank to credit the receiving bank"™s account, and B. An off-line bank warrants to the Reserve Bank that it does not act as an intermediary bank or a beneficiary"™s bank for payment orders received for a beneficiary that is a bank, unless the off-line bank notifies the Reserve Bank in writing

Which of the following comes under the heading of nontraditional mortgage product risks? A. Reduced documentation adds risk to a mortgage loan. Institutions may rely on reduced documentation in the credit underwriting process. Income and credit verification may not be obtained. Use of reduced documentation should be subject to clear policies that require more documentation when the credit risk rises B. Reduced documentation adds risk to a mortgage loan. Institutions may rely on reduced documentation in the credit underwriting process. Income and credit verification may not be obtained. Use of reduced documentation should be subject to clear policies that require more documentation when the credit risk rises C. Perform due diligence before entering into third-party relationships, including a review of the third party"™s General competence Business practices and operations Reputation Financial capacity Internal controls Record of compliance with laws D. Amounts credited as recovery on a loan must not exceed all principal, finance charges, and fees previously charged off. Amounts that exceed these must be credited as income

A. Reduced documentation adds risk to a mortgage loan. Institutions may rely on reduced documentation in the credit underwriting process. Income and credit verification may not be obtained. Use of reduced documentation should be subject to clear policies that require more documentation when the credit risk rises, and B. Duplicate to A

When all the required information is NOT provided by a person purchasing a cashier"™s check with $8,000 in currency, what should the bank do? A. Refuse the transaction B. Complete the transaction and record available information C. Complete the transaction and file a SAR D. Complete the transaction and insist that the customer return with the required information

A. Refuse the transaction

Requirements""12 CFR 202.2, 202.4, 202.5, 202.6, and 202.13 say that a creditor may not request information about an application"™s race, color, religion, national origin, or gender except as specifically permitted by ____________or another statute such as the Home Mortgage Disclosure Act. A. Regulation B B. Regulation U C. Regulation Z D. Regulation A

A. Regulation B

Payroll card accounts established directly or indirectly by an employer for the purpose of electronically transferring an employee"™s wages, salary, or other compensation on a recurring basis, are covered by: A. Regulation E B. Regulation T C. Regulation CC D. Regulation Z

A. Regulation E

Implemented by _______________, EFTA is intended to provide certain rights to individual consumers using EFT payment systems. It also places responsibilities on financial institutions whose accounts are affected by EFTs. A. Regulation E (Electronic Fund Transfers) B. Regulation F (Electronic Fund Transfers) C. Regulation T (Electronic Fund Transfers) D. Regulation A (Electronic Fund Transfers)

A. Regulation E (Electronic Fund Transfers)

The institution need not provisionally credit the consumer"™s account if it requires but does not receive written confirmation of oral notice of error or if the error involves an account subject to the margin requirements of ______________. A. Regulation T B. Regulation X C. Regulation Z D. Regulation E

A. Regulation T

_____________ requires that a statement of purpose be obtained from borrowers whose loans are to be greater than $100,000 and that will be secured by margin stock. Loans made for the purpose of purchasing margin stock are subject to additional limitations A. Regulation U B. Regulation V C. Regulation Z D. Regulation X

A. Regulation U

In the mid-1980s a movement began among the federal supervisory agencies to produce a uniform ARM regulation. In 1988, the Federal Reserve Board added the uniform ARM disclosure requirements to a regulation. Therefore, most of the original OCC ARM consumer protection requirements are now found in this new regulation. Adjustable rate mortgage loans made by national banks may be subject to the OCC"™s ARM regulation or the requirements of this new regulation, or both. This new regulation is: A. Regulation Z B. Truth in Lending C. CFR 34.21, 34.22 and 34.23 D. FIRREA penalty

A. Regulation Z, and B. Truth in Lending

In a compliance program, tactical compliance procedures should be integrated into business line procedures, such as how to deliver an Adverse Action Notice when an application is declined. In this case: A. Regulations should be applied consistently to procedures throughout the bank B. Revisions to procedures should be based on compliance expertise and not mere editing C. Providing solutions to mitigate any identified risk D. Assisting business units in developing or revising policies and procedures to reflect current regulatory requirements

A. Regulations should be applied consistently to procedures throughout the bank AND B. Revisions to procedures should be based on compliance expertise and not mere editing.

Supervisory review should also be the part of Subprime Mortgage Lending. It should review: A. Regulatory agencies will continue to focus on risk management review and consumer compliance processes B. Hiring and Training of personnel C. Agencies will continue to take action against institutions that violate consumer protection laws or fair lending laws or that engages in unfair or deceptive acts or practices or in unsafe or unsound lending practices D. Applicability of prepayment penalties

A. Regulatory agencies will continue to focus on risk management review and consumer compliance processes, and C. Agencies will continue to take action against institutions that violate consumer protection laws or fair lending laws or that engages in unfair or deceptive acts or practices or in unsafe or unsound lending practices

Which of the following is/are included in the persons covered under Fedwire transfer coverage? A. Reserve Banks sending or receiving payment orders B. Senders of payments to a Reserve Bank C. Banks receiving payments from a Reserve Bank D. None of these

A. Reserve Banks sending or receiving payment orders, and B. Senders of payments to a Reserve Bank, and C. Banks receiving payments from a Reserve Bank

During a recent compliance examination, regulatory examiners found that the bank was not conducting flood hazard area determinations before closing on construction loans. The compliance professional has reviewed the files and agreed with the examiners"™ finding. What should be done FIRST? A. Review the bank"™s flood policies and procedures to determine where the compliance failure occurred B. Conduct a risk assessment of the flood determination requirement on construction loans C. Prepare an analysis for bank management explaining the requirement D. Review all construction loan files to determine the extent of the problem

A. Review the bank"™s flood policies and procedures to determine where the compliance failure occurred

Second State Bank offers a mortgage product that involves simultaneous second lien loans. These include a first lien for up to 90 percent of the purchase price and a second loan for the down payment, secured by a second lien on the property. The bank would like to be in full compliance with the Interagency Guidance onNontraditional Mortgage Product Risks. Which of the following should Second State Bank incorporate into its loan program? A. Risk management procedures to measure the risk of all simultaneous second lien loans and report results to management B. A 100 percent loan loss reserve on all simultaneous second lien loans C. A product combining simultaneous second lien loans with negative amortization features made to nonowner occupied borrowers D. A prepayment penalty on all simultaneous second lien loans

A. Risk management procedures to measure the risk of all simultaneous second lien loans and report results to management

Content of notification to credit consumers must contain: A. Statement of the action taken B. Name and address of creditor C. Statement of the specific reasons for the adverse action or a disclosure of the applicant"™s right to receive the specific reasons within 30 days of a request. The request for specific reasons must be made within 60 days of the receipt of the adverse action notice. D. Statement of the specific reasons for the adverse action or a disclosure of the applicant"™s right to receive the specific reasons within 15 days of a request. The request for specific reasons must be made within 30 days of the receipt of the adverse action notice.

A. Statement of the action taken, and B. Name and address of creditor, and C. Statement of the specific reasons for the adverse action or a disclosure of the applicant"™s right to receive the specific reasons within 30 days of a request. The request for specific reasons must be made within 60 days of the receipt of the adverse action notice.

According to FDIC Guidance on Spousal Signature Provisions, if the creditor requires the spouse"™s signature on an instrument that imposes personal liability, the creditor"™s belief should be: A. Supported by a thorough review of pertinent statutes, decisional law, or an opinion of the state"™s attorney general B. Supported by a thorough review of pertinent statutes C. Supported by decisional law D. Supported by an opinion of the state"™s attorney general

A. Supported by a thorough review of pertinent statutes, decisional law, or an opinion of the state"™s attorney general

It is an extension of credit will be deemed to be made to an insider if the proceeds are transferred to the insider or used for the insider"™s benefit. This rule does not apply if the credit is made on substantially the same terms and conditions as those made to a noninsider and if the proceeds are used in a bona fide transaction involving the acquisition of property, goods, or services from the insider. What is it? A. Tangible economic benefit rule012 CFR 215.3(f) B. Extension of credit-12 CFR 215.3 C. Lending restrictions D. Intangible economic-benefit rule

A. Tangible economic benefit rule012 CFR 215.3(f)

Which one of the following types of credit may be extended in Requirements case-12 CFR 221.3, 221.7: A. Temporary advances in payment against delivery transactions B. Capital contribution leases C. Credit to clearing banking authorities D. Underwriter loans

A. Temporary advances in payment against delivery transactions, and D. Underwriter loans

The Reserve Bank may recover by charging any account on its books maintained by the sender if: A. The Reserve Bank makes written demand to sender to assume defense of the proceeding B. Any action by the Reserve Bank within is the scope of its authority in handling the item C. The sender has not made any other payment arrangement acceptable to the Reserve Bank D. There is any warranty made by the Reserve Bank

A. The Reserve Bank makes written demand to sender to assume defense of the proceeding, and C. The sender has not made any other payment arrangement acceptable to the Reserve Bank

As an alternative to providing a periodic statement, a financial institution holding payroll card accounts may make available: A. The account balance, accessed through a readily available telephone line B. An electronic history of the account that covers a period of at least 60 days preceding the time the consumer electronically accesses the account C. A written history of account transactions, available on request that covers a period of at least 15 days preceding the date of the consumer request D. A written history of account transactions, available on request that covers a period of at least 30 days preceding the date of the consumer request

A. The account balance, accessed through a readily available telephone line, and B. An electronic history of the account that covers a period of at least 60 days preceding the time the consumer electronically accesses the account

First National Bank is a member of a multibank holding company. The bank makes ARM loans and occasionally purchases ARM loans from its affiliate national and state banks as well as from nonaffiliated banks. Which of the following practices is NOT acceptable under the OCC ARM regulation? A. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National"™s prime rate. B. The bank makes loans to purchase single-family dwellings with interest rates that may be adjusted from time to time. C. The bank links the interest rate indices on its own ARM loans to them national prime rate as published in The Wall Street Journal. D. The bank requires its national bank affiliates to use the national prime rate as published in The Wall Street Journal as the index for any of the ARM loans it purchases.

A. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National"™s prime rate.

In the small bank performance standard, which of the following is NOT a criterion? A. The bank"™s CRA strategic plan B. The bank"™s loan-to-deposit ratio C. The geographic distribution of loans D. The percentage of loans within the bank"™s assessment area(s)

A. The bank"™s CRA strategic plan

Underwriting standards in Subprime Mortgage Lending include: A. The borrower"™s debt-to-income ratio should include the borrower"™s total yearly housing-related payments as a percentage of gross monthly income B. Institutions should have a clear policy governing the use of risk-layering features, such as reduced documentation loans or simultaneous second lien mortgages C. Stated income and reduced documentation loans to subprime borrowers should be made only if there are clear, documented mitigating factors D. Mitigating factors should be present when risk layering features are combined in order to support the underwriting decision and the borrower"™s repayment capacity

A. The borrower"™s debt-to-income ratio should include the borrower"™s total yearly housing-related payments as a percentage of gross monthly income

Consumers are not considered to be the customers if they do not have continuing relationship with the financial institution. A relationship is considered NOT to be a continuing relationship if: A. The consumer obtains financial services only in isolated transactions, such as using an ATM B. The consumer"™s loan is sold and servicing rights are retained C. The consumer purchases airline tickets or travel insurance in an isolated transaction D. The consumer is a beneficiary or grantor of a trust not administrated by the bank

A. The consumer obtains financial services only in isolated transactions, such as using an ATM, and C. The consumer purchases airline tickets or travel insurance in an isolated transaction

What information must be on the loan application registers for home loans on property located within the bank"™s metropolitan area? A. The county, census tract, and metropolitan area of the property B. The address, census tract, and metropolitan area of the property C. The county, address, and fair market value of the property D. The name, address, and metropolitan area of the applicant

A. The county, census tract, and metropolitan area of the property

QRS State Bank is being examined under the lending test. Which of the following is the most relevant criteria for the lending test? A. The distribution of the bank"™s small business loans B. The racial and gender characteristics of QRS"™s lending staff C. The location of QRS"™s branches D. The services QRS offers to its community

A. The distribution of the bank"™s small business loans

Which of the following actions subjects a lender to mortgage interest reporting requirements? A. The lender holds mortgage loans in the course of its trade or business. B. The lender is a qualified FHA or VA lender. C. The lender receives at least $500 in interest on a mortgage loan during a calendar year. D. The lender offers unsecured home improvement loans.

A. The lender holds mortgage loans in the course of its trade or business.

Cash items"™ payment proceeds must be available to the Reserve Bank by the latest of: A. The next clock hour that is after the hour the paying bank receives the item B. 9:30 A.M. Eastern time C. Such other time as provided in the Reserve Bank"™s operating circulars D. Both A and B

A. The next clock hour that is after the hour the paying bank receives the item, and B. 9:30 A.M. Eastern time, and C. Such other time as provided in the Reserve Bank"™s operating circulars

Payment to a beneficiary is made at the earlier of the time when: A. The payment order is credited to the beneficiary"™s account or when notice of the credit is sent to the beneficiary B. The amount is credited to the receiving bank"™s account at the Reserve Bank or when the payment order is sent to the receiving bank C. The amount is debited to the receiving bank"™s account at the Reserve Bank or when the payment order is sent to the receiving bank D. The payment order is debited to the beneficiary"™s account or when notice of the credit is sent to the beneficiary

A. The payment order is credited to the beneficiary"™s account or when notice of the credit is sent to the beneficiary

There is no error in an error in EFT when there is situation as: A. The reversal of a direct deposit made in error is not considered an unauthorized EFT if the deposit was made to the wrong customer"™s account, a duplicate was made to the customer"™s account, or a credit was made in the wrong amount B. A request for duplicate copies of statements C. The failure to receive a receipt from an electronic terminal when the transaction amount is $25 or more D. A returning request for information for tax or recordkeeping purposes

A. The reversal of a direct deposit made in error is not considered an unauthorized EFT if the deposit was made to the wrong customer"™s account, a duplicate was made to the customer"™s account, or a credit was made in the wrong amount, and B. A request for duplicate copies of statements

What insurance disclosures are required in the lease disclosure statement? A. The types and amounts of coverage provided by the lessor and the cost to the lessee B. The types, amounts, and estimated costs of recommended coverage even if not provided or paid by the lessor C. The cost to the lessee NOTES D. No insurance disclosures are required

A. The types and amounts of coverage provided by the lessor and the cost to the lessee

To stop a payment of a preauthorized transfer, consumer must notify the institution or in writing at least: A. Three days before the transfer is to occur B. Within 14 days of oral notice C. Binding after 14 days if no written confirmation is received D. None of these

A. Three days before the transfer is to occur

For HMDA purposes, the term "dwelling" does NOT include which of the following? A. Timeshares B. Single family dwellings C. Individual condominiums D. Mobile homes not attached to real property

A. Timeshares

Which of the following should be done during research and interpreting regulations Compliance professionals in mitigating compliance risk? A. Track regulatory proposals B. Implementing final regulatory rules C. Understanding the business units"™ operating environment and risk tolerance D. Ranking solutions as high, moderate and low risk

A. Tracking regulatory proposals, and B. Implementing final regulatory rules, and D. Ranking solutions as high, moderate and low risk

Generally, a financial institution is required to ascertain if securities certificates they have taken by pledge, transfer, or otherwise have been reported as missing, lost, counterfeit, or stolen. When is it NOT required to take such actions? A. When the securities certificate is received directly from the issuer or issuing agent at issuance. B. When the bank officer personally knows the individual pledging the certificate. C. When the securities certificate received as part of a transaction has a face value of $20,000 or less. D. When the securities certificate is received directly from an insured delivery service.

A. When the securities certificate is received directly from the issuer or issuing agent at issuance.

Trust Co. and First National Bank are located in the same city and each has assets of over $20 million. The president of First National has been asked to serve as a director of Trust Co. First National has no trust department and no trust operations. Trust Co. operates solely as a trust company. Would this relationship violate the prohibitions against management official interlocks in Regulation L? A. Yes, because the institutions are in the same city. B. No, because the institutions are not both depository institutions. C. No, because the institutions do not compete. D. Maybe, but it depends on the size of the institutions.

A. Yes, because the institutions are in the same city.

First National is developing a consumer checking account that can access a line of credit. This is the first time the bank has ever had such a product, although this type of credit facility has been popular with other banks in town. To determine what interest rate to charge on this account, an officer of First National called some of his friends at other local banks offering this type of credit and asked several questions, including the interest rate charged on this type of account and what internal factors the banks use to set the rate. After obtaining this information, First National determines that it could charge approximately 2 percent more than it originally planned. Is there anything wrong with this course of action? A. Yes. Communicating with competitors for purposes of setting prices is wrong. B. No. Communication itself is never wrong regardless of the subject matter. C. Yes. The bank should have disguised its identity in calling its competitors. D. No. The bank could probably have determined the prices eventually without calling the banks directly.

A. Yes. Communicating with competitors for purposes of setting prices is wrong.

Issuing Bank, a foreign bank, maintains an account with First National Bank, a U.S. bank. Issuing Bank issues a letter of credit in favor of ABC, Inc., a U.S. corporation. The letter of credit contains a boycott provision. The letter of credit provides that any negotiating bank may obtain reimbursement from Issuing Bank"™s account at First National Bank by certifying that the conditions of the letter of credit have been met. Issuing Bank does not send First National Bank a copy of the letter of credit. May First National Bank reimburse negotiating banks for the letter of credit when it contains a boycott provision? A. Yes. First National Bank did not know of it, so it may reimburse a negotiating bank. B. No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays. C. No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision. D. Yes, provided ABC Company is not a participant in the boycott.

A. Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.

ABC Co. signs a contract to export goods to Country G, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires the goods to be shipped on a ship eligible to enter the port of Country G in conformity with its laws and regulations and that the insurer of the goods has an agent in Country G. Country G"™s laws prohibit blacklisted ships from calling at its ports and blacklisted insurance companies from qualifying agents in Country G. First National Bank confirms the letter of credit. Did the bank"™s action constitute an agreement to participate in or cooperate with an international boycott, and is it subject to IRS reporting requirements? A. Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements. B. Yes. The action is an agreement to participate in a boycott but no, it is not subject to the reporting requirements. C. No. Because the bank is not responsible for knowing the laws of Country G, it is not in participation with or in cooperation with a boycott. D. No. The confirmation of a letter of credit is not sufficient to be in participation or cooperation with a boycott.

A. Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements.

First National Bank has made a loan to Mr. Good, secured by margin stock, to purchase margin stock. He trades stocks frequently, makes substitutions on loan collateral regularly, and sometimes withdraws collateral and does not replace it. Must FNB ensure that margin requirements are met after every substitution and withdrawal? A. Yes. The margin requirements must be met at all times. B. No. If the margin requirements were met when the loan was made, there are no further requirements. C. No. The bank is only required to ensure that withdrawals do not violate margin requirements; collateral substitutions are not covered. D. No. In this case the margin requirement must be met only when the loan is renewed.

A. Yes. The margin requirements must be met at all times.

Mr. Roberts has three loans at First National Bank: Loan A made to purchase a car, secured by the car; Loan B made to purchase stock, secured by a lake lot; and Loan C made to pay taxes, secured by a rental house he owns. Last year he paid $2,500 in interest on Loan A; $550 in interest on Loan B; and $1,000 in interest on Loan C. How much interest will First National Bank report to the IRS? A. $4,050 B. $1,000 C. $1,550 D. $2,500

B. $1,000

How long after discovery does a bank have to report any lost or missing securities when criminal activity is suspected? A. 90 calendar days B. 1 business day C. Never. Law enforcement must report D. 10 business days

B. 1 business day

On a written request from a member of the public, the bank must disclose the names of each of its executive officers and principal shareholders to whom the bank had aggregate credit outstanding at the end of the latest quarter that equaled or exceeded: A. 10 percent of the bank"™s capital, and unimpaired surplus or $500,000, whichever is less; no disclosure is required if the aggregate credit was $30,000 or less. Disclosure of individual loan amounts is not required B. 5 percent of the bank"™s capital, and unimpaired surplus or $500,000, whichever is less; no disclosure is required if the aggregate credit was $25,000 or less. Disclosure of individual loan amounts is not required C. 6 percent of the bank"™s capital, and unimpaired surplus or $100,000, whichever is less; no disclosure is required if the aggregate credit was $25,000 or less. Disclosure of individual loan amounts is not required D. 5 percent of the bank"™s capital, and unimpaired surplus or $100,000, whichever is less; no disclosure is required if the aggregate credit was $35,000 or less. Disclosure of individual loan amounts is not required

B. 5 percent of the bank"™s capital, and unimpaired surplus or $500,000, whichever is less; no disclosure is required if the aggregate credit was $25,000 or less. Disclosure of individual loan amounts is not required

While Presenting items for payment: A. A Reserve Bank or a subsequent collecting bank may present an item for payment but doesn"™t send the item for presentment and payment B. A Reserve Bank may send an item to a collecting bank with authority to present it for payment or send it for presentment and payment C. A Reserve Bank may present an item for payment at the place requested by the paying bank, at a place requested by the nonbank payor, through a clearinghouse, or under a special collection agreement D. Within a Reserve Bank"™s district, the Reserve Bank may present the item indirectly to the paying bank or a nonbank payor, as applicable

B. A Reserve Bank may send an item to a collecting bank with authority to present it for payment or send it for presentment and payment, and C. A Reserve Bank may present an item for payment at the place requested by the paying bank, at a place requested by the nonbank payor, through a clearinghouse, or under a special collection agreement

In which of the following situations does a bank need to post a branch closing notice? A. A bank closes a branch temporarily because of heavy hurricane damage. B. A bank closes a branch in a suburban neighborhood because business has not adequately developed there. C. A bank decides not to exercise its option to purchase a branch it has been temporarily running for the FDIC as a part of a purchase of a failed institution. D. A bank closes a branch and moves it 850 feet down the street.

B. A bank closes a branch in a suburban neighborhood because business has not adequately developed there.

Which of the following practices is authorized by the Federal Reserve Act? A. An agreement by a bank that it is responsible for the obligations of its subsidiary B. A bank"™s purchase, in its fiduciary capacity, of the affiliate"™s assets if the fiduciary instrument allows for such a purchase C. The sale of a nonaccruing loan from a bank to its bank affiliate D. The acceptance of an affiliate"™s securities of an affiliate as collateral for a NOTES bank"™s loan from the bank to the affiliate

B. A bank"™s purchase, in its fiduciary capacity, of the affiliate"™s assets if the fiduciary instrument allows for such a purchase

First National Bank is a wholly owned subsidiary of Bank Holding Company, Inc. Which of the following companies is NOT an affiliate of First National Bank? A. A company that owns 60 percent of Bank Holding Company, Inc. B. A company of which First National owns 100 percent of the stock, set up solely to hold the title to the First National Bank building C. A company established to sell securities and that is 100 percent owned by Bank Holding Company, Inc. D. Another bank that is owned by Bank Holding Company, Inc.

B. A company of which First National owns 100 percent of the stock, set up solely to hold the title to the First National Bank building

When must disclosures on consumer leasing transactions subject to Regulation M be made? A. At the time of the application B. Before the consummation of the lease C. Before the first payment due under the lease D. Within 10 days after consummation of the lease

B. Before the consummation of the lease

Annual privacy notices are not required to be given to former customers, including cases where: A. A deposit account is active B. A customer pays a load in full or institution charges off the loan C. The institution no longer provides any open-end statements or notices to the customer D. None of these

B. A customer pays a load in full or institution charges off the loan, and C. The institution no longer provides any open-end statements or notices to the customer

Which of the following would NOT be acceptable under the Bank Bribery Act and the relevant guidelines? A. A luncheon paid for by a bank customer after a transaction is closed B. A gift of a hunting rifle to a loan officer from a borrower at Christmas C. The gift of a gold watch to a loan officer from a customer who is the loan NOTES officer"™s cousin D. An award of a writing pen and pencil set to a bank officer by a civic organization

B. A gift of a hunting rifle to a loan officer from a borrower at Christmas

Which of the following is NOT a written record the bank should retain in complying with the Bank Bribery Act? A. A copy of the bank"™s internal code of conduct B. A list of all gifts received by bank officers during the year C. Disclosures of unauthorized gifts D. A list of all bank officers"™ outside business interests

B. A list of all gifts received by bank officers during the year

For which of the following must a bank obtain Form FR U-1 when a loan is in excess of $100,000? A. A loan made to purchase margin stock B. A loan secured by margin stock C. A loan made to purchase margin stock and secured by margin stock D. A loan secured by stock (either margin or nonmargin)

B. A loan secured by margin stock

Which of the following entities is exempt from the requirements of the Government Securities Act? A. A bank that operates a securities underwriting department to provide underwriting services to issuers of government securities B. A national bank that purchases and sells government securities only in its fiduciary capacity on behalf of clients in its trust department C. A bank that operates a financial advisory service that provides advice to clients on the purchase and sale of government securities D. A bank that operates an investment department to provide investment advice and purchase and sell all types of securities (including government securities) for clients

B. A national bank that purchases and sells government securities only in its fiduciary capacity on behalf of clients in its trust department

In evaluating the coverage of a bank's Regulation U compliance for loans to purchase or carry margin stocks, which of the following securities is NOT covered in the regulatory definition of "margin stock"? A. Any OTC stock B. A security issued by an investment company that is licensed under the Small Business Administration Act C. A warrant or right to subscribe to, or purchase, a margin stock D. An equity security registered, or having unlisted trading privileges, on a national exchange

B. A security issued by an investment company that is licensed under the Small Business Administration Act

ACME Bank is a state nonmember bank with all of its offices in one state. However, it also has an Internet Web site where it advertises consumer credit and accepts applications from a five-state regional are A. Two of the states are community property states. The other three are not. What is the best explanation for what ACME bank"™s management should do to comply with the FDIC ECOA spousal signature guidance? A. Because ACME has all of its offices within one state, it only has to be knowledgeable of the legal requirements of that state regarding spousal property rights and can apply those laws to all of its operations. B. ACME must become familiar with the laws of each of the five states and ask for spouse signatures only when appropriate under the law. C. ACME can choose any of the state laws where it operates to apply to its consumer lending operations. D. ACME should make only business-purpose loans to avoid the spousal signature rules.

B. ACME must become familiar with the laws of each of the five states and ask for spouse signatures only when appropriate under the law.

The purpose of advisory letter in Avoiding Predatory and Abusive Lending Practices in Brokered and Purchased Loans- AL-2003-3 is to: A. Adopt sound credit underwriting policies B. Alert national banks to the risks they take if they make loans through brokers or purchase loans that contain or reflect abusive or predatory terms or practices C. Adopt policies that address the circumstances under which the bank would make loans that have features associated with abusive lending practices D. Make loans secured by the consumer"™s home but with high, up-front fees that are financed and secured by the home

B. Alert national banks to the risks they take if they make loans through brokers or purchase loans that contain or reflect abusive or predatory terms or practices

When conducting a records search pursuant to a FinCEN request, what must a bank search? A. All customer records from the previous five years B. All accounts maintained within the previous 12 months and transaction records for 6 months C. Only records that can be electronically searched D. Nothing; searches are voluntary

B. All accounts maintained within the previous 12 months and transaction records for 6 months

Creditors must retain for 25 months after the date that an offer of credit is made (12 months for business applicants with gross revenues of $1 million or less) the following items EXCEPT: A. The text of any prescreened solicitation B. All other written information concerning the applicant C. The list of criteria used to select recipients D. Any record of complaints regarding the solicitation

B. All other written information concerning the applicant

For purposes of insider lending laws and regulations, what is the definition of the term executive officer? A. All bank officers at or above the level of executive vice president B. Anyone who has the authority to participate in major policymaking functions at the bank NOTES C. Anyone who has the authority to participate in lending decisions at the bank D. All bank officers at or above the level of assistant vice president

B. Anyone who has the authority to participate in major policymaking functions at the bank NOTES

When must a bank make its mortgage loan disclosure statement available? A. Only when requested by its federal supervisory agency B. At any time when requested by a member of the public C. For 30 days following receipt of a request from its supervisory agency D. On an ongoing basis, by posting it in the lobby of each branch

B. At any time when requested by a member of the public

Which of the following institutions could be examined for CRA under the small intermediate bank performance standard? A. Bank A, a $230 million bank B. Bank B, a $700 million bank C. Bank C, a $50 million bank D. Bank D, a $2 billion bank

B. Bank B, a $700 million bank

First National Bank receives a notice from the IRS to begin withholding 28 percent of the interest payments on the money market savings account of Myra Wilcox because of payee underreporting. What is the most proper action for First National Bank to take? A. Send a notice to Ms. Wilcox within 15 days of the receipt of the IRS notice and begin withholding; stop withholding if Ms. Wilcox can prove to the bank that she is not underreporting B. Begin withholding and send a notice to Ms. Wilcox within 15 days of beginning the withholding; stop withholding only on written notice from the IRS C. Begin withholding with the first payment after 30 days and send a notice to Ms. Wilcox at least 15 days before the first payment from which funds are to be withheld; stop withholding only on written notice from the IRS D. Send notice to Ms. Wilcox within 15 days of the receipt of the IRS notice and begin backup withholding with the first payment following 30 days after the notice; stop withholding only on written notice from the IRS

B. Begin withholding and send a notice to Ms. Wilcox within 15 days of beginning the withholding; stop withholding only on written notice from the IRS

In which of the following activities may a bank engage and NOT be considered a municipal securities dealer? A. Underwriting municipal securities B. Buying securities for the bank"™s own account C. Providing advice to customers regarding the purchase of municipal securities D. Engaging in research and giving investment advice regarding municipal securities

B. Buying securities for the bank"™s own account

How may a bank limit the definition of executive officer? A. By strictly defining, in writing, the duties and responsibilities of the officers to be excluded from the definition B. By passing a board of director"™s resolution setting forth the bank"™s definition of an executive officer C. By requiring that those officers to be excluded from the definition not attend loan committee meetings or loan review meetings D. By limiting the amount of confidential information given to those officers to be excluded from the definition

B. By passing a board of director"™s resolution setting forth the bank"™s definition of an executive officer

After a compliance officer develops a base of knowledge of regulations, he or she must begin the art of applying regulations in a risk management environment.Which of the following is NOT out of a few things to be kept in mind when determining what to do FIRST? A. Think practically about your role as an advisor. Involve the business units in the decision process rather than making decisions for them B. Calculate the institution"™s consolidated risk profile C. Make sure you understand the level of risk the bank will tolerate, so decisions do not exceed this limit D. Add value by analyzing regulatory requirements for the business units before you present proposed or final rules or solutions

B. Calculate the institutions consolidated risk profile

It is a corporation or a non-depository institution that maintains an account with a Reserve Bank A. Savings and loan associations B. Clearing institution C. A foreign banker D. Insured credit unions

B. Clearing institution

What should a bank do when it receives a request from a customer to transfer funds to an individual in Iraq? A. Conduct the transfer as requested B. Conduct the transfer if the individual and the financial institution are not on the SDN list C. Block the transfer D. Conduct the transfer and then notify OFAC immediately

B. Conduct the transfer if the individual and the financial institution are not on the SDN list

Which of the following statements regarding applications is correct? A. Applications must be signed to be valid. B. Creditors may accept oral applications. C. Creditors may not develop their own definition for a completed application. D. A creditor is not required to attempt to complete incomplete applications.

B. Creditors may accept oral applications.

Which of the following must a "large" bank maintain as part of its CRA program? A. Listing of director, officer, and employee community involvement, and a listing of loans made to low- and moderate-income individuals B. Description of its assessment area, written comments and responses, and the public portion of the regulator"™s most recent CRA performance evaluation C. Copy of the bank"™s CRA Notice and the bank"™s most recent five years of CRA disclosure statements D. A comprehensive record of all CRA-related training completed by employees during the past two years 696 AMERICAN BANKERS ASSOCIATION

B. Description of its assessment area, written comments and responses, and the public portion of the regulator"™s most recent CRA performance evaluation

Which of the following must be included in a branch closing notice to a bank's regulatory agency? A. Comments from customers who oppose the closing B. Detailed statement of the reasons for the closing C. Copy of the notice to be sent to affected customers D. Copy of board minutes reflecting the decision to close

B. Detailed statement of the reasons for the closing

Of the following actions, which one is NOT recommended by the OCC"™s advisory letter as a necessary tool of management oversight of insurance and annuity sales? A. Hiring competent personnel B. Establishing a separate insurance agency C. Auditing systems and controls D. Requiring a member of management to actively oversee this function

B. Establishing a separate insurance agency

A bank does not know all of the specific information to be disclosed on the lease at the time of the consummation. What may the bank do after attempting to obtain the information? A. Omit the unknown disclosures B. Estimate the amounts and note that the information is estimated C. Delay consummation of the transaction until the information is ascertained D. Estimate the information based on averages of all other leasing transactions the bank has made within the last six months

B. Estimate the amounts and note that the information is estimated

In a review of a bank's compliance with the Regulation O overdraft provisions, what should the compliance officer do? A. Identify the related interests of all directors, executive officers, and principal shareholders B. Examine the bank's overdraft reports for a selected time period C. Examine the annual FFIEC-004 reports on indebtedness to correspondent banks D. Examine the bank's latest report of condition and income

B. Examine the bank's overdraft reports for a selected time period

Records regarding compliance with Regulation M must be kept for how long? A. Five years following consummation of the lease B. Two years after the disclosures are made C. Twenty-five months from consummation D. One year from the time the disclosures are made

B. Two years after the disclosures are made

Country A (a foreign country that is boycotting Country B, another foreign country) has ordered goods from ABC, a U.S. corporation. Country A has opened a letter of credit with Overseas, Inc., a foreign bank. The letter of credit specifies that ABC must certify that it does not do business with Country B. Overseas, Inc., sends a telegram to First National Bank, a U.S. bank, stating the major terms and conditions of the letter of credit and asking First National Bank to confirm the letter of credit. The telegram does not state the boycott provisions. Overseas mails the letter of credit to First National Bank and asks First National Bank to confirm it.What may First National Bank do? A. First National Bank must confirm it if it previously agreed to do so. B. First National Bank may advise ABC of the letter of credit and administer its disposal, but may not confirm it and must report it to the Department of Commerce and the IRS. C. First National Bank may do nothing but return the letter of credit to the issuing bank and report to the IRS. D. First National Bank must confirm the letter of credit but should also report it to the Department of Commerce.

B. First National Bank may advise ABC of the letter of credit and administer its disposal, but may not confirm it and must report it to the Department of Commerce and the IRS.

Legislation was recently enacted to reform consumer real estate protection laws, and the bank will now have to change the way it documents, discloses, and advertises real estate loans, an integral product line at your bank. What should the compliance professional do FIRST to implement the new law within the bank? A. Read the law and write a new real estate compliance policy B. Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan C. Talk to the bank president about the need for more resources in compliance D. Sign up all bank personnel affected by the changes for a seminar on the new law

B. Form a task force of the business unit managers whose departments will be affected by the law to collectively form an action plan

It is the policy of First Safe Bank to offer credit life insurance and accident and disability insurance to all consumer loan customers. What procedures fulfill the disclosure requirements for the bank? A. Place a sign on loan officers"™ desks that provides the disclosures and give each customer a written disclosure it loan closing. B. Give each customer the disclosures orally at the time of application and, if applicable, in writing at loan closing. C. Only a written disclosure at closing is necessary. D. Only give disclosures to persons who actually purchase the insurance.

B. Give each customer the disclosures orally at the time of application and, if applicable, in writing at loan closing.

Safe National Bank has a variety of consumer lending products. Among them are debt cancellation contracts that allow for the cancellation of a consumer"™s debt if certain events happen. The bank solicits sales for these contracts when the consumer makes an in-person loan application. What does Safe National have to do at the time of the application and solicitation? A. Nothing. Disclosures are required only when the contract is made. B. Give the customer the short-form disclosures orally. C. Give the customer the short-form disclosures in writing. D. Give the customer the long-form disclosures.

B. Give the customer the short-form disclosures orally.

When helping a loan officer determine whether the bank must give a written adverse action notice to a business loan applicant, what should the compliance officer consider? A. Current net income B. Gross revenue for the preceding year C. Length of time the applicant has been in business D. Type of business entity (that is, corporation, partnership, or sole proprietorship)

B. Gross revenue for the preceding year

First National Bank is a municipal securities dealer. Its municipal securities department is supervised by Mary Watkins, a municipal securities principal. The department has five other employees, including two municipal securities representatives. Martin Wells, a commercial loan customer of the bank, tells Ms. Watkins he wants to invest in municipal securities and asks for her help. Mr. Wells has never dealt with the municipal securities department of the bank and has never purchased municipal securities. He wants to purchase the securities today. What should Ms. Watkins do? A. Determine what he would like to buy and help him buy it B. Help him make the purchase only if she can be assured the transaction meets the MSRB suitability requirements C. Help him make the purchase but avoid making any recommendations or comments about the advisability of the transaction D. Refer him to a municipal securities representative

B. Help him make the purchase only if she can be assured the transaction meets the MSRB suitability requirements

Harvey Smith is a loan officer at First National Bank. Which of the following of Harvey"™s outside business interests may be considered to be a conflict of interest that should be disclosed to the bank? A. His ownership of 4,000 shares of stock in a local car dealership (the car dealership is not a bank customer) B. His wife"™s position as chair of the board of a local bank C. His attendance at a party hosted by one of his customers where other financial institutions were represented D. His role as honorary chair of a fund drive for a local charitable organization

B. His wife"™s position as chair of the board of a local bank

Under what circumstances will a G-FINW (a withdrawal as a government securities dealer) become effective in less than 60 days? A. If the bank requests a shorter time period B. If the regulatory agency determines that a shorter time period would be appropriate C. If the bank ceases doing business as a securities dealer D. If the bank has no employees that qualify as associated persons

B. If the regulatory agency determines that a shorter time period would be appropriate

A consumer reporting agency may furnish a consumer report A. If not authorized in writing by the consumer B. In response to a court order having jurisdiction or a subpoena issued by a federal grand jury or review or collection of an account of the consumer C. In connection with a credit or insurance transaction D. For employment purposes Before procuring a consumer report, an employer Must disclose to the individual in writing that a consumer report may be obtained Must obtain written authorization from the individual before procuring the report

B. In response to a court order having jurisdiction or a subpoena issued by a federal grand jury or review or collection of an account of the consumer, and C. In connection with a credit or insurance transaction, and D. For employment purposes Before procuring a consumer report, an employer Must disclose to the individual in writing that a consumer report may be obtained Must obtain written authorization from the individual before procuring the report

Under the ADA, what can an employer do? A. Inquire about a disability if the disability is obvious to the interviewer at the time of the job interview B. Inquire about a disability when offering a job provided the disability is related to the job requirements C. Refuse to make an accommodation for a disability if 50 persons or fewer are employed D. Note the disability in the employee"™s file so that other managers will be aware of it when interviewing the employee for future position changes

B. Inquire about a disability when offering a job provided the disability is related to the job requirements

Transfers involving entries to accounts maintained at two different Reserve Banks are: A. Fedwire transfers B. Interdistrict transfers C. Intradistrict transfers D. Any one of these

B. Interdistrict transfers

Securities credit covers credit subject to Section 7 of the Securities Exchange Act of 1934 or credit by a broker or dealer subject to regulation under the act. The following requirements of Regulation B do not apply EXCEPT: A. Restrictions regarding information about a spouse or former spouse, marital status, or sex of the applicant B. It is not payable by agreement in more than four installments C. Provisions relating to furnishing credit information D. Records retention requirements

B. It is not payable by agreement in more than four installments

The following statements make assertions about the collection and reporting of data on race, ethnicity, sex, and income. Which statement is false? A. It must be requested on all HMDA-reportable applications received in person from natural persons. B. It must be requested only for the loans where the application is taken in person. C. It must be reported unless the loan was purchased. D. It must be requested verbally on telephone applications.

B. It must be requested only for the loans where the application is taken in person.

Which of the following is true of a bank"™s CRA strategic plan? A. It must be limited to a one-year term. B. It must have measurable goals. C. Affiliates must have their own plans. D. Even if the bank has multiple assessment areas, it must have one strategic plan.

B. It must have measurable goals.

By what date must the bank send the borrower a statement in connection with an information return on foreclosed or abandoned property? A. January 15 of the year following the year of the foreclosure or abandonment B. January 31 of the year following the year of the foreclosure or abandonment C. February 28 of the year following the year of the foreclosure or abandonment D. March 1 of the year following the year of the foreclosure or abandonment

B. January 31 of the year following the year of the foreclosure or abandonment

By which date must an interest reporting statement be sent to the borrower"™s last known address? A. January 15 of the year following the year the interest is paid B. January 31 of the year following the year the interest is paid C. February 28 of the year following the year the interest is paid D. March 1 of the year following the year the interest is paid

B. January 31 of the year following the year the interest is paid

First National Bank and Fidelity Bank are subsidiaries of Bank Holding Company, Inc. Fidelity is planning to sell First National two loan participations. It has beenFidelity"™s practice for several years to sell overlines to First National. "¢ Loan A has been on Fidelity"™s books for two years. It is a line of credit that will be over Fidelity"™s loan limit with its next advance. It was recently classified as special mention during a safety and soundness examination. First National agreed to purchase overlines on Loan A before Fidelity"™s funding of the loan two years ago and signed a participation agreement at that time. "¢ Loan B is 60 days past due for a principal payment, although interest payments are current. The loan has been on the books at Fidelity for one year. FirstNational agreed to purchase overlines on Loan B six months ago. Which, if any, of these loans can First National purchase? A. Neither, both are low-quality assets B. Loan A only C. Loan B only D. Both Loan A and Loan B

B. Loan A only

Which of the following loans or applications is EXCLUDED from HMDA reporting? A. Residential loans purchased on the secondary market B. Loans secured by real estate that are made for purposes other than home purchase, improvement, or refinancing C. Loans on residential property in a flood zone when proof of flood insurance is not provided D. Applications for refinancing when there is no increase in principal

B. Loans secured by real estate that are made for purposes other than home purchase, improvement, or refinancing

Which of the following is NOT considered an acceptable form of identification for an individual when completing a CTR? A. U.S. passport B. Long-term deposit account relationship C. State-issued photo identification (e.g., driver"™s license) D. Photo identification card issued by a local government agency

B. Long-term deposit account relationship

First National Bank made a loan to Lawrence & Co. for the purpose of purchasing landscape equipment, secured by a storage lot the company owned. The borrower made payments for a year and then defaulted. Three months passed without any communication or payments from the borrower, despite the bank"™s efforts to locate the company"™s owners. The company appears to have ceased operations. What is the bank"™s BEST course of action? A. Do nothing, because the bank has no actual knowledge of abandonment and has not foreclosed on the property B. Make reasonable inquiries to determine whether the property is abandoned and if so, report it as abandoned C. Locate the borrower, foreclose on the property, and report the transaction as a foreclosure D. Report the property as abandoned

B. Make reasonable inquiries to determine whether the property is abandoned and if so, report it as abandoned

By what date must financial institutions submit their loan application registers to their federal supervisory agency? A. March 31 of the year following the calendar year for which the data were compiled B. March 1 of the year following the calendar year for which the data were compiled C. February 1 of the year following the calendar year for which the data were compiled D. April 1 of the year following the calendar year for which the data were compiled

B. March 1 of the year following the calendar year for which the data were compiled

OCC advisory on credit card practice-AL-2004-10 in credit card practices covers: A. Finance and credit management practices that may be unfair or deceptive and expose a bank to compliance and reputation risk B. Marketing and account management practices that may be unfair or deceptive and expose a bank to compliance and reputation risk C. Marketing and account management practices D. Marketing and account management practices that may be fair and can"™t expose a bank to compliance and reputation risk

B. Marketing and account management practices that may be unfair or deceptive and expose a bank to compliance and reputation risk

Which of the following groups of employees should be trained on the detailed use of W-9 forms? A. Senior management B. New account officers C. Auditors and accountants D. Security officers

B. New account officers

First National Bank has made three loans to Mrs. Elmwood. Two of the loans are regulated credits (they are for the purpose of purchasing margin stock and secured by margin stock). The third loan is for the purpose of purchasing margin and nonmargin stock, and the loan is secured by real estate and margin stock.Can the bank avoid having the third loan combined with the other two for Regulation U purposes? A. Yes, but the real estate must have a value of at least twice as much as the third loan. B. No. At least the part of the loan attributable to the security of margin stock must be treated as a regulated credit and combined with the other two loans. C. No. All of the third loan must be combined with the others. D. Yes. As long as there is any other collateral, the loan will not be a regulated credit.

B. No. At least the part of the loan attributable to the security of margin stock must be treated as a regulated credit and combined with the other two loans.

First National Bank advises Country A, a boycotting country, on various U.S. investments. Country A instructs First National Bank not to recommend for investment any shares of certain blacklisted companies. First National Bank follows this instruction. Has First National Bank participated or cooperated in an international boycott under the IRS regulations by this action? A. Yes. The companies are the subject of a boycott. B. No. The bank may agree not to recommend certain companies. C. Yes, if the companies are part of a boycott. D. No, but the bank must report this action to the IRS.

B. No. The bank may agree not to recommend certain companies.

Roberta Milton"™s car lease with First National Bank reached its termination on August 1. Roberta and the bank agreed to extend the lease on a month-to month basis without charging her a fee for doing so. What disclosure responsibilities does the bank have now? A. None are needed now. B. None, until after six months of the month-to-month lease C. The bank must make an entirely new initial disclosure D. The bank must disclose the estimated residual value at the end of six months

B. None, until after six months of the month-to-month lease

Which of the following is NOT included in the definition of margin stock? A. Stock traded on a national securities exchange B. Nonmargin stock convertible to margin stock C. Debt securities convertible to margin stock D. Warrants to purchase margin stock

B. Nonmargin stock convertible to margin stock

An electronic image of an item together with electronic information describing that item in an approved format will be considered a valid instrument. Common forms of instruments are the following EXCEPT: A. Checks: Drafts drawn on a bank and payable on demand B. Pay checks C. Cash items: Checks or other items payable on demand and collectible at par and accepted at the Reserve Bank D. Noncash items: Items that a Reserve Bank classifies as requiring special handling

B. Pay checks

According to the 2007 interagency statement on subprime mortgage lending, what should an institution offering mortgage loans to subprime borrowers provide before submission of an application? A. Information on local residential real property values B. Payment shock information C. Truth in Lending disclosures D. Initial escrow statements

B. Payment shock information

Which of the following activities is permitted under ADA? A. Issuing a policy against making loans to health care providers who regularly work with infectious patients B. Prohibiting smoking anywhere in the bank building C. Providing readers to visually impaired loan applicants for a $15 fee D. Requiring disabled depositors to use a teller window that is specially constructed for the use of disabled persons

B. Prohibiting smoking anywhere in the bank building

Which of the following activities is NOT a permissible nonbanking activity? A. Servicing mortgage loans B. Providing general courier services to the businesses around the bank office C. Providing mortgage loan data processing services to mortgage companies D. Acting as a broker for credit life insurance

B. Providing general courier services to the businesses around the bank office

A municipal securities principal must directly supervise municipal securities operations. This includes reviewing all but one of the following. Which task is NOT involved in directly supervising municipal securities operations? A. Opening the customer"™s account B. Providing quotations to customers C. Handling customer complaints D. Handling a municipal securities transaction

B. Providing quotations to customers

ACME Bank is a $600 million institution with 15 branches within three counties. Because of its proximity to Mexico, the bank has many foreign national customers and makes many foreign wire transfers for its customers. Currently the bank"™s branch managers print the OFAC list of SDNs and place them in strategic places in each branch. The wire transfer department keeps its own copy of the list. The compliance officer has implemented an annual auditing program to check the bank"™s compliance with OFAC regulations. The findings of this audit are provided to the bank"™s board of directors annually. The bank"™s regulatory agency has indicated to management that the bank has a high risk for BSA/AML/OFAC compliance. Of the following actions, which would be the most effective to strengthen the bank"™sOFAC compliance? A. Conduct compliance audits twice a year B. Purchase and implement interdiction software for the wire transfer area C. As an internal control procedure, require the BSA officer to check the OFAC Web site daily for any changes to the SDN list D. Routinely provide account transaction information to federal security agencies so suspicious patterns can be detected

B. Purchase and implement interdiction software for the wire transfer area

On March 1, First National Bank opened three accounts:1) a savings account for Margaret Nelson, who did not have a TIN but signed a certification that she had applied for one;2) a money market savings account for Linda Miller, who could not remember her TIN but promised to provide it at the earliest possible date; and3) a certificate of deposit for John Whiteside, who completed a Form W-9 but provided a TIN with only eight numbers. Ms. Nelson provided her newly acquired TIN to the bank on April 15, Ms. Miller provided her TIN on April 5, and Mr. Whiteside provided his TIN to the bank on March 10. Interest was paid on all of these accounts on March 31, and the bank withheld 28 percent of the interest payments. On April 20 all the payees requested that the withheld interest be refunded.What should the bank do? A. Refund the withheld interest to all payees B. Refund to Ms. Nelson and Mr. Whiteside because the interest was erroneously withheld C. Refund only to Mr. Whiteside because the interest was erroneously withheld D. Refund only to Ms. Nelson because the interest was erroneously withheld

B. Refund to Ms. Nelson and Mr. Whiteside because the interest was erroneously withheld

Which of the following relationships does NOT violate Regulation L? "¢ Relationship A: First National Bank is located in the same city as an affiliate of First Savings and Loan. First National and the affiliate share a board member. "¢ Relationship B: State Bank and an affiliate of First National Bank are located in the same RMSA but not in the same town. State Bank has assets of $60 million, and the affiliate has assets of $7 million. The two institutions share a board member. "¢ Relationship C: Savings and Loan Association and Bank Holding Company do not have offices within the same RMSBank Holding Company"™s assets are in excess of $1.75 billion, and Savings and Loan Association"™s assets are in excess of $2.5 billion. These institutions share a board member. A. Relationship A B. Relationship B C. Relationship C D. All the relationships violate Regulation L

B. Relationship B

In Sender"™s agreement-12 CFR 210.28 it is clearly mentioned that: A. Reserve Banks have the right to debit payment amounts from accounts of senders with the Reserve Bank B. Senders have the right to create overdrafts in their accounts at the Reserve Bank; any overdraft is due and payable, without demand, at the end of the funds transfer day, when the Reserve Bank deems itself to be insecure, or at the time the sender suspends payments or is closed, whichever is earlier C. Sender gives the Reserve Bank a security interest in all of sender"™s assets that are in the possession of the Reserve Bank to secure any obligations to the Reserve Bank, including an overdraft D. Senders have 25 calendar days after receiving notice of a payment order to notify a Reserve Bank of an erroneously executed or unauthorized payment order

B. Senders have the right to create overdrafts in their accounts at the Reserve Bank; any overdraft is due and payable, without demand, at the end of the funds transfer day, when the Reserve Bank deems itself to be insecure, or at the time the sender suspends payments or is closed, whichever is earlier, and C. Sender gives the Reserve Bank a security interest in all of sender"™s assets that are in the possession of the Reserve Bank to secure any obligations to the Reserve Bank, including an overdraft

The BSA officer has just been notified by the chief operations officer that, due to a glitch in the bank"™s OFAC interdiction software, wires have been regularly transmitted to a bank on the SDN list. Based on the OFAC Enforcement Guidance, what should the BSA Officer do FIRST to attempt to mitigate any penalties? A. Review the OFAC wire policies and procedures to determine how the errors occurred B. Stop and hold all wires to the bank on the SDN list C. Investigate the customer who sends these wires D. Self-report the activity to OFAC

B. Stop and hold all wires to the bank on the SDN list

If the returned check is an electronic item that is not a representation of a ___________, Reserve Banks will indemnify a bank to which the check is returned if the bank incurs losses as a result of indemnities the bank would be required to make under Regulation CC in connection with a substitute check later created from the returned check. A Reserve Bank will not be liable, however, if the loss could be attributed to a lack of good faith or failure to exercise ordinary care on the part of any person who handled the item. A. Returning check B. Substitute check C. Cross check D. Retuning item

B. Substitute check

Which of the following types of security devices is required for each bank, at minimum, under the Bank Protection Act? A. Full-time security guard B. Tamper-resistant locks on exterior windows and doors C. Vault door made of steel that is at least 3 inches thick D. Bullet-proof glass at all windows

B. Tamper-resistant locks on exterior windows and doors

Which of the following is NOT a requirement of the Interagency Statement on Retail Sales of Nondeposit Investments? A. That employees selling nondeposit investments receive special training on the products they sell B. That all bank employees receive special training on the nondeposit investment products sold by the bank C. That employees selling nondeposit investments ensure that the product is suitable to the customer purchasing it D. That the history of employees selling nondeposit investments be checked before their employment

B. That all bank employees receive special training on the nondeposit investment products sold by the bank

Safety and soundness concerns in FDIC Payday Lending Guidance clearly mention that there should be adequate capital as Minimum capital requirements are not enough to offset the risks of payday loans. Banks should hold capital against its subprime portfolio in amounts: A. That are 1½ to 5 times greater than normal B. That are 1½ to 3 times greater than normal C. That are 1½ to 3 times lower than normal D. That should be between 2-5 in comparison to normal

B. That are 1.5 to 3 times greater than normal

A bank is planning to sell eight branches. The compliance officer participates on a bank committee to oversee the process. What should be the compliance officer"™s PRIMARY concern? A. That the bank's revenues will not be affected severely B. That the branches are closed in accordance with bank policy C. That customers of the branches will continue to have access to banking services D. That the bank"™s confidential information is returned to the main office

B. That the branches are closed in accordance with bank policy

An institution must take steps to determine that information is lawfully made available to the public, including a determination: A. That it includes Federal, state and local government records B. That the information is of the type that is available to the public C. Whether the individual can direct that the information not be made available to the public, and, if so, that the consumer has not done so D. That a list of names, addresses of consumers of an organization that is not a financial institution

B. That the information is of the type that is available to the public, and C. Whether the individual can direct that the information not be made available to the public, and, if so, that the consumer has not done so

____________ is an agent or a subagent of the owner of an item; agency terminates when it receives payment for an item in finally collected funds and makes the proceeds available to the sender, and the time for commencing all actions against it has expired. A. Clearing agent B. The Reserve Bank C. Foreign bank D. Foreign banker

B. The Reserve Bank

Your bank"™s president comes back from an industry conference and tells the compliance officer that she attended a presentation about OFAC. She heard the bank could be fined for not adhering to OFAC requirements. Thus, she has directed that every bank transaction be reviewed for OFAC compliance. What is the most appropriate statement the compliance officer could make to the bank president? A. The bank is already in compliance because OFAC checks are performed on all new depositors B. The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures C. OFAC does not apply because the bank does not conduct business in foreign countries or with foreign nationals D. Banks are usually not fined for OFAC violations unless they conduct transactions with SDNs or blocked countries

B. The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures

The mortgage lending department of Bank XYZ received some inquiries from potential applicants who are visually impaired. The bank would like to comply withADA concerning these potential applicants, but it does not want to spend a significant amount of money. Which of the following statements is true? A. The bank must have its loan application and disclosures translated into Braille. B. The bank may have a loan assistant read each loan application and disclosure document to the applicant and assist in completion of the forms. C. The bank may require the applicant to bring a sighted friend or relative to the bank to assist in completing the application. D. The bank may make a policy not to lend money to blind persons.

B. The bank may have a loan assistant read each loan application and disclosure document to the applicant and assist in completion of the forms.

Fastfood, Inc., a nationwide restaurant chain, opened an account at First National Bank last year. Fastfood is making daily deposits in amounts of $15,000 to$20,000. First National needs to determine if this company is an exempt person. What should the bank do first? A. Because the restaurant is an established depositor, the bank should provide an unlimited exemption for cash deposits and withdrawals. B. The bank should look in the newspaper or on the Internet to determine if Fastfood, Inc"™s, stock appears on one of the listed exchanges. C. The bank should ask the company if it qualifies as a listed business. D. The bank should perform a corporate records check to determine if the company is chartered in the United States.

B. The bank should look in the newspaper or on the Internet to determine if Fastfood, Inc"™s, stock appears on one of the listed exchanges.

The senior lender at ABC bank would like to make stated income mortgage loans (i.e., loans where the bank does not verify the applicant"™s income) to mortgage customers, including subprime borrowers. Under the statement on subprime mortgage lending, which of the following is the best statement of the bank"™s responsibility regarding this new program? A. Due to the risks, it should not implement such a program for subprime borrowers B. The bank should make a policy for this program that includes mitigating factors for the risks C. The bank should set stringent debt-to-income ratios for these loans D. The bank should establish workout procedures for such loans in advance of making them.

B. The bank should make a policy for this program that includes mitigating factors for the risks

A bank may engage in voluntary self-testing and self-correction of its compliance with Regulation B. If the bank takes any appropriate corrective action, the reports, results, analysis, opinions, and conclusions of the self-test will be protected by a privilege. The privilege will be lost if A. Loan and application files or other records related to a credit transaction and information derived from such files and records, even if it has been reorganized and summarized for analysis B. The information is voluntarily disclosed to the government C. The public or is used in any manner as a defense to a discrimination charge D. credit information is furnished in response to inquiries concerning an account reflecting the participation of consumer

B. The information is voluntarily disclosed to the government, and C. The public or is used in any manner as a defense to a discrimination charge

Which state receives the reporting and escheatment of unclaimed property? A. The state where the bank is domiciled, if different from the bank holding company B. The state of the customer"™s last known address, if available and not foreign C. The state where the property is located, if a deposit account D. The state chosen by a bank holding company, if a multistate operation

B. The state of the customer"™s last known address, if available and not foreign

First National"™s consumer leasing department placed an ad in the local paper that pictured a car with the caption, "Sign a lease with us and pay only $275 per month." What other information must this ad have? A. A statement that the transaction is not a loan B. The total amount due at consummation or delivery, the number of payments required, and any required security deposit C. The bank"™s policy regarding the purchase of the property by the lessee D. Disclosures regarding required insurance

B. The total amount due at consummation or delivery, the number of payments required, and any required security deposit

Which of the following institutions is exempt from the coverage of CRA? A. State National Bank of Ashgrove, a $15 million bank in a rural community, not located in an MSA B. Trust Company, Inc., an institution offering only trust services located in a large urban area C. ACME Savings Association, a federal thrift institution located in a mediumsized midwestern city, included in an MSA D. First National Bank, a $250 million bank located in a rural area, not in an MSA

B. Trust Company, Inc., an institution offering only trust services located in a large urban area

First National Bankshares, Inc., a bank holding company, held substantially all of the voting stock of an equipment manufacturing corporation as collateral for a loan to the owner. On May 15 the borrower defaulted and on September 1, after proper notice was given, the bank foreclosed its security interest on the stock and exercised its rights to vote the stock at appropriate times. On December 31 the bank transferred the stock to a subsidiary corporation, FNB, Inc., to market the stock for sale more effectively. What is the longest time period that FNB, Inc., can possibly hold the stock? A. Up to two years from September 1 B. Up to five years from September 1 C. Up to two years from December 31 D. Up to five years from December 31

B. Up to five years from September 1

When does a gift accepted by a banker clearly violate the Bank Bribery Act? A. When it is given for personal reasons B. When it is given with corrupt intent C. When it is valued at a dollar amount exceeding $50 D. When it is not given in connection with a generally accepted holiday

B. When it is given with corrupt intent

When is it possible for a bank to be exempted from compliance with some of the Government Securities Act custodial regulations? A. When the bank maintains its securities in the ordinary course of business B. When the bank has procedures in place to make sure it complies with the custodial regulations of its federal regulatory agency C. When the bank does not hold itself out as a government securities broker or dealer D. When the bank uses more than the normal standard of care when maintaining possession and control of securities

B. When the bank has procedures in place to make sure it complies with the custodial regulations of its federal regulatory agency

When may a bank pay an overdraft of $5,000 created by an executive officer of the bank? A. When the officer is at the level of a vice president or lower. B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft. C. When the officer has enough funds in another account to cover the overdraft. D. When the bank pays the overdrafts for other good customers in the ordinary course of business.

B. When the officer has previously signed an overdraft protection credit agreement in an amount sufficient to cover the overdraft.

Walter Johnson has two accounts at First National Bank. His savings account was opened in 1975, and his money market savings account was opened in1985.He has never supplied a TIN number to the bank. What must First National Bank do? A. Withhold 28 percent of the payments on each of the accounts B. Withhold 28 percent of the payments on each account and annually request a TIN on the savings account C. Annually request a TIN on both accounts D. Refuse to open future accounts without a TIN

B. Withhold 28 percent of the payments on each account and annually request a TIN on the savings account

Under Regulation U, prior to extending credit secured by margin stock for more than $100,000, a national bank must obtain which of the following? A. Certificate of value for the collateral B. Written statement from the borrower as to the purpose of the loan C. Written statement certifying the borrower's business address and daytime phone number D. Notice from the borrower as to his willingness to provide additional margin stock as collateral

B. Written statement from the borrower as to the purpose of the loan

Jayne Logan, a loan officer at State National Bank, has recently recruited Mr. David Roberts as a new loan customer. She has known Mr. Roberts for 10 years and handled his lending transactions at another bank where she previously worked. As his first transaction with State National Bank, Mr. Roberts pledges stock that is traded on the NYSE. The stock is received directly from Mr. Roberts, who has his secretary personally deliver it to the bank. Is the bank required, in this instance, to send a lost or stolen securities inquiry regarding the stock? Why or why not? A. No. Because Ms. Logan has known Mr. Roberts for more than five years, no inquiry must be sent. B. Yes. Because Mr. Logan is a new customer to the bank, the inquiry must be sent. C. No. Because Mr. Logan"™s secretary personally delivered the stock certificates, no inquiry must be sent. D. Yes. All stock pledged against a loan that is traded on the NYSE must have an inquiry sent.

B. Yes. Because Mr. Logan is a new customer to the bank, the inquiry must be sent.

ABC Co. signed a contract to export goods to Country M, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires ABC Co. to certify that none of its directors are nationals of any country boycotted by Country M before ABC can be paid. First NationalBank confirms the letter of credit to ABC after determining that all of the documents are in order. Did First National Bank participate in a boycott, and must the bank report the action to the IRS? A. No. The bank"™s action was only ministerial. B. Yes. The action was participation in a boycott and the bank must report the action to the IRS. C. No. Only ABC Co. is required to report to the IRS. D. Yes, but no reporting requirements were triggered.

B. Yes. The action was participation in a boycott and the bank must report the action to the IRS.

First National Bank, a U.S. bank, is contacted by Manufacturing Company, Inc., a U.S. company, to finance its transaction with Country Z, a boycotting country.Payment will be made through a letter of credit in favor of Manufacturing Company at its U.S. address. First National Bank knows that the letter of credit will contain restrictive boycott conditions that would prevent the bank from implementing it. First National Bank suggests to Manufacturing Company, Inc., that it set up a shell corporation in Country Y, a nonboycotting country, and have the shell corporation be the beneficiary of the letter of credit. Does First National Bank have any problem with this transaction? A. No. The transaction is now not subject to Department of Commerce regulations because the beneficiary is not a U.S. company. B. Yes. The transaction is set up to evade the regulation and First National Bank is liable. C. No. The transaction is set up to evade the regulation, but First National Bank is not liable because Manufacturing Company, Inc., actually effected the transaction. D. No. First National should have Manufacturing Company, Inc., sign a statement accepting full responsibility for the establishment of the shell corporation.

B. Yes. The transaction is set up to evade the regulation and First National Bank is liable.

Mrs. Franklin has two mortgage loans at First National Bank on which she makes monthly payments. On Loan A she made 13 payments last year, mailing the last payment on December 28. It was received the afternoon of January 2 and credited on January 3. The amount of interest paid on Loan A in the first 12 payments was $1,000. There was $155 of interest on the 13th payment. On Loan B, she made 12 payments; each contained interest accrued to the fourth day of the month.The last payment was mailed on December 19 and was received and credited on December 23. The last payment contained interest accrued to January 4. The total interest paid on Loan B was $2,000, of which $100 accrued between January 1 and January 4 of the next year. How much interest must First National Bank report? A. $1,155 for Loan A and $2,000 for Loan B B. $1,155 for Loan A and $2,100 for Loan B C. $1,000 for Loan A and $2,000 for Loan B D. $1,000 for Loan A and $2,100 for Loan B

C. $1,000 for Loan A and $2,000 for Loan B

What is the longest time after board approval that a bank can approve a line of credit for an executive officer? A. 12 months of such approval B. 9 months of such approval C. 14 months of such approval D. 6 months of such approval

C. 14 months of such approval

A national bank may make a loan to an affiliated mortgage company that is 100 percent owned by the same bank holding company, if the aggregate amount of all covered transactions of the national bank and its subsidiaries does not exceed a certain percentage of capital and surplus of the national bank. What is that percentage? A. 10 percent B. 15 percent C. 20 percent D. 25 percent

C. 20 percent

Regulation B defines "elderly" as having attained an age of how many years? A. 55 B. 59½ C. 62 D. 70½

C. 62

Under Regulation M, what is a "consumer lease"? A. Any lease of $25,000 B. A consumer lease for $25,000 or less with an option to own the property after the lease expires C. A consumer lease for $25,000 or less for the use of personal property D. Any consumer or agricultural lease for $25,000 or less

C. A consumer lease for $25,000 or less for the use of personal property

Which of the following is a high-net-worth customer? A. An individual with $5 million in assets, including her home B. A corporation with $15 million in revenues C. A couple with a net worth of $10 million D. An individual who is not acting with his spouse, with $1 million in assets and another $3 million in community property

C. A couple with a net worth of $10 million

What may a creditor do if an applicant applies for individual unsecured credit? A. A creditor may never require the signature of another person. B. A creditor may ask for the signature of the applicant"™s spouse if the applicant is not creditworthy. C. A creditor may require another signature if the applicant relies on jointly owned property to establish creditworthiness. D. A creditor may ask the applicant to withdraw the application if it does not meet the creditor"™s credit standards.

C. A creditor may require another signature if the applicant relies on jointly owned property to establish creditworthiness.

With regard to standards for wear and use of leased property, which of the following statements is true? A. A lessor must adhere to the manufacturer"™s standards for wear and use of the leased property. B. A lessor must develop and disclose its own standards for wear and use of leased property. C. A lessor must provide a notice of wear and use standards on motor vehicle leases. D. A lessor need not provide a notice of wear and use standards on motor vehicle leases if the lessor imposes an automatic, standardized charge.

C. A lessor must provide a notice of wear and use standards on motor vehicle leases.

For a U.S. bank with domestic and foreign locations, which transaction does NOT require an information return to report the amount of interest paid? A. A loan made to James Roberts, a U.S. resident, payable at the bank"™s New York office, to purchase securities secured by the borrower"™s home in Mexico B. A loan made to Robert and Louise LeBlanc, who are resident aliens, payable at the bank"™s New York office, secured by a piece of real property located in Canada C. A loan made to Smith and Withers, a partnership formed for the practice of law, located in the United States, payable at the bank"™s New York office, guaranteed by Mr. Smith and Mr. Withers, and secured by the law firm"™s office building D. A loan made by Mrs. West, a U.S. citizen, to purchase a mobile home and the lot on which it will be placed; both the mobile home and lot are located in the United States

C. A loan made to Smith and Withers, a partnership formed for the practice of law, located in the United States, payable at the bank"™s New York office, guaranteed by Mr. Smith and Mr. Withers, and secured by the law firm"™s office building

Which of the following loans is clearly NOT subject to the IRS mortgage interest reporting requirement? A. A loan made to purchase securities, secured by rural acreage B. A loan made to finance a college education, secured by a piece of commercial real estate C. A loan made to purchase a lot on a lake, secured by a certificate of deposit D. A loan made to purchase a residence, secured by the dwelling

C. A loan made to purchase a lot on a lake, secured by a certificate of deposit

On foreclosure, which of the following loans is subject to the reporting requirements for foreclosed and abandoned property? A. A loan made to purchase a family car, secured by the car B. An unsecured loan made to purchase a computer used in the borrower"™s business C. A loan made to purchase a residence, secured by the residence D. A loan made to purchase a home computer, secured by the computer

C. A loan made to purchase a residence, secured by the residence

Of the following loans made by a national bank, which loan is NOT covered by the OCC ARM regulation? A. A loan to purchase a single-family dwelling to be used as a residence, secured by the dwelling with an adjustable interest rate B. A loan made to purchase a mobile home to be used as rental property, secured by the home with a variable interest rate C. A loan made to purchase an eight-unit apartment complex, secured by the building, made payable on demand with a variable rate of interest D. A loan made to purchase a duplex, secured by the dwelling, amortized over 15 years with a 5-year maturity, at a variable rate of interest

C. A loan made to purchase an eight-unit apartment complex, secured by the building, made payable on demand with a variable rate of interest

Which of the following credit arrangements would most likely be considered a purpose credit because it is indirectly secured by margin stock? A. A loan made to purchase margin stock secured by nonmargin stock B. A loan made to a company for various corporate purposes, including the purchase of margin stock, secured by the corporate assets, which from time to time include margin stock; on the date of the consummation of the transaction approximately 10 percent of the assets of the company are margin stock C. A loan made to purchase margin stock, guaranteed by an individual who has pledged margin stock as security for the guarantee D. Bank is the trustee for a qualified pension plan from which the participants may borrow and use their interest in the plan as security; a participant borrows money for the purpose of purchasing margin stock

C. A loan made to purchase margin stock, guaranteed by an individual who has pledged margin stock as security for the guarantee

First National Bank has foreclosed on several loans. One of the loans is not subject to the requirement to submit an information return on the foreclosed property.Which loan is most likely NOT covered by the regulations? A. A loan to Brown & Associates, a local law firm, to purchase furniture, secured by the furniture B. A loan to Mrs. Lynch to purchase stereo equipment for use in her office waiting room C. A loan to Dr. Stevens to purchase kitchen appliances D. A loan to Mr. and Mrs. Sanders to purchase a computer for their antique shop

C. A loan to Dr. Stevens to purchase kitchen appliances

On which of the following adjustable-rate loans must the bank use an index beyond its control? A. A loan to purchase a home to refurnish and resell for a profit B. A loan to purchase a vacation home C. A loan to purchase a duplex where the borrower will live in one of the units D. A loan to purchase a home to be used as rental property

C. A loan to purchase a duplex where the borrower will live in one of the units

First National Bank would like to adopt a recordkeeping system that complies with the requirements of Regulation O. Which of the following best describes the recordkeeping system required by Regulation O? A. A system in which the bank annually surveys all executive officers of First National and its affiliates to determine the insiders"™ related interests B. A system in which the bank asks all borrowers as loans are made whether the borrower is a related interest of an insider C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests D. A system that requires an annual survey of affiliate insiders

C. A system that surveys insiders of First National annually and requires each insider to disclose his or her related interests

Which of the following banks CANNOT select Montana as its home state for deposit production purposes? A. ABC National Bank with its headquarters in Missoula, Montana B. XYZ State Bank, with a Montana state charter C. ACME National Bank with its headquarters in Minneapolis, MN, but with most of its branches and the majority of its loans in Montana D. Friendly Bank, a U.S. branch of a foreign bank with two U.S. locations, one in Montana and one in Wyoming

C. ACME National Bank with its headquarters in Minneapolis, MN, but with most of its branches and the majority of its loans in Montana

Banks must maintain an ____________ adequate to absorb estimated credit losses from payday loans. Banks should evaluate the collectability of accrued fees and finance charges on payday loans and ensure that this income is appropriately measured. A. TILA B. FCRA C. ALLL D. A and B both

C. ALLL

Which of the following businesses would be eligible to be an exempt person under the requirements of the Bank Secrecy Act? A. Jackson"™s Used Cars B. Evanston Recreational Boats C. Al Williams Seafood Restaurant D. Goldsmith Aircraft Distributors

C. Al Williams Seafood Restaurant

Milton Edwards leased an automobile from First National Bank. The lease contained a provision whereby Milton would be liable for the automobile at the end of the lease based on its fair market value. At the end of the lease, the bank notified Milton that the value of the automobile, based on industry publications, was$10,500 and required him to pay that amount to obtain ownership of the property. Milton objected and requested that the car be individually appraised. What must the bank do? A. Nothing; an estimate of the value based on industry standards is sufficient B. Hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal) C. Allow Milton to hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal) D. Use the average of the car value as determined by a third party appraiser Milton hires with the original bank appraisal

C. Allow Milton to hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal)

Which account is NOT subject to backup withholding? A. A money market savings account owned by Brenda Wilson B. A time deposit account owned by Bob and Nancy Dawson C. An IRA owned by Max Jones D. A savings account owned by Karen Hitchings

C. An IRA owned by Max Jones

First National Bank would like to make a loan to an affiliate bank. Which of the following would NOT be acceptable as collateral for such a loan? A. U.S. Treasury bills in an amount equal to the loan B. Stock traded on the New York Stock Exchange that has a market value equal to 130 percent of the loan amount C. An account for the benefit of First National held at the affiliate bank in an amount equal to the loan amount D. Eligible bankers"™ acceptances with a market value equal to the loan amount 582 AMERICAN BANKERS ASSOCIATION

C. An account for the benefit of First National held at the affiliate bank in an amount equal to the loan amount

Which of the following does an extension of credit NOT include? A. An advance by means of an overdraft or cash item B. The making or renewal of any loan or granting of a line of credit C. An advance against accrued salary D. An acquisition of a note on which an insider is a maker, drawer, or guarantor

C. An advance against accrued salary

Which of the following is required to be reported on ABC Bank"™s HMDA LAR? A. An application from Mr. Welch for a preapproval of a home purchase loan application that is approved by ABC in writing but not accepted by Mr. Welch B. An application from Ms. Ensley for a preapproval of a temporary construction loan that is denied by ABC C. An application from Mr. and Mrs. Rawlings for a preapproval of a home purchase loan application that is denied by ABC D. An application from Ms. Connor for a home equity loan to be used to consolidate credit cards

C. An application from Mr. and Mrs. Rawlings for a preapproval of a home purchase loan application that is denied by ABC

A bank may include all of the following in the narrative portion of its financial disclosure except for one. Which of these pieces of information CANNOT be disclosed? A. Information relating to mergers and acquisitions B. Information related to a regulatory enforcement action that currently applies to the bank C. An excerpt from the latest regulatory examination prepared by the bank"™s regulatory agency D. The bank"™s future plans for product development

C. An excerpt from the latest regulatory examination prepared by the bank"™s regulatory agency

How is the maximum loan value of margin stock defined? A. As a percentage of the amount to be loaned B. As a percentage of the book value of the stock C. As a percentage of the current market value of the stock D. As a percentage of the good-faith loan value of the stock

C. As a percentage of the current market value of the stock

Williams National Bank has its home office in New York State; however, it has branches in Nebraska. The federal banking agencies most recent host state loan to- deposit publication lists the loan-to-deposit ratio for Nebraska as 78 percent. For Williams Bank to pass the loan-to-deposit screen of the Reigle-Neal Act, what must its loan-to-deposit ratio be for Nebraska? A. At least 78 percent B. At least 50 percent C. At least 39 percent D. At least 25 percent

C. At least 39 percent

Unless the debt collector has express permission from the consumer or from a court, the law prohibits communication with a consumer under the following conditions EXCEPT: A. At an unusual time or place, such as before 8:00 a.m. or after 9:00 p.m., local time at the consumer"™s location B. When the debt collector knows that the consumer is represented by an attorney in connection with the debt and the attorney"™s name and address are known (unless the attorney fails to respond within a reasonable period of time to communication from the debt collector) C. At the consumer"™s place of employment if the debt collector doesn"™t know or has no reason to know that the employer forbids such communication D. If the consumer has notified the collector in writing and asked that the collector ceases all further contact. The debt collector may, in such circumstances, notify the debtor of any special remedies available to it, notify the debtor that collection efforts are being terminated, or notify the borrower that the creditor is invoking a specific remedy.

C. At the consumer"™s place of employment if the debt collector doesn"™t know or has no reason to know that the employer forbids such communication

Bank B is a correspondent of Bank A. Which of the following must be included in Bank A"™s calculation of credit exposure to Bank B? A. A loan to Mr. Pierce from Bank A secured by Bank B common stock B. Bank B"™s purchase of U.S. government T-Bills on behalf of Bank A under an overnight repurchase arrangement C. Bank A"™s deposit account of $1 million in Bank B D. A letter of credit issued by Bank B and pledged against the ACME Company"™s debt at Bank A

C. Bank A"™s deposit account of $1 million in Bank B

Which of the following institutions is NOT subject to the coverage of HMDA? "¢ Bank A, with assets of $55 million and located in a large urban city, makes home improvement loans and some home purchase loans to existing customers, but no mortgage loans. "¢ Bank B, with assets of $9 million and located in a rural area, has several branches, also in rural areas, including one that makes home improvement and home purchase loans. "¢ Mortgage Company C, with assets of $75 million and a home office in a large East Coast city, makes exclusively home purchase loans. A. All the institutions are subject to HMDA B. Bank A C. Bank B D. Mortgage Company C

C. Bank B

They also embrace the concept of risk-based compliance management. They expect compliance management to be tailored to the bank, be it large or small, offering standard or specialty financial services, simple or complex products lines, and adjusted as appropriate for the customer base as that issued for the BankSecrecy Act, also establishes their expectations that a bank"™s program be risk based. Who are they? A. Outsourcing firms B. Foreign financial service providers C. Bank regulatory agencies D. Risk management organizations

C. Bank regulatory agencies

The purpose of guidelines for National Banks to Guard against Predatory and Abusive Lending Practices- AL-2003-2 includes all of the following EXCEPT: A. Provide examples to national banks of practices that may be abusive B. Advise banks on how they should avoid abusive practices C. Banks should consider appropriate discount rates, credit loss rates, and prepayment rates when valuing these assets D. Show how some abusive lending can involve unfair or deceptive practices and therefore violate the Federal Trade Commission Act

C. Banks should consider appropriate discount rates, credit loss rates and prepayment rates when valuing these assets

Which of the following primary purpose/s were behind the Electronic Fund Transfer Act (EFTA)? A. To provide disclosures to consumers who use electronic fund transfer (EFT) systems B. To provide consumers with limitations on liability for unauthorized electronic fund transfers C. Both A and B D. None of these

C. Both A and B

Credit scoring systems: A. Evaluate an applicant"™s creditworthiness mechanically, based on key attributes of the applicant and aspects of the transaction, and determine, alone or in conjunction with an evaluation of additional information about the applicant, whether an applicant is deemed creditworthy B. Are evaluated by regulatory agencies to determine whether they are empirically derived and statistically sound and to examine: The bank"™s policies on the use of the credit scoring system Training of bank employees on the use of the system The number of high-side and low-side overrides of the system C. Both of these D. None of these

C. Both of these

Regulation O both restricts lending to insiders and requires that certain loans to insiders be disclosed. Each banking agency has adopted the provisions ofRegulation O for administrative enforcement purposes. These were not found to be useful in preventing insider lending abuse. Regulation O governs which of the following areas major areas: A. Lending to insiders B. Disclosures of loans made to insiders C. Both of these D. None of these

C. Both of these

______________ should include basic elements designed to understand and mitigate risk. It usually includes:Written program -Compliance-related policies and procedures A. Tactical Compliance procedure B. Rank solution C. Compliance program D. None of these

C. Compliance program

A bank is conducting due diligence for a foreign correspondent bank account. Which of the following is NOT required information? A. The identities of the correspondent bank"™s true ownership B. Information on the government licenses of the correspondent bank C. Copies of the tax return of the correspondent bank D. Information on the products and services the correspondent bank offers

C. Copies of the tax return of the correspondent bank

________________is defined as every aspect of an applicant"™s dealing with a creditor, beginning with information gathering and continuing through to the servicing and collection of the loan. A. Credit terms B. Credit rating C. Credit transaction D. Credit application

C. Credit transaction

What should a bank"™s Bank Secrecy Act compliance program include? A. All lobby notice requirements B. The one-year record retention requirements C. Designation of individuals responsible for day-to-day compliance D. A list of types of loans covered by the Act

C. Designation of individuals responsible for day-to-day compliance

A subsidiary of First National Bank can legally participate in all but one of the following businesses. In which business may the subsidiary NOT legally participate? A. Selling securities B. Selling insurance C. Developing real estate D. Providing financial planning advice

C. Developing real estate

A bank has a large mortgage department as well as a high HMDA error rate. An expensive software program could automate the process, but the business unit manager does not want to purchase the software because of its expense. Though it is not as efficient, the manager prefers to make some improvements to the manual process, add some more robust monitoring procedures, and opt not to purchase the software. What should the compliance professional do? A. Elevate the issue to a higher authority to force the mortgage department unit to purchase the software B. Nothing; the compliance professional"™s job is done with the completed research C. Document the fact that the level of risk present with manual systems is acceptable to the mortgage department business unit D. Write a memo to the president of the bank that explains the risk assessment for this area

C. Document the fact that the level of risk present with manual systems is acceptable to the mortgage department business unit

The sender"™s liability for warranties and indemnities that a Reserve Bank makes for a substitute check is subject to the following conditions and limitationsEXCEPT: A. The sender of an original check is not liable for amounts paid by the Reserve Bank absent the sender"™s agreement to the contrary B. The sender"™s liability under Regulation CC is not altered by the Regulation J provisions C. Failure of sender to have authority to make the required warranties and agreements D. A sender of an electronic item that is not a substitute check is not liable for any amount paid by a Reserve Bank that is attributable to the Reserve Bank"™s own lack of good faith or failure to exercise ordinary care

C. Failure of sender to have authority to make the required warranties and agreements

For how long must a bank keep records of transactions involving currency in amounts greater than $10,000? A. Two years B. Three years C. Five years D. Seven years

C. Five years

In _______________, Congress enacted restrictions on the way financial institutions disclose information on customers to third parties. The law also requires financial institutions to provide disclosures, both at the time of establishing the customer relationship and annually thereafter. A. Gramm-Billey Act of 1998 B. Gramm-Leach Act of 2000 C. Gramm-Leach-Billey Act of 1999 D. Gramm-Leach-Billey Act of 2001

C. Gramm-Leach-Billey Act of 1999

Bob Jones, president of ACME bank, has had a banking relationship with Linda O"™Reilly, a local real estate agent for several years. Ms. O"™Reilly keeps most of her deposit accounts with ACME and also has had several personal loans there. Over a three-month time period, Ms. O"™Reilly consistently (two or three times a week) brings to the bank a series of money orders in amounts ranging from $7,000 to $15,000, made payable to her in denominations of $1,000, and asks the teller to take them and issue one cashier"™s check payable to her. After this activity has continued for three months, Mr. Jones notices the frequency of cashier"™s checks issued to Ms. O"™Reilly on a management report. It catches his attention because he does not know why Ms. O"™Reilly would need this number of cashier"™s checks.On inquiry, the head teller explains the weekly transactions. Which of the following statements best describes Mr. Jones"™s responsibility? A. He should immediately file a SAR. There is no logical explanation for this activity. B. He should immediately file a CTR. Ms. O"™Reilly is trying to evade the BSA currency transaction. C. He should ask Ms. O"™Reilly why she is conducting these transactions and then determine whether to file a SAR. D. He is not required to do anything. Mr. Jones is well acquainted with this customer, and it is not illegal to purchase cashier"™s checks.

C. He should ask Ms. O"™Reilly why she is conducting these transactions and then determine whether to file a SAR.

First National Bank is a newly chartered bank. Which of the following security related procedures is NOT required under the Bank Protection Act? A. Appoint a security officer B. Write a security program C. Hire a security consultant to inspect the bank for the effectiveness of the bank"™s security devices D. Write procedures to assist in preserving evidence of crimes

C. Hire a security consultant to inspect the bank for the effectiveness of the bank"™s security devices

An individual borrowed $1,000 to remodel her mobile home. She lives in the mobile home that is not anchored to the ground. The loan will be secured by the mobile home, but the borrower does not own the lot on which it is parked. For HMDA purposes, this loan is considered to be which of the following types of loans? A. Consumer RV B. Home equity C. Home improvement D. Second mortgage

C. Home improvement

If the lender is subject to the mortgage interest reporting requirement, which of the following actions is NOT required? A. The lender must file an information return with the IRS. B. The lender must report the amount of interest and points on the information return. C. The lender must report the loan balance as of December 31 of the year preceding the year the report is filed. D. The lender must send a statement to the borrower.

C. The lender must report the loan balance as of December 31 of the year preceding the year the report is filed.

Which of the following statements is true regarding the lessee"™s ability to purchase the leased property? A. The lessor must allow the lessee to purchase the leased property either during the lease term or at the end of the term. B. If the lessor allows the lessee to purchase the property at the end of the lease term, the lessor may not charge more than the equivalent of 12 monthly payments for the property. C. If the lessor allows the lessee to purchase the property at the end of the lease term, the purchase price must be disclosed in the initial disclosure statement. D. The purchase price of the leased property must be mutually agreed on by the lessor and the lessee.

C. If the lessor allows the lessee to purchase the property at the end of the lease term, the purchase price must be disclosed in the initial disclosure statement.

Under Unauthorized transfers-12 CFR 205.6 prerequisites for consumer liability are all of the following EXCEPT: A. If an access device was used, it must have been an accepted access device B. Institution must have provided a means of identifying the consumer to whom the device was issued (for example, by electronic means (PIN), photograph, or fingerprint) C. Increased liability for the consumer D. Institution must have provided the following in writing to the consumer "¢ A summary of consumer"™s liability for unauthorized transfers "¢ Telephone number and address of person or office to be notified "¢ in case of unauthorized transfer "¢ Institution"™s business days

C. Increased liability for the consumer

Which of the following interest-bearing accounts is EXEMPT from Form 1099 annual information reporting requirements under IRS regulations? A. Time certificates of deposit B. Money market deposit accounts C. Individual retirement accounts D. Negotiable order of withdrawal accounts

C. Individual retirement accounts

Mammoth Enterprises is a new customer to the bank. It is a wholly owned subsidiary of Mammoth Corporation. Which of the following statements, if true, would make Mammoth Enterprises an exempt customer at the bank? A. Mammoth Corporation is a London corporation, trading on the London Stock Exchange. B. Mammoth Corporation is a U.S. corporation with unlisted stock. C. Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange. D. Mammoth Enterprises is a U.S. corporation primarily in the investment banking business.

C. Mammoth Corporation is a U.S. corporation trading on the American Stock Exchange.

Which of the following advertising activities indicate that a bank would NOT be exempt from SEC registration requirements? A. Listing its securities transfer services as a service the bank provides for IRA accounts along with other IRA benefits B. Listing its securities services for trust accounts in the bank"™s extensive trust services brochure C. Mentioning in a print advertisement that the bank provides accommodation securities trades for its regular custodial accounts D. Stating in an advertisement concerning employee benefit plan services that the bank provides securities brokerage services for employee benefit plan accounts

C. Mentioning in a print advertisement that the bank provides accommodation securities trades for its regular custodial accounts

In April Lillian Redmond, the teller supervisor for First National Bank, discovers five counterfeit $20 bills in several teller drawers. In May and in June she discovers two additional counterfeit $20 bills. She has no knowledge of criminal activity on the part of any of the bank"™s employees or customers. She does not suspect any particular person in this transaction. Which of the following statements is true? A. Ms. Redmond must report the counterfeit funds on a SAR and must name the most likely individual(s) on the report. B. Ms. Redmond must report the counterfeit funds on a SAR but is not required to name any individual(s) on the report. C. Ms. Redmond need not file a SAR on this incident because the total amount is less than $25,000. D. Ms. Redmond need not report this incident on a SAR because each incident is less than $5,000.

C. Ms. Redmond need not file a SAR on this incident because the total amount is less than $25,000.

What may a creditor do when furnishing credit information? A. May designate accounts in any manner that is convenient and reasonable B. Must designate accounts as specified by the parties C. Must designate accounts to show participation by both spouses if both are liable D. Must designate accounts to show all parties, including guarantors

C. Must designate accounts to show participation by both spouses if both are liable

Mills Company, Inc., is a manufacturing company with a working capital line of credit from First National Bank. The credit agreement governing the loan states thatMills cannot obtain additional unsecured credit without the approval of the bank. Mills believes that such a clause violates the Bank Holding Company Act"™s anti- tying clause. Does it? A. Yes. It is a restraint of trade. B. Yes, unless the bank will reasonably allow additional credit at Mills"™s request. C. No, since this clause relates to the soundness of the credit D. No, unless the bank refuses to grant additional credit to Mills itself

C. No, since this clause relates to the soundness of the credit

ACME National bank uses telephone solicitations to sell its debt cancellation contracts. The banker explains to the borrower the nature of the contract, gives an oral short form disclosure, receives the customer"™s affirmative election orally, and sends the written long form disclosures and written affirmative election within three business days. Is the bank in compliance with the telephone solicitation rules as they apply to affirmative elections? A. Yes, the bank has fulfilled all of its requirements. B. No, oral affirmative elections are not acceptable. C. No, the bank also must give the customer 30 days to cancel the contract. D. No, telephone solicitations are not allowed for debt cancellation contracts.

C. No, the bank also must give the customer 30 days to cancel the contract

First National Bank owns a data processing company that sells financially related data processing services to various businesses in the community. Daniel Tyler, a loan officer, is negotiating a loan to a local CPA firm. He would like to make the loan conditional on the CPA firm"™s use of the subsidiary data processing firm. May he do so? A. Yes, because it is not a bank service. B. Yes, because it is not related to pricing. C. No. It is an illegal tie-in. D. No, unless the company was planning to obtain a new data processing service provider anyway.

C. No. It is an illegal tie-in.

Which of the following pieces of information is the bank NOT required to report on Form 1099 for foreclosed and abandoned property? A. The name, address, and TIN of the borrowers B. A description of the property C. The original loan amount D. Whether the borrower is personally liable for the debt

C. The original loan amount

Hector Martinez is a loan officer in a non-community property state. He receives a verbal request for a small business working capital loan from Leon Rogers for his technology consulting business. The business is a sole proprietorship. Mr. Rogers gives Hector a written business plan for his business, a financial statement for the business for the past two years, and a personal financial statement that includes information on himself and his wife. Can Hector assume that the application is a joint application from Mr. Rogers and his wife? A. Yes. Because the financial statement is signed by both Mr. and Mrs. Rogers and includes joint information, the application can be considered to be from both spouses. B. Yes. Because the business is a sole proprietorship, the spouse"™s financial information is important. C. No. The bank cannot assume the application is a joint one simply on the basis of submission of joint financial information. D. No. Because the business is a sole proprietorship, the bank should assume the application is for individual credit.

C. No. The bank cannot assume the application is a joint one simply on the basis of submission of joint financial information.

Following institutions comes under the heading of ________________: "¢ Institutions subject to the commodity Futures Trading Commission "¢ The Federal Agriculture Mortgage Corporation or institutions charted and operating under the Farm credit Act "¢ Institutions charted by Congress to engage in securitizations, secondary market sales, or similar transactions, provided that the institution does not sell or transfer nonpublic personal information to nonaffiliated third parties A. Consumers B. Financial institutions C. Non-financial institutions D. Regulatory authorities

C. Non-financial institutions

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC"™s sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do? A. Implement the letter of credit because there is no boycott language on its face B. Require ABC to indemnify the bank against any potential loss for participation in a boycott C. Not implement the letter of credit D. Have the letter of credit confirmed by a bank in Country X

C. Not implement the letter of credit

Which of the following customers may be exempted under Phase II of the Bank Secrecy Act? A. Government agencies B. Correspondent banks C. Payroll customers D. Businesses whose stocks are traded on a national stock exchange

C. Payroll customers

ACME Bank has a separate page on its Web site where it describes insurance products, such as life insurance and health and disability insurance. The page invites consumers to call the bank officer in charge of selling these products. The Web site"™s lending page also describes consumer loans and uses the following phrase: "Have peace of mind""credit life and disability insurance are available on all consumer loans to qualified borrowers." Neither the insurance page nor the lending page mentions insured deposits. What does ACME need to do to make sure its Web site is in compliance? A. Nothing. As long as the insurance products are segregated, the Web site is in compliance. B. Place the advertising disclosures (not a deposit, not insured by the FDIC, and so on) on the insurance page. C. Place the advertising disclosures on both the Web site"™s insurance page and its lending page. D. Create a separate Web site for all insurance products.

C. Place the advertising disclosures on both the Web site"™s insurance page and its lending page.

The federal banking agencies have proposed an amendment to Regulation Z that would require a new early disclosure statement for loans secured by the borrower"™s principal dwelling. After reading the proposed change, what should the compliance professional do FIRST? A. Establish a task force to study the proposed rule. B. Contact the bank"™s platform software vendor to determine whether it will be ready for the change NOTES C. Prepare a summary document that outlines the effects the proposed rule would have on the bank"™s operations D. Train bank staff on the new rule

C. Prepare a summary document that outlines the effects the proposed rule would have on the bank"™s operations

Which of the following sets of policies or procedures is NOT a requirement of a security program? A. Policies addressing what to do in case of a robbery B. Procedures for opening the bank at the beginning of the day C. Procedures for keeping customer information private D. Policies addressing periodic reporting to the board of directors

C. Procedures for keeping customer information private

What is the definition of a "small" business under CRA rules? A. Employs fewer than 50 people B. Has assets of less than $5 million C. Produces gross annual revenues of $1 million or less D. Does not generally have access to regional or national credit markets

C. Produces gross annual revenues of $1 million or less

Institutions that offer nontraditional mortgage products should make sure they comply with the following, as applicable, EXCEPT: A. Truth in Lending Act B. FTC Act (i.e., Unfair and Deceptive Acts and Practices) C. RESTA D. State laws prohibiting deceptive trade practices

C. RESTA

Which of the following actions is NOT an adverse action? A. Refusal to grant credit on substantially the same terms and conditions as requested by the applicant B. Termination of an account C. Refusal to grant credit on the grounds that the lender does not offer the type of credit requested D. Refusal to increase the amount of credit on an existing account after a request

C. Refusal to grant credit on the grounds that the lender does not offer the type of credit requested

___________ governs the collection of checks and other cash and noncash items and the handling of returned checks by Federal Reserve Banks. It also covers the rules governing funds transfers sent through the Fedwire. Its purpose is to provide rules for collecting and returning items and settling balances. A. Regulation Z B. Regulation X C. Regulation J D. None of the above

C. Regulation J

A compliance officer is constructing a review of a transaction in which M, a deposit account customer, used cash to purchase travelers"™ checks in an amount of$4,000. The compliance officer must determine compliance with financial recordkeeping and currency reporting regulations. Which of the following pieces of information must be part of the bank"™s records for this transaction? A. M"™s date of birth B. M"™s deposit account number C. The serial numbers of the travelers"™ checks purchased D. The name of the branch where the transaction occurred

C. The serial numbers of the travelers"™ checks purchased

State National Bank offers credit life and disability insurance on all consumer loans. This credit-related insurance is sold by a third party, but the bank collects a commission on all sales. The bank also sells hazard insurance through its affiliated insurance agency. Which of the following actions is legal for State National? A. Require all consumers to purchase credit life insurance through the bank B. Require only certain consumers to purchase credit life insurance through the bank C. Require all borrowers with real property loans to provide insurance to protect the collateral D. Require borrowers on real estate loans over $50,000 to purchase hazard insurance through the bank

C. Require all borrowers with real property loans to provide insurance to protect the collateral

A bank received a signed letter criticizing its performance in meeting the credit needs of the community, but not adversely reflecting upon any individual bank employee"™s reputation. What must the bank do with this letter? A. Have it reviewed and discussed by the board of directors B. File it with the regional office of the bank"™s federal regulator C. Retain it in the CRA public comment file D. Answer it within 10 business days

C. Retain it in the CRA public comment file

Under the Interagency Statement on Retail Sales of Nondeposit Investment Products, what may a bank teller do? A. Discuss the past performance of a bank-related mutual fund B. Transfer mutual fund shares from an investment savings account to an IRA account C. Take the business card of a customer who has asked to purchase a bank-related mutual fund and give it to a licensed representative D. Assist a customer in determining eligibility to purchase a bank-related mutual fund

C. Take the business card of a customer who has asked to purchase a bank-related mutual fund and give it to a licensed representative

Under the Interagency Statement on Retail Sales of Nondeposit Investment Products what disclosure must the bank"™s investment sales representative make to the customer? A. The bank"™s regulatory agency B. The sales commission resulting from the investment purchase C. That the investment product is not guaranteed by the bank D. The arbitration procedure for resolving disputes over investment advice

C. That the investment product is not guaranteed by the bank

Which of the following transactions does NOT require prior approval of the Federal Reserve Board? A. The formation of a bank holding company B. The acquisition by a bank holding company of a subsidiary C. The acquisition of 25 percent of voting stock of a bank by another bank, in good faith, in its fiduciary capacity with no power to vote D. The acquisition of 25 percent of voting stock of a bank by another bank in its fiduciary capacity for the benefit of the acquiring bank"™s employees

C. The acquisition of 25 percent of voting stock of a bank by another bank, in good faith, in its fiduciary capacity with no power to vote

Robin Martin made an individual application to the bank for a car loan. She has just returned to work on a regular basis because she was a full-time homemaker until recently, when her last child entered school. The loan officer would like to ask her about her husband. Under what circumstances can the officer ask Robin about her husband? A. The creditor believes the spouse"™s signature will make the applicant more creditworthy. B. The applicant is married. C. The applicant resides in a community property state. D. The applicant"™s credit reports indicate that the spouse is a better credit risk.

C. The applicant resides in a community property state.

First National Bank made a loan to a nonbank affiliate of its holding company that is secured by stocks, bonds, and debentures. At the outset of the loan, FirstNational had collateral with a market value equal to 150 percent of the loan amount. Over time, some of the collateral has been retired and amortized. Some has dropped in value. What is the responsibility of the bank regarding the collateral? A. The bank has no responsibility once the loan is made provided the percentages were correct at the loan"™s inception. B. The bank must check values every month to ensure that the percentages are correct at all times. C. The bank must check values when the collateral is retired or amortized to make sure the collateral is replaced with securities that will bring the loan into compliance with the percentages required in the law. D. The bank must annually check the value of the collateral to ensure that the percentage of value is maintained.

C. The bank must check values when the collateral is retired or amortized to make sure the collateral is replaced with securities that will bring the loan into compliance with the percentages required in the law.

Which of the following describes the record retention requirements under Regulation B for a credit application from a business with annual gross revenues in excess of$1,000,000? A. The bank must retain records for 30 days; however, if a written statement of action is requested, the bank must retain the records for 90 days. B. After 6 months, the bank must dispose of the applications and records in accordance with waste disposal rules promulgated by the EPA. C. The bank must retain records for 12 months if a written statement of adverse action is requested within 60 days after notifying the applicant of the action taken. D. The bank must retain records for 25 months from the date of application.

C. The bank must retain records for 12 months if a written statement of adverse action is requested within 60 days after notifying the applicant of the action taken.

ABC National Bank, an independent bank with $120 million in total assets located in a large urban area, is in the process of determining its option for its CRA evaluation. Which of the following options is NOT open to ABC Bank? A. The small bank performance standard B. The lending, investment, and service tests C. The community development test D. The strategic plan option

C. The community development test

The Fair Credit Reporting Act (FCRA) became effective in 1971. The purpose of FCRA is to regulate: A. The consumer credit reporting and related industries to ensure that consumer information is reported in an accurate manner B. The consumer credit reporting and related industries to ensure that consumer information is reported in a timely manner C. The consumer credit reporting and related industries to ensure that consumer information is reported in an accurate, timely, and complete manner D. None of these

C. The consumer credit reporting and related industries to ensure that consumer information is reported in an accurate, timely, and complete manner

Which of the following is NOT a factor considered by the Federal Reserve Board when it evaluates an application under Regulation Y? A. The financial strength of the applicant B. The management strength of the applicant C. The current nonbanking activities of the applicant D. The effect of the transaction on competition

C. The current nonbanking activities of the applicant

Banks may extend and maintain purpose credit without complying with Regulation U if the credit is extended: A. To a bank auditor B. To a qualified employee stock ownership plan running previously but not now C. To any customer, other than a broker or dealer, to temporarily finance the purchase or sale of securities for prompt delivery, if the credit is to be repaid in the ordinary course of business on the completion of the transaction D. To enable a customer to meet emergency expenses not reasonably foreseen and if the bank obtains a good faith statement from the customer. Emergency expenses are ones related to unforeseen death or disability, not a chance to make a profit.

C. To any customer, other than a broker or dealer, to temporarily finance the purchase or sale of securities for prompt delivery, if the credit is to be repaid in the ordinary course of business on the completion of the transaction, and D. To enable a customer to meet emergency expenses not reasonably foreseen and if the bank obtains a good faith statement from the customer. Emergency expenses are ones related to unforeseen death or disability, not a chance to make a profit.

Which of the following is NOT a requirement of CRA? A. To delineate the bank"™s assessment area(s) B. To collect loan data C. To approve the bank"™s CRA statement at an annual board meeting D. To report small business loan data

C. To approve the bank"™s CRA statement at an annual board meeting

EFT provides consumers with limitations on liability for unauthorized electronic fund transfers. It includes the following types of funds transfers EXCEPT: A. Point-of-sale transfers B. Automated teller machine (ATM) transfers C. Transfers initiated by Fax D. Withdrawals of funds, including merchant transactions where no electronic terminal is involved, if the customer"™s account is debited

C. Transfers initiated by Fax

Transactions with which of the following government securities would NOT subject a bank to the registration requirements of the Government Securities Act? A. Obligations of the Farm Credit System B. GNMA securities C. U.S. Savings Bonds D. FNMA obligations

C. U.S. Savings Bonds

A compliance professional is a member of the task force studying how the bank can reduce customer complaints about holding deposits. One proposed solution involves purchasing an expensive system that will reduce the number of holds placed by evaluating the customer"™s history and relationship with the bank. Which of the following roles is MOST important for the compliance professional on the task force? A. Developing training for tellers who will use the new system B. Setting parameters for what the system should review to determine the strength of the customer relationship C. Validating the system to ensure it complies with regulatory restrictions D. Conducting a cost-benefit analysis to determine if the system is the best solution

C. Validating the system to ensure it complies with regulatory restrictions

Which of the following bank products is NOT subject to the disclosure provisions of the Interagency Statement on Retail Sales of Nondeposit InvestmentProducts? A. Fixed-rate annuities B. Variable-rate annuities C. Variable-rate savings accounts D. Mutual funds

C. Variable-rate savings accounts

If a bank is a government securities broker or dealer, what are its responsibilities when it obtains a Form G-FIN-4 or an MSD-4 from an employee? A. Retain the form for 10 years B. Verify the accuracy of all information on the form C. Verify the accuracy of the information by inquiring of all employers of the employee for the previous three years D. Verify the accuracy of the information by inquiring of all employers of the employee for the previous five years

C. Verify the accuracy of the information by inquiring of all employers of the employee for the previous three years

By sending an item to a Reserve Bank, a sender: A. Never authorizes the Reserve Bank to handle the item based on this regulation and the Reserve Bank"™s circulars B. Warranties for electronic items that are substitute checks C. Warrants to each Reserve Bank handling the item that it has good title, that it is entitled to enforce the item, that the item has not been materially altered, and that the item bears all endorsements applied by parties that previously handled the item in paper or electronic form D. The sender makes all of the warranties set forth in the Uniform Commercial Code (UCC) as if the item were subject to the UCC and makes all of the Regulation CC warranties as if the electronic item were a paper item subject to that regulation

C. Warrants to each Reserve Bank handling the item that it has good title, that it is entitled to enforce the item, that the item has not been materially altered, and that the item bears all endorsements applied by parties that previously handled the item in paper or electronic form, and D. The sender makes all of the warranties set forth in the Uniform Commercial Code (UCC) as if the item were subject to the UCC and makes all of the Regulation CC warranties as if the electronic item were a paper item subject to that regulation

In which of the following situations is the bank NOT required to report lost or stolen securities? A. When bonds were expected to be delivered in person from the local Federal Reserve Bank and were not received B. When stock traded on the over-the-counter exchange (OTC) was expected to be received through the mail from a customer"™s broker C. When securities with no CUSIP numbers were expected from another financial institution D. When stock traded on the New York Stock Exchange (NYSE) was expected to be delivered by the issuer"™s agent

C. When securities with no CUSIP numbers were expected from another financial institution

The initial disclosure requires that certain disclosures relating to the termination of a lease be given to the consumer. Which of these disclosures is NOT required? A. The conditions under which the lease may be terminated before the end of its term B. Whether or not the lessee has the option to purchase the property and at what price C. Whether the lease may be extended at the option of the lessee D. Whether the lessee will be liable for the difference between the estimated value of the property and its realized value at the termination or end of the lease

C. Whether the lease may be extended at the option of the lessee

Which of the following actions is NOT required of a municipal securities principal? A. Pass the Municipal Securities Principal Qualification Examination B. Complete Form MSD-4 and submit it to the bank C. Work as an apprentice for one year in a municipal securities operation D. Work in a supervisory role in a municipal securities operation

C. Work as an apprentice for one year in a municipal securities operation

Is the renewal of a loan considered to be a new extension of credit for purposes of valuing the collateral under Regulation U? A. Yes B. Yes, if any additional amounts are added to the loan balance C. Yes, if any amounts other than interest, service charges, or taxes are added to the loan balance D. No, a renewal is never considered to be a new credit

C. Yes, if any amounts other than interest, service charges, or taxes are added to the loan balance

A member bank wants to sell assets to an affiliated bank that is 100 percent owned by the same bank holding company. Is this transaction allowed? A. No. It is prohibited. B. Yes, but it is subject to an aggregate limit of 10 percent of the member bank"™s capital and unimpaired surplus. C. Yes. It is permitted, if the assets are not low quality. D. Yes, but it must be classified on the receiving bank's books as low quality assets.

C. Yes. It is permitted, if the assets are not low quality

A bank that is a government securities broker accepts money from a customer for the purchase of securities on Monday and does not purchase the securities by the end of the day on Tuesday. Does the bank have any responsibilities under the Government Securities Act? A. No. The bank has fulfilled its responsibilities under the Act. B. Yes. The bank must purchase the securities before the close of business on Wednesday. C. Yes. The bank must deposit the money in an account of the customer at the close of business on Tuesday. D. No. The bank has until the close of business on Wednesday to purchase the securities before being liable to the customer for failure to effect a purchase.

C. Yes. The bank must deposit the money in an account of the customer at the close of business on Tuesday.

What is the maximum number of government securities transactions a bank may have and still remain exempt from the Government Securities Act? A. 100 per year B. 250 per year C. 400 per year D. 499 per year

D. 499 per year

On which of the following loans does First Savings Bank NOT have to provide a 1098-E (Student Loan Interest) report? A. A $10,000 tuition loan made to Bobby Wilcox, a student at the state university, guaranteed by the Department of Education B. A $35,000 line of credit made to Don and Barbara Cocelli, secured by their home, for the payment of certified school expenses for their twin daughters at an accredited private school C. A $15,000 loan to Linda Chu to be used for the purpose of paying tuition and fees and purchasing college books, lab equipment, and a computer for use in her education at the local community college D. A $12,000 loan to Paul and Rhonda Pena and their daughter Jennifer, used to pay her college tuition as well as the tuition at the private high school her sister, Jeanne, attends

D. A $12,000 loan to Paul and Rhonda Pena and their daughter Jennifer, used to pay her college tuition as well as the tuition at the private high school her sister, Jeanne, attends

In Guidance on Nontraditional Mortgage Product Risks, if the institution has a concentration in a nontraditional mortgage portfolio, the institution should: A. Have well-developed monitoring systems and risk management practices B. Monitor by originator and key borrower and portfolio characteristics C. Not understand the risk of payment shock and negative amortization D. A and B

D. A and B

In Requirements section of Adjusted Mortgage Regulation (12 CFR 34), for loans subject to both the OCC ARM regulation and to Regulation Z, 12 CFR 226.19(b) ""that is, loans made to an individual, for personal purposes, secured by the borrower"™s principal dwelling, and having a term longer than one year"" the index to which the interest rate is tied must be: A. Specified in loan documents B. Readily available to and verifiable by the browser C. Multiple values of a chosen measure or a moving average of the chosen measure calculated over a specified period D. A and B only

D. A and B only

On which of these loans does First National have to report the interest rate spread on its HMDA LAR? A. A loan to remodel a 60-unit apartment complex B. A loan to renovate a rental property C. An unsecured loan to purchase an investment property D. A home improvement loan secured by a principal dwelling

D. A home improvement loan secured by a principal dwelling

Which of the following sources is the least desirable to use when monitoring a correspondent bank"™s capital? A. A national rating agency"™s report on the correspondent bank B. The correspondent bank"™s own call report C. The correspondent bank"™s annual report to shareholders D. A national newspaper"™s story on the correspondent bank"™s financial condition

D. A national newspaper"™s story on the correspondent bank"™s financial condition

Which of the following is (are) NOT covered by the regulation? A. All banks regardless of insurance sales. B. A lender who indicates to the consumer that he or she is selling insurance on behalf of the bank C. A person to whom the bank refers consumers and who has a contract with the bank to receive commissions on sales of insurance D. A person who sells insurance to nonconsumers for other than personal, family, or household purposes

D. A person who sells insurance to nonconsumers for other than personal, family, or household purposes

In Consumer Leasing Act Content of non-segregated disclosures may be made separately or as part of another document (such as the lease agreement); however, other information cannot be stated, used, or placed so as to mislead or confuse the consumer. Other disclosures include all of the following EXCEPT: A. A statement of the conditions under which the lessee or lessor may terminate the lease before the end of the lease term, along with the amount (or a description of the method of how the amount is determined) of any penalty or other charge for early termination B. Whether the lessee has the option to purchase the leased property during the lease term and, if applicable, the purchase price (or method for determining it) and when the lessee may exercise it C. The lessee"™s right to an independent appraisal of the property if the lessee"™s liability at the end of the lease is based on the realized value of the leased property, and that the appraisal will be binding on all parties D. A statement of maintenance responsibilities including the counter bank responsible and a description of the responsibility

D. A statement of maintenance responsibilities including the counter bank responsible and a description of the responsibility

Which of the following elements is NOT required to be in a repurchase agreement between a bank that is a government securities dealer and a counterparty? A. A statement that the funds are not insured by the FDIC B. A list of the specific securities that are the subject of the agreement C. A provision for substitution of securities if they can be substituted D. A statement that the bank is a regulated government securities dealer

D. A statement that the bank is a regulated government securities dealer

Purpose credit is credit for all of the following EXCEPT: A. Immediate purpose of purchasing or carrying margin stock B. Incidental purpose of purchasing or carrying margin stock C. Ultimate purpose of purchasing or carrying margin stock D. Accidental purpose of purchasing or carrying margin stock

D. Accidental purpose of purchasing or carrying margin stock

____________ is any company of which the bank is a subsidiary or any other subsidiary of the same company of which the bank is a subsidiary. A. Brokerage House B. Treasury C. FDIC D. Affiliates

D. Affiliates

First National Bank is attempting to determine which of the following customers would qualify as exempt persons: "¢ Nationwide Foods, Inc., is a national company with stock listed on the New York Stock Exchange "¢ National Paper Products, is a wholly owned subsidiary of Nationwide Foods, Inc. "¢ Products Incorporated, a depositor for three months, is a regional company whose stock is designated a NASDAQ Capital Markets Company and that sells and leases large boats "¢ Century Enterprises, a local company owning several local restaurants, is a longtime bank customer and frequently makes deposits in excess of $10,000. All ofCentury"™s stock is owned by a local family. Which of these customers would qualify as an exempt person? A. All except for Nationwide Foods, Inc. B. All except for National Paper Products C. All except for Century Enterprises D. All except for Products Incorporated

D. All except for Products Incorporated

In a motor vehicle lease, a mathematical progression showing how the periodic payment is derived, containing the following information: A. Gross capitalized cost (including the agreed-on value of the vehicle) B. Rent charge (the difference between the total of base payment over the lease term minus the depreciation and any amortized amounts) C. Itemization of other charges that are part of the periodic payment D. All of the above

D. All of the above

The Reserve Bank may recover from the sender the attorneys"™ fees if an action is brought against a Reserve Bank on the basis of: A. Failure of sender to have authority to make the required warranties and agreements B. Any action by the Reserve Bank within the scope of its authority in handling the item C. Any warranty made by the Reserve Bank D. All of the above

D. All of the above

What is actually a Single credit rule-12 CFR 221.3(d)? A. All purpose credit extended to a customer will be considered to be a single credit for purposes of Regulation U B. The value of all collateral securing all-purpose loans will be aggregated to determine if it is sufficient C. If unsecured purpose credit is extended before secured purpose credit, the loans need only be combined for purposes of applying the withdrawal and substitution rules D. All of the above

D. All of the above

Which of the following are recommended practices in Avoiding Predatory and Abusive Lending Practices in Brokered and Purchased Loans""AL-2003-3? A. Have written agreements with third-party brokers that specifically and clearly address the rights and responsibilities of each party. Written agreements should 1. Ensure that no inappropriate compensation exists 2. Provide for indemnification to the bank 3. Enable banks to exit the arrangement through a termination procedure 4. Provide for the bank"™s and the OCC"™s ability to access all records of the third party and to audit the third party"™s operations B. Verify that brokers and originators have established policies to ensure that loans will comply with all applicable laws C. Establish an effective management information system to monitor the performance of third-party brokers and originators D. All of the above

D. All of the above

Compliance professionals have a duty to keep senior management and the board apprised of the state of compliance within the bank through which of the following: A. Self-monitoring and audit results B. Proactive compliance controls C. Timely and accurate regulatory reporting D. All of the options mentioned above

D. All of the options mentioned above

An error in EFT includes any of the following: A. An unauthorized EFT B. The omission from a periodic statement of an EFT that should have been included C. A consumer"™s request for documentation required to be given on receipts or statements or for clarification of information (does not include routine inquiries about account balances) D. All of these

D. All of these

By presentation or transmission of an item a Reserve Bank warrants to a subsequent collecting bank and paying bank that: A. The Reserve Bank has good title to the item B. The item has not been altered C. The item bears all endorsements applied by parties that have previously handled the item in paper or electronic form D. All of these

D. All of these

Debt collectors acquiring location information from a third party: A. Must identify themselves and, if expressly asked, must identify their employer B. Must state that the call is to confirm or correct location information C. Once location information is received, may not communicate with the third party again unless the person asks the debt collector to or the debt collector reasonably believes the earlier response was erroneous or incomplete and that person now has correct or complete location information D. All of these

D. All of these

Initial privacy notice-12CFR332.4; 12CFR40.4; 12 CFR 216.4; 12 CFR 573.4 says that: A. A notice must be given to a consumer before the institution discloses any nonpublic personal information about the consumer to a nonaffiliated third party, unless the disclosure is on the exempt list B. A notice is not required to be given to a consumer who is not a customer if the financial institution does not disclose any nonpublic personal information about the consumer to any nonaffiliated third party, other than as authorized by this regulation C. Only one notice is required to be provided on joint accounts. Therefore only one notice need to be provided to consumer loan customers even if there is more than one borrower and even if there is a separate guarantor D. All of these

D. All of these

Record keeping requirements-12 CFR 215.8 elaborates that: A. Each bank must establish a recordkeeping system to keep records necessary for compliance with Regulation O B. Banks may use any alternative recordkeeping method for insiders of affiliates if the bank"™s regulatory agency determines the bank"™s method is at least as effective as that required by Regulation O C. All recordkeeping systems must Include either an annual survey of insiders to identify related interests, or a requirement as part of each extension of credit that the borrower indicates whether he or she is an insider. Provide for the maintenance of records of all credit to insiders, including the amounts and terms D. All of these

D. All of these

The Equal Credit Opportunity Act (ECOA) was enacted in 1974 to prevent discrimination in credit transactions. In 1975 the act was amended. Which of the following prohibited base/s are now included in it? A. National origin B. Exercise of rights under the Consumer Credit Protection Act C. Receipt of public assistance income D. All of these

D. All of these

To be effective, compliance risk management professionals must design a framework to ensure that bank management understands the risks and the steps that must be taken to mitigate them. The many roles compliance professionals fill incorporate risk management aspects including: A. Coordinating regulatory exams to explain risks to examiners B. Overseeing compliance training targeting higher risk areas C. Tracking regulatory proposals and final rules to understand new risks D. All of these

D. All of these

Under Interagency Guidance on Subprime Lending (1999) lending policy must: A. Be appropriate to the size and complexity of the operation B. Address the types of products offers and those not authorized C. Require credit file documentation D. All of these

D. All of these

A compliance professional"™s responsibilities include all of the following EXCEPT: A. Understanding the business units operating environment and risk tolerance B. Performing risk assessments with the assistance of business units to determine current risk levels and risks associated with the bank"™s products, lines of business, customers, and locations, among other factors C. Working with business units to ensure prompt corrective action for any detected errors D. Assisting business lines with compliance training for employees, as needed

D. Assisting busines lines with compliance training for employees, as needed

A bank municipal securities dealer has 30 employees in its municipal securities operation. How many municipal securities principals must it have? A. At least one B. At least three C. No more than five D. At least two

D. At least two

In which of the following cases is a branch closing notice required? A. Bank A decides to stop cashing checks for noncustomers at its neighborhood branch. B. Bank B and Bank C merge. Each has a branch in the near-town neighborhood. The merged organization is closing the branch that was formerly Bank B and merging it into the branch that was formerly Bank C. C. Bank D is closing its drive-through facilities in its near-town neighborhood branch, although its regular facility is remaining. D. Bank E is closing its near-town facility because of its outmoded building and equipment. Bank E has commissioned a study from a local development center to determine if it is feasible to re-open its branch in the future.

D. Bank E is closing its near-town facility because of its outmoded building and equipment. Bank E has commissioned a study from a local development center to determine if it is feasible to re-open its branch in the future.

In which of the following circumstances is it LEAST appropriate for a bank to file a SAR regarding Internet activity? A. Bank determines that one of its customers is the victim of identity theft B. Bank becomes aware of identity theft of its domain name (i.e., another entity selects a name similar to the bank"™s in order to confuse customers and obtain confidential financial information) C. Bank discovers that someone has hacked into its data system in order to obtain confidential customer data D. Bank determines through its transaction-monitoring program that a customer is making electronic transfers between his own checking and savings accounts that are just below the $10,000 reporting level

D. Bank determines through its transaction-monitoring program that a customer is making electronic transfers between his own checking and savings accounts that are just below the $10,000 reporting level

In a review of a bank"™s home mortgage loan application register, which of the following must be included in Regulation C reporting? A. Loans made or purchased in a fiduciary capacity B. Servicing rights purchased C. Interim construction loan applications D. Loans made and sold within the reporting period

D. Loans made and sold within the reporting period

First National Bank has several exempt customers."¢ Alpha is an exempt person because its stock is listed on a major stock exchange. "¢ Beta is an exempt person because it meets the nonlisted customer requirements. "¢ Zeta is exempt because it is a payroll customer. For which customer(s) must the bank conduct an annual review to determine its continuing eligibility to be exempt from CTR filings? A. Alpha B. Beta C. Zeta D. Beta and Zeta

D. Beta and Zeta

Non public personal information under Regulation P includes: A. Personally unidentifiable financial information B. Any list or grouping of consumers that us derived using personally identifiable financial information that is not publicly available C. Federal state and local government records D. Both B and C

D. Both B and C

Bank A offers safe deposit services in a vault area that contains a door too narrow for wheelchair passage. The bank cannot widen the door because of the vault construction. Therefore, when a customer in a wheelchair needs access to a safe deposit box the customer cannot enter the vault. The bank provides viewing rooms for all safe deposit customers, and one of these rooms has a door wide enough for a disabled customer to enter. Which of the following must the bank do to provide safe deposit box service to wheelchair customers? A. Remove the old vault and install a new vault to allow wheelchair access B. Construct an alternative facility in which to store the safe deposit boxes of wheelchair customers C. Require wheelchair customers to be accompanied by a walking individual to retrieve the safe deposit box for the customer D. Bring the safe deposit box to the customer and provide an accessible area where the customer may privately have access to the contents

D. Bring the safe deposit box to the customer and provide an accessible area where the customer may privately have access to the contents

Unless excluded by a board resolution or the bylaws, the following officers will be considered to be executive officers EXCEPT: A. Chairman of the board B. President C. Each vice-president and above (for example, senior vice-president, executive vice-president, and so on) D. Brokerage house"™s vice president

D. Brokerage house"™s vice president

In Processing and evaluating applications""12 CFR 202.6, protected income part is also under discussion. Which of the following considerations is NOT its part? A. Public assistance income may not consider whether an applicant"™s income is from a public assistance source B. Public assistance income may consider as it relates to another pertinent element of creditworthiness C. May consider length of time public assistance income will be received, whether the applicant will continue to qualify for the income, and whether the income can be garnished D. Can discount or refuse to consider the following: Part-time income Annuities Pensions Retirement benefits Alimony, child support, and separate maintenance payments to the extent they are likely to be consistently made

D. Can discount or refuse to consider the following: Part-time income Annuities Pensions Retirement benefits Alimony, child support, and separate maintenance payments to the extent they are likely to be consistently made

Which of the following transactions requires completion of FinCEN Form 104, a CTR? A. Deposit of checks totaling $12,000 to a checking account B. Cash purchase of a cashier"™s check for $7,800 C. Cash withdrawal of $3,000 from a checking account D. Cashing of a $14,000 check for a customer

D. Cashing of a $14,000 check for a customer

Of the following practices, which one is NOT accepted in insurance and annuity sales? A. Reviewing insurance company ratings B. Monitoring customer complaints against insurance companies C. Verifying that personnel are properly licensed D. Churning accounts

D. Churning accounts

In which of the following cases would First National Bank be required to give a branch closing notice? A. Removing its ATM from the local grocery store B. Opening a deposit-taking facility in a kiosk during a college fair for one weekend C. Moving its central branch across the street D. Closing its near-town neighborhood branch

D. Closing its near-town neighborhood branch

Mrs. Evans, a customer of First National Bank, deposits $15,000 in cash to her account. During the transaction, Mrs. Evans explains that she received the money in the mail from her sister in Europe. What responsibility does the bank have? A. Complete a Currency Transaction Report (CTR) B. Complete a United States Customs form 4790 (CMIR) C. Complete both a currency transaction report and a CMIR D. Complete a CTR and encourage Mrs. Evans to file a CMIR

D. Complete a CTR and encourage Mrs. Evans to file a CMIR

A compliance officer receives a call from a loan officer who asks for advice on what she should do with a stock certificate (1,437 shares of IBM) from a new loan customer who wants to pledge it in support of a loan that has been approved at your bank. What should the compliance officer tell her FIRST? A. Retain a copy of the certificate in the loan file B. Retain the original certificate in the branch vault for the term of the loan C. Record the certificate information and give the original back to the customer D. Contact the SIC to determine if the certificate was reported as lost, counterfeit, or stolen

D. Contact the SIC to determine if the certificate was reported as lost, counterfeit, or stolen

Records that must be retained for deposit accounts include which of the following? A. Average daily balance B. Overdraft history C. All amounts of currency deposited or withdrawn D. Customer"™s TIN

D. Customer"™s TIN

Several types of loan-related data appear in the following list. Which type of data is NOT required to be reported under HMDA? A. Data on multifamily housing B. Data on unsecured home improvement loans C. Data on refinancings of home purchase loans D. Data on loans to purchase residential lots

D. Data on loans to purchase residential lots

A bank is considering canceling its agreement with a broker to which it currently leases space in its lobby. The new plan would include an agreement with a different broker, but bank employees would complete product sales. What should the compliance manager do FIRST? A. Establish a licensing program for bank employees B. Establish a training plan for employees who will be selling the nondeposit investment products C. Obtain copies of SEC and NASD rules regarding nondeposit investment products D. Determine the additional compliance risk for the bank as a result of this change

D. Determine the additional compliance risk for the bank as a result of this change

A recent compliance review revealed that several branch officers are using obsolete loan application forms, which do not include disclosures related to credit insurance sales. Which of the following steps should be taken FIRST? A. Determine which customers were affected and take corrective action. B. Contact the bank"™s primary regulator to determine the best course of action. C. Instruct the branch to destroy all obsolete forms and immediately begin using the current versions. D. Determine whether the branches use a separate document for required credit insurance sales disclosure.

D. Determine whether the branches use a separate document for required credit insurance sales disclosure.

Which of the following transactions is subject to the provisions of Regulation O? A. Time deposit account held by a director B. Travel advance to an executive officer outstanding for less than 30 days C. Extension of credit to a director of an unaffiliated, competing, noncorrespondent bank D. Extension of credit to a member of the bank's board of directors

D. Extension of credit to a member of the bank's board of directors

In evaluating a bank"™s CRA performance, to what do bank examiners give the greatest consideration? A. Efforts to analyze the geographic origins of its deposit base B. Efforts to establish communication with members of the community regarding credit needs C. Participation of the bank"™s board of directors in formulating CRA policy D. Extensions of credit the bank has made where the financing benefits low and moderate-income borrowers or neighborhoods

D. Extensions of credit the bank has made where the financing benefits low and moderate-income borrowers or neighborhoods

For which of the following is a bank most likely to be in danger of receiving a cease and desist order? A. Repetition in a BSA examination of a noncritical deficiency reported in a previous BSA examination B. Failure to document AML training to its part-time clerical employees C. A 2 percent error rate on the bank"™s CTRs D. Failure to file suspicious activity reports

D. Failure to file suspicious activity reports

First National Bank sold several of its mortgage loans to individual investors and now services the loans for the individuals. First National Bank collects more than$600 on most of these mortgages and deposits the money into the account of the investors. At the end of each year, First National Bank sends the investors a summary of transactions on the mortgages and a detailed breakdown of the principal and interest payments made. Who is responsible for filing the mortgage interest information returns? A. The investors, because they own the loans and the money is collected for them B. The investors, because they have the necessary information from the servicer C. First National Bank, because it was the first owner of the loans D. First National Bank, because it collects the interest and has the information necessary to file the information return

D. First National Bank, because it collects the interest and has the information necessary to file the information return

Content of segregated disclosures in Consumer Leasing Act include all of the followingEXCEPT: A. Amount due at lease signing or delivery, itemized by type and amount, including: Refundable security deposit Advance monthly or other periodic payment Capitalized cost reduction An itemization of how the amount due will be paid, by type and amount (only required in a motor vehicle lease), using the model form B. Number, amount, and due date of payments scheduled and the total amount of periodic payments C. In an open-end lease, the descriptive statement "You will owe an additional amount if the actual value of the vehicle is less than the residual value" D. If there are multiple items of property, the property description may be separate

D. If there are multiple items of property, the property description may be separate

First National Bank does not have the TINs of several borrowers with mortgage loans. What should the bank do to fulfill the mortgage interest reporting regulations? A. Mail a one-time request for TINs by certified mail to each borrower who has failed to provide one B. Post a notice in its mortgage lending lobby that TINs are required for mortgage loans C. Mail a separate request for TINs annually to borrowers who have failed to provide one D. Include a request for TINs in the annual mailing of the payment coupon book

D. Include a request for TINs in the annual mailing of the payment coupon book

According to federal regulations, what must a security officer do when establishing a bank security program? A. Survey competitors' security procedures B. Hire uniformed armed guards to monitor the bank lobby C. Modify the cash vault to meet minimum wall thickness standards D. Institute procedures for testing security devices periodically

D. Institute procedures for testing security devices periodically

What obligation does a bank have to disclose a covered CRA agreement 40 months after it terminates? A. It must maintain a copy in its CRA public file. B. It must send a copy to its regulatory agency upon request. C. It must send a copy to a member of the public upon request. D. It has no obligation to disclose these covered CRA agreements.

D. It has no obligation to disclose these covered CRA agreements.

First National Bank made the following loans to Mr. James Wilson during the previous calendar year: "¢ Loan A, made on February 2, is a loan for purchasing margin stock and is secured by margin stock "¢ Loan B, made on March 15, is also for purchasing margin stock and is secured by margin stock "¢ Loan C, made on June 30, is an unsecured loan for purchasing margin stock "¢ Loan D, made on September 10, is for purchasing a car, secured by the carAll the loans are still outstanding at the end of the year. Which of the loans must be combined for purposes of the margin requirements of Regulation U? A. All of the loans must be combined B. Loans A and B C. None of the loans must be combined D. Loans A, B, and C

D. Loans A, B, and C

Guidelines for National Banks to Guard against Predatory and Abusive Lending Practices""AL-2003-2 says that refusing to purchase the following types of loans can reduce the possibility of purchasing abusive mortgage loans EXCEPT: A. Loans in which the lender has not adequately determined the borrower"™s ability to repay the debt B. Loans subject to the Home Ownership and Equity Protection Act (HOEPA) C. Loans with points and fees in excess of 5 percent of the loan amount, except in cases where the higher amount was to prevent the loan from being unprofitable D. Loans in which a prepaid multiple-premium credit insurance policy was included in the amount financed

D. Loans in which a prepaid multiple-premium credit insurance policy was included in the amount financed

Debt collector may not abuse or harass the consumer by: A. Using or threatening to use violence or to harm the physical person, reputation, or property of any person when collecting a debt B. Using obscene, profane, or abusive language when communicating with anyone C. Allowing a telephone to ring repeatedly or engaging a person in telephone conversations repeatedly with the intent to abuse or harass D. Making telephone calls without meaningful disclosure of the caller"™s identity

D. Making telephone calls without meaningful disclosure of the caller"™s identity

Which of the following is MOST effective in strengthening an anti-money- laundering program involving cash transactions? A. Review all deposits of $25,000 or more B. Complete CTR worksheets on all cash transactions of $5,000 or more C. Complete SAR worksheets on all cash transactions of $5,000 or more D. Monitor cash transactions of less than $10,000 for suspicious patterns

D. Monitor cash transactions of less than $10,000 for suspicious patterns

Bob Richardson has had three loan applicants this morning:"¢ Heather Smith, age 17, who needs a car loan for $9,500 for 3 years "¢ John Bako, age 42, who would like a stock loan for $15,000 for 1 year "¢ Maynard Williams, age 70, recently retired, who needs a $50,000 home improvement loan for 12 years Bob"™s bank uses a judgmental credit evaluation system.For which of these applications is Bob able to consider the age of the applicant as a factor in the decision making process? A. All of them B. None of them C. Only Mr. Williams D. Mr. Williams and Ms. Smith

D. Mr. Williams and Ms. Smith

FDIC guidance lists three requirements to ensure compliance with spousal signature rules include all of the following EXCEPT: A. Review and revise policies Eliminate policies or procedures that are inconsistent with the requirements Expand loan policies and procedures to provide loan staff with specific guidance on state law(s) regarding requiring signatures Cover the laws of all states where the creditor institution does business Create checklists to address situations when spousal signatures can be required B. Provide training to consumer and commercial loan staff C. Implement monitoring and auditing programs to check for spousal signature violations D. Must allow an applicant to designate a birth-given first name and a birth-given, surname, spouse"™s surname, or combination

D. Must allow an applicant to designate a birth-given first name and a birth-given, surname, spouse"™s surname, or combination

Martha Smith of First National Bank is attempting to close a large commercial loan to a manufacturing equipment company. In negotiating the interest rate on the loan Martha states that if the company will move some of its demand accounts to the bank, it could get a lower interest rate. Is this wrong? A. Yes. It violates the anti-tying provisions. B. Yes. It is a restraint of trade. C. No, unless moving the accounts is a condition of the loan. D. No. The bank may condition the loan on the customer placing a deposit in the bank.

D. No. The bank may condition the loan on the customer placing a deposit in the bank

Lending restrictions under requirements 12 CFR 215; 12 CFR 337, 12 CFR 349 are all of the following EXCEPT: A. Banks may not lend to executive officers, directors, principal shareholders, or any of their related interests unless the credit is made on substantially the same terms and following credit underwriting standards that are not less stringent than those on loans to persons who are not insiders; however, if the bank has a benefit program widely available to its employees, it may lend to insiders on the same terms and conditions as it lends to its other employees, pursuant to its employee benefit pr B. Banks may not lend to any executive officer, director, or principal shareholder, and to any of their related interests, amounts that exceed the higher of $25,000 or 5 percent of the bank"™s capital and unimpaired surplus (up to a maximum of $500,000) in the aggregate unless The credit is approved in advance by the board of directors The interested party has abstained from voting C. Prior approval is not needed for each draw against a line of credit provided the line of credit was approved within the preceding 14 months, based on the then- current financial statement D. None of these

D. None of these

State National Bank is a $250 million community bank. It makes a variety of consumer and commercial loans, regularly transmits funds via wire transfers for its customers, and issues commercial and stand-by letters of credit. Which of the following transactions can State National make without checking the OFAC SDN list and without incurring liability? A. Send a wire transfer via its correspondent bank in New York for a commercial customer. B. Sell a cashier"™s check payable to a third party. C. Cash an on-us check over-the-counter for a noncustomer. D. None. The bank can be liable for all.

D. None. The bank can be liable for all.

Big Nationwide Bank has decided to close one of its smaller branches in Texas. A community association from the small town where the branch is located is not pleased with the decision because Big Nationwide"™s branch is the only financial institution in the small town. The community group complains to the federal agency that regulates Big Nationwide. What must Big Nationwide do in light of this protest against its decision to close the branch? A. Re-post the notice and wait an additional 90 days B. Send the federal agency a detailed statistical analysis that is consistent with its branch closing policy and that proves why closing the branch is economically necessary C. Meet with the community group, explain their reasoning, and help the group find some alternative financial services D. Nothing is required

D. Nothing is required

ACME national bank plans to acquire Smith Brothers insurance agency and make it an operating subsidiary of the bank. ACME is considered a well-managed and adequately capitalized bank. What regulatory-related action must ACME take to obtain the agency? A. Complete the sale of the agency and notify the OCC within 10 days B. Complete the sale of the agency and notify the OCC within 30 days C. No regulatory notice is required D. Notify the OCC before completing the sale

D. Notify the OCC before completing the sale

ABC Bank has an interactive Internet Web site at which it takes consumer credit applications. At the time an applicant completes an application on the Web site and submits it, the applicant also is asked for his or her email address. If the application is denied, ABC sends an adverse action notice to the applicant"™s email address listed on the application. Using this procedure, what is ABC Bank"™s responsibility? A. Post the notice on its Web site also B. Send a paper notice by regular mail also C. Use a credit scoring system D. Obtain the applicant"™s affirmative consent before sending the notice

D. Obtain the applicant"™s affirmative consent before sending the notice

An individual comes into the bank and makes a $6,000 cash deposit into a checking account. At the same time, the individual buys a $7,000 cashier"™s check with cash. According to the Bank Secrecy Act, what is the bank is required to do? A. File a SAR for $13,000 B. File a CTR for the $6,000 cash deposit C. Aggregate the transactions and retain information about the purchase of the cashier"™s check D. Obtain the recordkeeping information for the purchase of the cashier"™s check and complete a CTR for the total cash-in transaction of $13,000

D. Obtain the recordkeeping information for the purchase of the cashier"™s check and complete a CTR for the total cash-in transaction of $13,000

The liability of paying and returning banks is subject to the following conditions and limitations EXCEPT: A. The paying or returning bank that sends an original check that is returned as a substitute check or paper or electronic representation thereof will not be responsible for amounts the Reserve Bank pays under Regulation CC absent the paying bank"™s or returning bank"™s agreement to the contrary B. Regulation CC governs the paying and returning banks"™ liabilities when returning a substitute check or paper or electronic representation thereof C. The paying or retuning bank that sends an electronic item that is not a representation of a substitute check will not be liable for losses attributable to the Reserve Bank"™s own lack of good faith or failure to exercise ordinary care D. Paying and returning banks agree to indemnify each Reserve Bank for any loss or expense resulting from the paying or returning bank"™s lack of authorization or any action by a Reserve Bank within the scope of its authority related to the return of the check or any warranty made by the Reserve Bank

D. Paying and returning banks agree to indemnify each Reserve Bank for any loss or expense resulting from the paying or returning bank"™s lack of authorization or any action by a Reserve Bank within the scope of its authority related to the return of the check or any warranty made by the Reserve Bank

Which of the following is the best method for a large bank to use in monitoring its CRA performance? A. Review the effectiveness of marketing materials. B. Evaluate approval and denial rates for minority loan applicants. C. Perform a quarterly evaluation of the bank"™s loans-to-deposits ratio. D. Perform a geographic analysis of lending levels and dispersion of loans.

D. Perform a geographic analysis of lending levels and dispersion of loans.

A bank"™s president would like to begin offering a new home equity line of credit product within two weeks. In all cases the borrower"™s principal dwelling will secure the loan. The president has already launched a planned advertising campaign for the bank"™s major service markets. What should the compliance professional doFIRST? A. Hire an attorney to write the appropriate legal documents and disclosures B. Write a memo to the president explaining why the compliance professional should have been in on the process at an earlier date C. Begin training sessions for the lending and loan operations staff on the compliance issues involved D. Perform a risk assessment to determine the bank"™s level of risk in offering this new product

D. Perform a risk assessment to determine the bank"™s level of risk in offering this new product

Your institution has identified a transaction by an existing depositor that should be blocked under OFAC requirements. The branch manager contacts you for specific instructions. Before reporting the transaction to OFAC, what should the bank do? A. Reject the transaction B. Process the transaction C. Close the customer"™s account D. Place the funds in an interest-bearing account

D. Place the funds in an interest-bearing account

Which of the following is NOT a requirement of Regulation F? A. Writing and maintaining policies and procedures for managing exposure to correspondent banks B. Monitoring the exposure to correspondent banks on a regular basis C. Establishing internal limits on exposure to correspondents D. Providing quarterly reports to the board of directors of compliance audit results

D. Providing quarterly reports to the board of directors of compliance audit results

A bank representative is selling insurance products in, or on behalf of, the bank. What may the representative NOT require the customer to do? A. Pre-pay a portion of the initial premium B. Complete an application for the insurance on the premises C. Obtain a medical examination for life insurance coverage D. Purchase the insurance from an affiliate of the institution

D. Purchase the insurance from an affiliate of the institution

The manager of Main Street branch calls and relates the following information: John Smith purchased a cashier"™s check for $1,000 cash at 10:00 a. m. onTuesday. At 11:30 a. m. Mr. Smith returned and purchased a cashier"™s check for $2,500 cash and deposited traveler"™s checks totaling $9,000 into his checking account. At 4:00 p.m. Mr. Smith returned and deposited $8,000 cash into his checking account. This deposit was after normal banking hours, so it was recorded as of Wednesday"™s business date. What action should the bank take? A. None, because no single cash transaction exceeded $10,000 B. File a Currency Transaction Report (CTR) for $11,500 C. Record the $1,000, $2,500, and $9,000 transactions on the bank"™s monetary instrument sales log because the total exceeds the $3,000 threshold D. Record the $1,000 and $2,500 transactions on the bank"™s monetary instrument sales log because the total exceeds the $3,000 threshold

D. Record the $1,000 and $2,500 transactions on the bank"™s monetary instrument sales log because the total exceeds the $3,000 threshold

Under content of disclosures long term disclosures may include the following, as applicable EXCLUDING: A. Notification that the product is optional B. Explanation of debt-suspension agreement C. Lump-sum payment of fee with no refund D. Refund of fee paid in lump sum

D. Refund of fee paid in lump sum

Compliance issues related to payday lending are all of the following EXCEPT: A. Payday lending may adversely affect a bank"™s CRA rating. Any illegal or questionable practices will negatively affect a bank"™s CRA performance. A payday lending program may be inconsistent with helping to meet the community"™s credit needs B. The bank (or its third-party partner) must properly disclose all finance charges and fees to payday lending customers. Advertisements of the program are also subject to Truth-in-Lending requirements C. Adverse action disclosures must be provided to applicants of payday loans that are denied if a consumer report (including check tracking services) was used in the credit decision D. The bank may be subject to the FOC"™s unfair or deceptive practices rules.

D. The bank may be subject to the FOC's unfair or deceptive practices rules

Martha Whitmire, the BSA Compliance Officer for First National Bank, is responsible for monitoring the bank"™s daily currency activity and wire transfers, for compliance with information retention and reporting requirements. Ms. Whitmire notices during her review on March 10 that, during the previous two weeks, a transaction occurred on the same account several times during the week. The activity appeared at one branch office as cash deposits in dollar amounts under the reporting thresholds. Ms. Whitmire discusses this activity with the branch manager and determines that this same deposit activity occurred several times during the previous six weeks. She then conducts a more extensive examination of the account"™s activity for several months and discovers that cash deposits were made at one branch office and purchases of bank cashiers checks were made by withdrawals from the same account at a different branch office. All withdrawals and purchases of cashier"™s checks were for the identical amount as the cash deposits. Which statement best describes Ms. Whitmire"™s responsibility? A. Complete a CTR for each of the cash activities at the branch office B. Make no report of the activities because the transactions were not discovered until after the 15-day reporting deadline C. Report the account activity to senior management for further review D. Report the account activity as suspicious account activity and recommend that a SAR be filed

D. Report the account activity as suspicious account activity and recommend that a SAR be filed

The OCC recommends all but one of the following actions to help prevent a national bank"™s purchasing or acquiring predatory or abusive loans. Which practice isNOT recommended? A. Establish policies on the bank"™s relationship with third-party brokers and originators B. Review loan documentation C. Audit the third-party broker D. Require the broker to establish a reserve account for legal contingencies

D. Require the broker to establish a reserve account for legal contingencies

During a recent compliance examination, regulators cited the bank for violations of various marketing regulations. How should the compliance professional FIRST respond? A. Contact the bank"™s marketing manager to discuss the finding B. Develop a policy requiring that all marketing materials be reviewed and approved by compliance before being published C. Set up a training class for the marketing department D. Review the marketing materials and applicable regulations to verify the finding.

D. Review the marketing materials and applicable regulations to verify the finding.

A recent audit revealed that the bank's personal trust division was failing to determine whether securities being accepted from new trust customers have been reported as lost or stolen. To address the root cause of this problem, what should the compliance officer do FIRST? A. Inquire with the SIC about all securities noted in the audit B. Contact the bank's primary regulator to determine the best course of action C. Retrain all personal trust administrators on the lost and stolen securities requirements D. Review the policies and procedures for accepting securities in new personal trust relationships to ensure securities verification

D. Review the policies and procedures for accepting securities in new personal trust relationships to ensure securities verification

Margin stock includes: A. Equity securities registered or having delisted trading privileges on a national securities exchange: B. Over-the-counter (OTC) securities that do not qualify for trading in the National Market System C. Warrants or rights to subscribe to or purchase a common stock D. Securities issued by an investment company registered under the Investment Company Act, except for: A company licensed under the Small Business Investment Company Act A company that has at least 95 percent of its assets continuously invested in exempted securities; or A company that issues face-amount certificates; or A company that is considered a money market fund under the SEC Rules

D. Securities issued by an investment company registered under the Investment Company Act, except for: A company licensed under the Small Business Investment Company Act A company that has at least 95 percent of its assets continuously invested in exempted securities; or A company that issues face-amount certificates; or A company that is considered a money market fund under the SEC Rules

Which of the following bank policies does NOT comply with the Interagency Policy Statement on the Retail Sales of Nondeposit Investments? A. Supervisors and sales personnel will receive compensation based on the volume of sales each department achieves as well as the effectiveness of the department"™s ability to find suitable investments for customers. B. All bank employees engaged in the sale of nondeposit investments will provide the bank"™s required disclosures to all customers before the purchase of a nondeposit investment product. C. No teller will discuss nondeposit investment products with a bank customer. D. Tellers and new accounts personnel will receive a $25 fee for all customers referred to the nondeposit investment department on the customer"™s purchase of an investment product.

D. Tellers and new accounts personnel will receive a $25 fee for all customers referred to the nondeposit investment department on the customer"™s purchase of an investment product.

ACME Bank would like its tellers to help sell insurance products to new and existing customers. The tellers would refer customers to personal bankers who have insurance licenses from the state. The bank would like to reward tellers by giving them a small percentage of the commission for each policy sold where the sale resulted from a referral. Which of the following statements presents ACME"™s biggest concern in complying with the Consumer Protection in Sales of Insurance regulation? A. It is difficult for many people to get an insurance license. B. It is hard for tellers to handle so many types of products. C. It is hard to physically separate insured deposit products from insurance products. D. Tellers should not be rewarded only when the referral results in a sale.

D. Tellers should not be rewarded only when the referral results in a sale.

First National Bank (FNB) purchased a table for $500 at the Governor"™s reelection fundraising dinner last fall. FNB President Sally Holmes tells Mary Watkins, the municipal securities principal, that the bank is planning to participate in the upcoming state highway bond. What does Ms. Watkins tell President Holmes? A. The bank cannot participate without prior approval of the MSRB. B. The bank can participate because national banks are exempt from MSRB rules. C. The bank can participate, provided it includes the contribution on its next disclosure. D. The bank cannot participate within two years of a contribution to the issuer.

D. The bank cannot participate within two years of a contribution to the issuer.

State National Bank has a Web site on which it advertises all of its products. One page of the Web site is devoted to the products of its affiliate, State NationalInvestment Products, Inc. The affiliate sells uninsured mutual funds and various other investments not insured by the FDIC. What are State National"™s responsibilities for this advertising? A. None. The affiliate is responsible. B. None. Because it is a Web site, the advertising rules do not apply. C. The bank must make sure the FDIC logo is properly placed. D. The bank must make sure that the noninsured disclosures are on this page and that the FDIC logo does not appear.

D. The bank must make sure that the noninsured disclosures are on this page and that the FDIC logo does not appear.

Which of the following is an accurate statement according to the requirements of the customer identification program regulations? A. A bank must always require documentary verification of a customer"™s identification B. A bank may waive any part of the CIP requirements if senior management approves the waiver and there is a good cause C. A physical address or a post office box is acceptable for any new customer D. The bank"™s CIP program must enable it to form a reasonable belief about the identity of the person

D. The bank"™s CIP program must enable it to form a reasonable belief about the identity of the person

A banking agency is conducting a credit needs determination. Which of the following is NOT a criterion used in such a determination? A. The bank"™s CRA rating B. Economic conditions, including loan demand in the bank"™s communities C. Whether the bank was once part of a failed institution D. The bank"™s profitability ratios

D. The bank"™s profitability ratios

Which of the following is NOT a requirement when a bank pays an employee a fee for referring a high-net-worth or institutional customer to a broker? A. The bank must have a written agreement with the broker B. The bank must give a disclosure to the customer C. The bank must reasonably believe that the customer is a high net worth or institutional customer D. The employee must be registered with the bank"™s regulatory agency

D. The employee must be registered with the bank"™s regulatory agency

A bank has given a customer a merchandise gift with a fair market value of $25.00 for opening a deposit account. Which of the following statements describes the proper reporting status of this gift? A. If the cost of the gift is under $20.00, it is not reportable to the IRS. B. The cost of the gift is credited to the customer's account as a bonus, increasing the account balance. C. The fair market value of the gift is reported to the customer on the periodic statement. D. The fair market value of the gift is added to the interest paid and reported on Form 1099-INT.

D. The fair market value of the gift is added to the interest paid and reported on Form 1099-INT.

Which of the following representations on the HMDA loan application register is a violation of Regulation C? A. The MSA number, instead of the MSA name, is used for each loan and application B. The "reasons for denial" column is blank C. Race, national origin, and gender information are not included for purchased loans D. The gender of the applicant is designated by the letters M or F

D. The gender of the applicant is designated by the letters M or F

Of the following types of data, which one is NOT required to be reported for each application for an originated loan subject to Regulation C? A. Purpose of the loan B. Race, ethnicity, and sex of the applicant C. Type of action taken and the date D. The interest rate on the loan

D. The interest rate on the loan

If a bank makes a loan that is in compliance with Regulation U, what will be the status of the loan at its consummation? A. The loan will be in compliance until it is renewed, regardless of the reduction of the borrower"™s equity in the stock. B. The loan will be in compliance only if the value of the stock remains within the margin requirements. C. The loan will be in compliance unless the status of the stock changes (for example, margin or nonmargin) D. The loan will always be in compliance until its maturity, regardless of the reduction of the borrower"™s equity in the stock, provided there are no substitutions or withdrawals that adversely affect the loan value.

D. The loan will always be in compliance until its maturity, regardless of the reduction of the borrower"™s equity in the stock, provided there are no substitutions or withdrawals that adversely affect the loan value.

John and Elise Fernandez apply to ABC Bank for a loan to purchase a manufactured home. ABC Bank is a community bank with approximately $100 million in assets, and the home would be located outside of the bank"™s metropolitan area. Mr. and Mrs. Fernandez complete an in-person application for a mobile home that is denied by the bank due to insufficient income. Which piece of information on the Fernandez application is ABC Bank NOT required to report on its HMDA LAR? A. The ethnicity of the applicants B. The race of the applicants C. The purpose of the loan application D. The metropolitan area where the home will be located

D. The metropolitan area where the home will be located

There is no established template for documenting compliance risk. Each institution should develop a risk assessment that fits its risk profile. The components that are commonly used throughout the industry are as follows EXCEPT: A. Risk assessment B. Measuring key risk indicators C. Identifying key performance indicators D. Training the leadership of compliance regulation program

D. Training the leadership of compliance regulation program

When developing a training plan for commercial lenders, which of the following regulations is least important to include? A. Equal Credit Opportunity, FRS Regulation B B. Home Mortgage Disclosure, FRS Regulation C C. Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks, FRS Regulation O D. Truth in Lending Act, FRS Regulation Z

D. Truth in Lending Act, FRS Regulation Z

When may an automatically renewable time deposit account be considered for inclusion in the unclaimed property report? A. When a customer has corresponded with the bank but not made deposits to the account B. When a customer has shown interest in the account but not made deposits to the account C. When a customer does not instruct the bank in writing to roll over the account D. When the customer has not deposited or withdrawn funds from the account or another account at the same bank

D. When the customer has not deposited or withdrawn funds from the account or another account at the same bank

When is it permissible for a bank that is a government securities broker or dealer to refrain from filing a Form G-FIN-5 or a Form MSD-5 when an employee terminates the associated person status? A. When the employee files the form B. When the bank does not have all the necessary information and notifies its regulatory agency C. When the employee"™s status is reinstated within six months D. When the employee remains employed by the bank and the bank notifies its regulatory agency

D. When the employee remains employed by the bank and the bank notifies its regulatory agency

Which of the following factors would NOT be considered when evaluating whether specific behavior by a banker violates the statute? A. The social and family ties of the banker B. The standard for business amenities and entertaining in that particular part of the country C. Whether there was a demonstrable business purpose D. Whether a business transaction was consummated as a result

D. Whether a business transaction was consummated as a result

A current member of the board of directors at First Savings Association (an institution with $150 million in total assets) was a director at First National Bank (an institution with total assets of $200 million) for many years. The two institutions are located in the same town. Before being elected to the board of First Savings, the director retired from the First National board. To honor his years of service with First National, the bank made him a director emeritus for life. He can attend any board meeting but cannot vote. He may speak to matters before the board and receives a director"™s fee. In actuality, however, the director never attends board meetings. Does this relationship violate Regulation L? A. No, because he does not attend meetings. B. No, because he cannot vote. C. Yes, because he receives a fee. D. Yes, because he is really an honorary director.

D. Yes, because he is really an honorary director.

Bob"™s wife is HIV-positive due to a blood transfusion during an appendectomy 15 years ago. She is not yet sick, but takes medication to prevent the onset of AIDS.Bob occasionally needs to take time off from work to take her for testing at Johns Hopkins in Baltimore. Because of complaints about Bob"™s exposure to this disease, employees have asked HR to limit his contact with them and with customers. The bank has asked Bob not to eat in the lunchroom with the other employees and has placed Bob in a position where he has limited customer contact. Does this company have any potential ADA liability? A. No. Bob"™s exposure to HIV could endanger other employees and customers B. No. Because the hiring manager does not know that Bob actually has HIV or AIDS, there is no liability C. Yes. Because the manager has associated Bob with this disease, the "associated with" rule applies D. Yes. Because the manager has regarded Bob as having a disability, he has been "regarded as" disabled and the ADA applies

D. Yes. Because the manager has regarded Bob as having a disability, he has been "regarded as" disabled and the ADA applies

First National Bank has an employee benefit program whereby all bank employees who meet the bank"™s credit underwriting standards may obtain consumer loans for major purchases or expenses at a rate that is less than the bank"™s prime rate. Can the bank allow its executive officers to borrow under this program? A. No. Executive officers may not have preferential interest rates under any circumstances. B. No. However, the related interests of the executive officers may take advantage of it. C. Yes. However, executive officers must secure their loans with collateral valued at 100 percent of the loan balance or more. D. Yes. Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.

D. Yes. Provided the program is available to everyone at the bank as an employee benefit, executive officers may also participate.

Roger Jameson is the head of the consumer loan department at First National Bank. He is a regular participant in a lending committee of a local finance trade association. The committee meets once a month at a local hotel. After the committee meetings, Roger and several other committee members who are officers at other banks in town go to a hotel restaurant and talk for a couple of hours before leaving. During these informal conversations Roger learned that the other members require the car dealerships in town that sell consumer installment contracts to the banks to refrain from selling them to local savings and loan associations. Roger believes that this is a good idea and would like to implement it at First National. Is there a problem with doing so? A. No, because interest rates are not involved. B. No, because this decision would have no effect on the cost to the consumer. C. Yes, unless there are enough dealerships in town to provide contracts to all of the institutions. D. Yes. Restricting the dealerships is a restraint of trade.

D. Yes. Restricting the dealerships is a restraint of trade.

James Walker DBA Walker Enterprises has been a customer of the bank for one month. The company told the bank that it would regularly make deposits in excess of $10,000 because it operates several laundromats in the city. The bank performed a background check on the company before opening the account. For its first 30 days, the company made 12 large cash deposits. Can the bank exempt this company now? Why or why not? A. No. It is a not a corporation, but a sole proprietorship. B. No. It has not maintained an account at the bank for 12 months. C. No. It operates an ineligible business. D. Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.

D. Yes. The bank conducted due diligence on the customer to determine that it had legitimate large cash transactions.

Cassandra Phillips requested a loan to purchase a boat. She asked for $15,000 at 7.5 percent for seven years. The bank considered her request but decided, considering her income and credit history, the best offer of credit the bank could make was $10,000 at 8.25 percent for five years. Rhonda Mays, the loan officer, wrote a letter, setting forth the terms the bank could offer. The letter was mailed on July 1. Ms. Phillips received the letter and began to look elsewhere for a loan on the terms and conditions she wanted. Does the bank have any additional responsibility to Ms. Phillips? A. No. Because the bank made the offer of a loan, there is no further responsibility. B. No. Because the customer decided to look elsewhere, there is no further responsibility. C. Yes. The bank must follow up with a phone call to determine if Ms. Phillips is still interested. D. Yes. The bank must send an adverse action notice because Ms. Phillips did not take the bank"™s counteroffer.

D. Yes. The bank must send an adverse action notice because Ms. Phillips did not take the bank"™s counteroffer.

The sender agrees to indemnify each Reserve Bank for: A. Any loss or expense resulting from sender"™s lack of authority B. Any action taken by the Reserve Bank within the scope of its authority in the handling of the item C. An electronic item that is not a substitute check is not liable for any amount paid by a Reserve Bank that is attributable to the Reserve Bank"™s own lack of good faith or failure to exercise ordinary care D. Any warranty made by the Reserve Bank under Regulation J, Regulation CC, or the UCC

The sender agrees to indemnify each Reserve Bank for: A. Any loss or expense resulting from sender"™s lack of authority, and B. Any action taken by the Reserve Bank within the scope of its authority in the handling of the item, and D. Any warranty made by the Reserve Bank under Regulation J, Regulation CC, or the UCC