Apply AML Requirements - Securities Industry Essentials SIE

1. What is a common AML red flag involving third parties and account control?

   Unexplained third-party control or funds from unrelated parties. Unexplained third-party involvement raises suspicions of layering or control in money laundering schemes.

2. Which U.S. agency administers and enforces economic and trade sanctions used in OFAC screening?

   OFAC (U.S. Treasury). OFAC, part of the U.S. Treasury, implements sanctions programs that firms must screen against for compliance.

3. What is the standard SAR filing deadline after initial detection of suspicious activity?

   Within $30$ calendar days of initial detection. The 30-day timeline allows for investigation while ensuring prompt reporting to FinCEN as per BSA regulations.

4. What is the extended SAR filing deadline when a suspect cannot be identified promptly?

   Within $60$ calendar days of initial detection. The extended deadline applies when additional time is needed to identify subjects, maintaining compliance with SAR requirements.

5. Which four basic data elements must a CIP generally collect for an individual customer?

   Name, date of birth, address, identification number. These elements are mandated by CIP regulations to establish and verify customer identity for AML compliance.

6. Identify the correct action: a potential OFAC match appears during account opening screening.

   Escalate for review; do not transact until cleared by procedures. Firms must follow internal procedures to investigate matches and avoid violating OFAC sanctions.

7. What is a Suspicious Activity Report (SAR) used for in the securities industry?

   Report suspicious transactions potentially involving illegal activity. SARs are required under the Bank Secrecy Act to notify authorities of transactions that may indicate money laundering or other crimes.

8. What is the AML rule requirement regarding independent testing of a broker-dealer AML program?

   Independent testing must be conducted periodically. FINRA and SEC rules require regular independent audits to ensure the AML program's effectiveness and compliance.

9. What is the role of the designated AML compliance person (AML officer) at a broker-dealer?

   Oversee and enforce the firm AML program and reporting. The AML officer is responsible for implementing and monitoring the program to meet regulatory obligations under the Bank Secrecy Act.

10. What is the primary purpose of an AML program at a broker-dealer under the Bank Secrecy Act?

    Detect and report money laundering and suspicious activity. The Bank Secrecy Act mandates broker-dealers to establish AML programs to identify potential money laundering and ensure timely reporting of suspicious activities.

11. What does ongoing AML training require for appropriate broker-dealer personnel?

    Periodic training on AML laws, red flags, and procedures. Training ensures personnel can recognize and respond to money laundering risks in accordance with FINRA and BSA requirements.

12. Identify the likely issue: a customer makes $9000$ cash deposits on consecutive days to avoid reporting.

    Structuring to evade CTR reporting. Deposits below the threshold on consecutive days suggest intent to evade BSA reporting obligations.

13. What is the required action if a customer is a confirmed match to an OFAC blocked person?

    Block (freeze) assets and report to OFAC per procedures. OFAC rules mandate asset freezing and reporting to prevent sanctioned parties from accessing U.S. financial systems.

14. Identify whether a CTR is required: customer deposits $10000$ in cash in one day.

    No; CTR is for more than $10000$. BSA requires CTRs only for transactions exceeding $10,000 in a single business day.

15. What does CIP (Customer Identification Program) require a firm to do before opening an account?

    Verify customer identity using reliable documents or methods. CIP rules under the USA PATRIOT Act require firms to obtain and verify customer identity to prevent illicit activities like money laundering.

16. Which regulator receives SAR filings from broker-dealers (the U.S. financial intelligence unit)?

    FinCEN. FinCEN, as the U.S. Treasury's financial intelligence unit, collects and analyzes SARs to combat financial crimes.

17. Identify whether a CTR is required: customer deposits $6000$ cash, then $5000$ cash same day.

    Yes; aggregated cash is $11000$ in one business day. Multiple transactions by the same person aggregating over $10,000 in one day trigger CTR filing under BSA rules.

18. Which list is most commonly checked during OFAC screening for blocked persons and entities?

    SDN (Specially Designated Nationals) List. The SDN List identifies individuals and entities subject to blocking under OFAC sanctions programs.

19. What is the CTR reporting threshold for currency transactions in a single business day?

    More than $10000$ in currency. The threshold is set by BSA to monitor significant cash transactions that could indicate illicit activities.

20. Identify the likely AML concern: customer refuses to provide CIP information but wants to trade immediately.

    CIP failure; account should not be opened or used until verified. CIP regulations prohibit account opening or transactions without verified identity to mitigate AML risks.

21. What is the purpose of a Currency Transaction Report (CTR)?

    Report large currency transactions to FinCEN. CTRs help track large cash flows to detect potential money laundering as required by the Bank Secrecy Act.

22. What is structuring in the context of CTR reporting requirements?

    Breaking up transactions to evade the CTR threshold. Structuring is illegal under BSA as it intentionally avoids triggering CTR requirements.

23. What is the main purpose of OFAC screening at a broker-dealer?

    Prevent dealings with sanctioned persons, entities, and countries. OFAC regulations prohibit U.S. firms from transacting with sanctioned parties to enforce foreign policy and national security goals.

24. What is the key confidentiality rule regarding SARs for customers and third parties?

    SAR filing and contents must not be disclosed (no tipping off). Confidentiality prevents alerting suspects, preserving the integrity of investigations under BSA rules.

25. What is a common AML red flag involving account activity inconsistent with a customer profile?

    Unusual transactions inconsistent with stated business or income. Such inconsistencies may indicate money laundering, requiring monitoring under AML program guidelines.

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