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Question 1 of 30
1. Question
Which of the following is/are examples of “red flags” that could cause further investigation?
I. A customer is from, or has accounts in a third world country with questionable government policies
II. A corporate customer lacks general knowledge of its own industry
III. A customer is unconcerned with risks, commissions or other costs associated with trading
IV. A customer exhibits an unusual level of concern for secrecy, particularly with regard to the customer’s identity, type of business or source of assetsCorrect
Firms should provide employees with examples of behavior or activity that should raise a “red flag” and cause further inquiry. These “red flags” may alert employees to possible suspicious activity. Some examples of “red flags” that could cause further investigation include:
- A customer exhibits an unusual level of concern for secrecy, particularly with regard to the customer’s identity, type of business or source of assets;
- A corporate customer lacks general knowledge of its own industry;
- A customer is unconcerned with risks, commissions or other costs associated with trading;
- A customer appears to be acting as an agent for another entity or individual but is evasive about the identity of the other entity or individual (except situations involving the identity of ownership interests in a collective investment vehicle);
- A customer is from, or has accounts in a country identified as, a haven for bank secrecy, money laundering or narcotics production;
- A customer engages in extensive, sudden or unexplained wire activity (especially wire transfers involving countries with bank secrecy laws);
- A customer engages in transactions involving more than $5,000 in currency or cash equivalents (in one transaction or a series of transactions in one or more days and in any number of accounts); and
- A customer makes a funds deposit followed by a request that the money be wired out or transferred to a third party, or to another firm, without any apparent business purpose.
Incorrect
Firms should provide employees with examples of behavior or activity that should raise a “red flag” and cause further inquiry. These “red flags” may alert employees to possible suspicious activity. Some examples of “red flags” that could cause further investigation include:
- A customer exhibits an unusual level of concern for secrecy, particularly with regard to the customer’s identity, type of business or source of assets;
- A corporate customer lacks general knowledge of its own industry;
- A customer is unconcerned with risks, commissions or other costs associated with trading;
- A customer appears to be acting as an agent for another entity or individual but is evasive about the identity of the other entity or individual (except situations involving the identity of ownership interests in a collective investment vehicle);
- A customer is from, or has accounts in a country identified as, a haven for bank secrecy, money laundering or narcotics production;
- A customer engages in extensive, sudden or unexplained wire activity (especially wire transfers involving countries with bank secrecy laws);
- A customer engages in transactions involving more than $5,000 in currency or cash equivalents (in one transaction or a series of transactions in one or more days and in any number of accounts); and
- A customer makes a funds deposit followed by a request that the money be wired out or transferred to a third party, or to another firm, without any apparent business purpose.
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Question 2 of 30
2. Question
FCMs and IBs are required to file form SAR with FinCEN to report suspicious transactions when the transaction or pattern of transactions involves the following except?
Correct
For transactions occurring after May 18, 2004, FCMs and IBs are required to file form SAR with FinCEN to report suspicious transactions that are conducted, or attempted by, at, or through an FCM or IB, involve an aggregate of at least $5,000 in funds or other assets (not limited to currency), and the FCM or IB knows, suspects or has reason to suspect that the transaction or pattern of transactions:
- Involves funds that come from illegal activity or are part of a transaction designed to conceal that the funds are from illegal activity;
- Is designed, such as through structuring, to evade the reporting requirements of the BSA;
- Does not appear to serve any business or apparent lawful purpose; or
- Involves the use of the FCM or IB to facilitate a criminal transaction.
Incorrect
For transactions occurring after May 18, 2004, FCMs and IBs are required to file form SAR with FinCEN to report suspicious transactions that are conducted, or attempted by, at, or through an FCM or IB, involve an aggregate of at least $5,000 in funds or other assets (not limited to currency), and the FCM or IB knows, suspects or has reason to suspect that the transaction or pattern of transactions:
- Involves funds that come from illegal activity or are part of a transaction designed to conceal that the funds are from illegal activity;
- Is designed, such as through structuring, to evade the reporting requirements of the BSA;
- Does not appear to serve any business or apparent lawful purpose; or
- Involves the use of the FCM or IB to facilitate a criminal transaction.
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Question 3 of 30
3. Question
Which of the following statement with regards to the SAR is false?
Correct
FCMs and IBs must file a SAR within 30 days after the firm becomes aware of the suspicious transaction. However, if the identity of the suspect involved is unknown on the date the firm first becomes aware of the suspicious transaction, the firm may delay filing up to an additional 30 days in order to identify the suspect. A copy of the SAR and all supporting documentation must be maintained for five years from the date the SAR was filed.
Incorrect
FCMs and IBs must file a SAR within 30 days after the firm becomes aware of the suspicious transaction. However, if the identity of the suspect involved is unknown on the date the firm first becomes aware of the suspicious transaction, the firm may delay filing up to an additional 30 days in order to identify the suspect. A copy of the SAR and all supporting documentation must be maintained for five years from the date the SAR was filed.
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Question 4 of 30
4. Question
FCMs and IBs must develop risk-based ongoing CDD procedures that are designed to do which of the following?
I. Understand the nature and purpose of customer relationships for purposes of developing a customer risk profile
II. Conduct ongoing monitoring to identify and report suspicious transactions
III. Maintain and update customer information, including information regarding the beneficial owner of a legal entity customer
IV. Reveal the existence of a SAR to the person involved in the transactionCorrect
FCMs and IBs must develop risk-based ongoing CDD procedures that are designed to (1) understand the nature and purpose of customer relationships for purposes of developing a customer risk profile; and (2) conduct ongoing monitoring to identify and report suspicious transactions, and on a risk basis, to maintain and update customer information, including information regarding the beneficial owner of a legal entity customer.
Incorrect
FCMs and IBs must develop risk-based ongoing CDD procedures that are designed to (1) understand the nature and purpose of customer relationships for purposes of developing a customer risk profile; and (2) conduct ongoing monitoring to identify and report suspicious transactions, and on a risk basis, to maintain and update customer information, including information regarding the beneficial owner of a legal entity customer.
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Question 5 of 30
5. Question
The following are additional to the risk-based measures that can help ensure the confidentiality of SARs except?
Correct
Firms should develop additional risk based measures to help ensure the confidentiality of SARs, including limiting access to a “need-to-know” basis, establishing restricted areas for reviewing SARs, maintaining a log of access to SARs, using cover sheets for SARS or supporting documentation that indicates the filing of a SAR, or using electronic notices that highlight confidentiality concerns before a person may access or disseminate the information.
Incorrect
Firms should develop additional risk based measures to help ensure the confidentiality of SARs, including limiting access to a “need-to-know” basis, establishing restricted areas for reviewing SARs, maintaining a log of access to SARs, using cover sheets for SARS or supporting documentation that indicates the filing of a SAR, or using electronic notices that highlight confidentiality concerns before a person may access or disseminate the information.
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Question 6 of 30
6. Question
FCMs and IBs are relieved of the filing requirement from activity related to a robbery or burglary, provided the activity is reported to the appropriate law enforcement agency. This also includes the following except?
Correct
FCMs and IBs are not required to file form SAR for activity related to a robbery or burglary, provided the activity is reported to the appropriate law enforcement agency. FCMs and IBs are relieved of the filing requirement for a violation of the Commodity Exchange Act, CFTC Regulations, Exchange or NFA rules that is otherwise required to be reported under the Commodity Exchange Act, CFTC regulations, Exchange or NFA rules committed by the FCM/IB or any of its officers, directors, employees or associated persons, provided that the activity is properly reported to the appropriate regulatory authority.
If this activity also involves a violation of the BSA, a firm must file the form SAR with FinCEN regardless of whether it has reported the activity to the CFTC or other appropriate regulator.
Incorrect
FCMs and IBs are not required to file form SAR for activity related to a robbery or burglary, provided the activity is reported to the appropriate law enforcement agency. FCMs and IBs are relieved of the filing requirement for a violation of the Commodity Exchange Act, CFTC Regulations, Exchange or NFA rules that is otherwise required to be reported under the Commodity Exchange Act, CFTC regulations, Exchange or NFA rules committed by the FCM/IB or any of its officers, directors, employees or associated persons, provided that the activity is properly reported to the appropriate regulatory authority.
If this activity also involves a violation of the BSA, a firm must file the form SAR with FinCEN regardless of whether it has reported the activity to the CFTC or other appropriate regulator.
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Question 7 of 30
7. Question
Under what circumstances could an FCM or IB share the SAR itself or any information which would reveal the existence of a SAR?
I. For the purpose of the parent entity fulfilling its obligation to review compliance by its subsidiaries in meeting the legal requirements to identify and report suspicious activity.
II. Share to an affiliate, provided the affiliate is subject to a SAR regulation issued by FinCEN or another regulatory agency.
III. To the CFTC or other appropriate regulator, in order to satisfy the filing requirement as stated by the Commodity Exchange Act.
IV. To a parent company for the purpose of establishing restricted areas for reviewing suspicious activitiesd.Correct
The BSA and the implementing regulations prohibit an FCM or IB from sharing both the SAR itself or any information which would reveal the existence of a SAR, firms may share a SAR with parent entities, both domestic and foreign, for the purpose of the parent entity fulfilling its obligation to review compliance by its subsidiaries in meeting the legal requirements to identify and report suspicious activity.
FCMs and IBs may also share a SAR, or any information that might reveal the existence of a SAR, with an affiliate, provided the affiliate is subject to a SAR regulation issued by FinCEN or another regulatory agency.
Incorrect
The BSA and the implementing regulations prohibit an FCM or IB from sharing both the SAR itself or any information which would reveal the existence of a SAR, firms may share a SAR with parent entities, both domestic and foreign, for the purpose of the parent entity fulfilling its obligation to review compliance by its subsidiaries in meeting the legal requirements to identify and report suspicious activity.
FCMs and IBs may also share a SAR, or any information that might reveal the existence of a SAR, with an affiliate, provided the affiliate is subject to a SAR regulation issued by FinCEN or another regulatory agency.
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Question 8 of 30
8. Question
Which of the following does FinCEN recommend when in the event an FCM or IB receives a request from an authorized law enforcement agency to keep an open account that has suspicious activity?
I. deny any and all request unless given consent from FinCEN
II. ask for a written request from the law enforcement agency
III. keep the account open if there is no proof of suspicious activity
IV. provide the request but only if it has gained the approval of the CTFCCorrect
In the event an FCM or IB receives a request from an authorized law enforcement agency to keep an open account that has suspicious activity, FinCEN recommends that the firm ask for a written request from the law enforcement agency. This request should be issued by a supervisory agent or by an attorney within a United States Attorney’s Office or another office of the Department of Justice.
The request should also indicate the duration of the request, not to exceed six months (law enforcement may issue a subsequent request for a longer duration).
Incorrect
In the event an FCM or IB receives a request from an authorized law enforcement agency to keep an open account that has suspicious activity, FinCEN recommends that the firm ask for a written request from the law enforcement agency. This request should be issued by a supervisory agent or by an attorney within a United States Attorney’s Office or another office of the Department of Justice.
The request should also indicate the duration of the request, not to exceed six months (law enforcement may issue a subsequent request for a longer duration).
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Question 9 of 30
9. Question
Which of the following are requirements in the request from the law enforcement agency to keep an open account that has suspicious activity?
I. indicate that the agency requested that the financial institution maintain the account and the purpose of the reques
II. if the request is made by a state or local law enforcement agency, the request should be from a supervisor of the state or local law enforcement or from an attorney within a state or local prosecutor’s office
III. be issued by a supervisory agent or by an attorney within an office of the Department of Finance
IV. indicate the duration of the request, not to exceed six months (law enforcement may issue a subsequent request for a longer duration)Correct
This request should be issued by a supervisory agent or by an attorney within a United States Attorney’s Office or another office of the Department of Justice. If the request is made by a state or local law enforcement agency, the request should be from a supervisor of the state or local law enforcement or from an attorney within a state or local prosecutor’s office. The request should indicate that the agency requested that the financial institution maintain the account and the purpose of the request. The request should also indicate the duration of the request, not to exceed six months (law enforcement may issue a subsequent request for a longer duration). FinCEN also recommends that the FCM or IB maintain the request for five years after the request has expired.
Incorrect
This request should be issued by a supervisory agent or by an attorney within a United States Attorney’s Office or another office of the Department of Justice. If the request is made by a state or local law enforcement agency, the request should be from a supervisor of the state or local law enforcement or from an attorney within a state or local prosecutor’s office. The request should indicate that the agency requested that the financial institution maintain the account and the purpose of the request. The request should also indicate the duration of the request, not to exceed six months (law enforcement may issue a subsequent request for a longer duration). FinCEN also recommends that the FCM or IB maintain the request for five years after the request has expired.
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Question 10 of 30
10. Question
The following are the purposes for FCMs to access FinCEN’s secure website except?
Correct
FCMs are required to access FinCEN’s secure website to obtain the most recent lists and search their records for any current accounts and accounts maintained by a named subject during the preceding 12 months and for transactions not linked to an account conducted by a named subject during the preceding 6 months. FCMs must report any matches to FinCEN through the web based system within the required time-frames (generally within 14 days of the lists being posted on the secure web-site). For matches involving an introduced account, FCMs should inform FinCEN or the appropriate law enforcement agency that the match involves an introduced account (and identify the IB) during any follow up conducted by FinCEN or the law enforcement agency.
Incorrect
FCMs are required to access FinCEN’s secure website to obtain the most recent lists and search their records for any current accounts and accounts maintained by a named subject during the preceding 12 months and for transactions not linked to an account conducted by a named subject during the preceding 6 months. FCMs must report any matches to FinCEN through the web based system within the required time-frames (generally within 14 days of the lists being posted on the secure web-site). For matches involving an introduced account, FCMs should inform FinCEN or the appropriate law enforcement agency that the match involves an introduced account (and identify the IB) during any follow up conducted by FinCEN or the law enforcement agency.
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Question 11 of 30
11. Question
FCMs should maintain which of the following records to verify that they are complying with 314(a) request requirements?
I. for positive matches, the date the match was reported to FinCEN
II. record of the date of the request
III. the date the request was searched
IV. the prices of the tradeCorrect
FCMs should maintain the following records to verify that they are complying with 314(a) request requirements: a record of the date of the request, the tracking numbers within the request, and the date the request was searched; and for positive matches, the date the match was reported to FinCEN.
Incorrect
FCMs should maintain the following records to verify that they are complying with 314(a) request requirements: a record of the date of the request, the tracking numbers within the request, and the date the request was searched; and for positive matches, the date the match was reported to FinCEN.
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Question 12 of 30
12. Question
FCMs are required to designate a point of contact (POC) person(s) for matters involving 314(a) and provide that information to which of the following?
Correct
FCMs are required to designate a point of contact (POC) person(s) for matters involving 314(a) and provide NFA with that information. Any changes to POC information must be immediately reported to NFA.
Incorrect
FCMs are required to designate a point of contact (POC) person(s) for matters involving 314(a) and provide NFA with that information. Any changes to POC information must be immediately reported to NFA.
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Question 13 of 30
13. Question
FCMs and IBs are also required to establish due diligence programs for the following except?
I. public accounts established or maintained by local finance institutions
II. private banking accounts established or maintained for non-U.S. persons
III. private banking accounts established or maintained for U.S. persons
IV. correspondent accounts established or maintained for foreign financial institutionsCorrect
FCMs and IBs are also required to establish due diligence programs for correspondent accounts established or maintained for foreign financial institutions (correspondent account rule) and private banking accounts established or maintained for non-U.S. persons (private banking rule).
Incorrect
FCMs and IBs are also required to establish due diligence programs for correspondent accounts established or maintained for foreign financial institutions (correspondent account rule) and private banking accounts established or maintained for non-U.S. persons (private banking rule).
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Question 14 of 30
14. Question
As part of its anti-money laundering program, FCMs and IBs must establish a due diligence program that includes which of the following?
I. state of the art software to detect the origins of suspicious activities
II. appropriate, specific, risk based, and where necessary, enhanced policies
III. procedures and controls that are reasonably designed to enable the FCM/IB to detect and report, on an ongoing basis, any known or suspected money laundering activity
IV. search for any correspondent account established, maintained, administered or managed by the FCM or IB in the United States for a foreign financial institutionCorrect
As part of its anti-money laundering program, FCMs and IBs must establish a due diligence program that includes appropriate, specific, risk based, and where necessary, enhanced policies, procedures and controls that are reasonably designed to enable the FCM/IB to detect and report, on an ongoing basis, any known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered or managed by the FCM or IB in the United States for a foreign financial institution.
Incorrect
As part of its anti-money laundering program, FCMs and IBs must establish a due diligence program that includes appropriate, specific, risk based, and where necessary, enhanced policies, procedures and controls that are reasonably designed to enable the FCM/IB to detect and report, on an ongoing basis, any known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered or managed by the FCM or IB in the United States for a foreign financial institution.
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Question 15 of 30
15. Question
In assessing the risk presented by a correspondent account, FCM and IBs should consider which of the following factors?
I. the nature of the foreign financial institution’s business and the markets it serves
II. the type, purpose and anticipated activity of the correspondent account
III. the nature and duration of the FCM’s or IB’s relationship with the interest rate parity from foreign trade
IV. the anti-money laundering and supervisory regime in which the foreign financial institution is chartered or licensedCorrect
In assessing the risk presented by a correspondent account, FCM and IBs should consider a number of factors, as appropriate. These factors include: (1) the nature of the foreign financial institution’s business and the markets it serves; (2) the type, purpose and anticipated activity of the correspondent account; (3) the nature and duration of the FCM’s or IB’s relationship with the foreign financial institution; (4) the anti-money laundering and supervisory regime in which the foreign financial institution is chartered or licensed; and (5) information known or reasonably available to the FCM or IB about the foreign financial institution’s anti-money laundering record.
Incorrect
In assessing the risk presented by a correspondent account, FCM and IBs should consider a number of factors, as appropriate. These factors include: (1) the nature of the foreign financial institution’s business and the markets it serves; (2) the type, purpose and anticipated activity of the correspondent account; (3) the nature and duration of the FCM’s or IB’s relationship with the foreign financial institution; (4) the anti-money laundering and supervisory regime in which the foreign financial institution is chartered or licensed; and (5) information known or reasonably available to the FCM or IB about the foreign financial institution’s anti-money laundering record.
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Question 16 of 30
16. Question
FCMs and IBs are required to apply enhanced due diligence measures to the following except?
Correct
FCMs and IBs are required to apply enhanced due diligence measures to correspondent accounts maintained for a foreign bank operating under an offshore banking license, under a license issued by a country designated as being non-cooperative with international money laundering principles by FATF (and the U.S. concurs with the designation), or under a license issued by a country that has been designated by the Secretary of Treasury as a primary money laundering concern and as warranting special measures under Section 311.
Incorrect
FCMs and IBs are required to apply enhanced due diligence measures to correspondent accounts maintained for a foreign bank operating under an offshore banking license, under a license issued by a country designated as being non-cooperative with international money laundering principles by FATF (and the U.S. concurs with the designation), or under a license issued by a country that has been designated by the Secretary of Treasury as a primary money laundering concern and as warranting special measures under Section 311.
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Question 17 of 30
17. Question
Which of the following are the minimum measures for FCMs and IBs when applying enhanced due diligence measures?
I. determine whether any such foreign bank maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the foreign bank’s correspondent account with the FCM or IB, and if so, to take reasonable steps to obtain information to assess and mitigate the money laundering risks associated with such accounts
II. identify the owners of the foreign bank if the bank’s shares are not publicly traded, and the nature and extent of each owner’s ownership interest
III. conduct risk-based enhanced scrutiny of correspondent accounts established or maintained for this type of foreign bank to guard against money laundering and to identify and report suspicious activity
IV. collect information known or reasonably available to the FCM or IB about the foreign financial institution’s anti-money laundering recordCorrect
At a minimum, these measures must include taking reasonable steps to (1) conduct risk-based enhanced scrutiny of correspondent accounts established or maintained for this type of foreign bank to guard against money laundering and to identify and report suspicious activity, (2) determine whether any such foreign bank maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the foreign bank’s correspondent account with the FCM or IB, and if so, to take reasonable steps to obtain information to assess and mitigate the money laundering risks associated with such accounts, and (3) identify the owners of the foreign bank if the bank’s shares are not publicly traded, and the nature and extent of each owner’s ownership interest.
Incorrect
At a minimum, these measures must include taking reasonable steps to (1) conduct risk-based enhanced scrutiny of correspondent accounts established or maintained for this type of foreign bank to guard against money laundering and to identify and report suspicious activity, (2) determine whether any such foreign bank maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the foreign bank’s correspondent account with the FCM or IB, and if so, to take reasonable steps to obtain information to assess and mitigate the money laundering risks associated with such accounts, and (3) identify the owners of the foreign bank if the bank’s shares are not publicly traded, and the nature and extent of each owner’s ownership interest.
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Question 18 of 30
18. Question
Enhanced scrutiny should require the FCM or IB to do the following except?
Correct
Enhanced scrutiny should require the FCM or IB, (1) to obtain and consider information related to the anti-money laundering program of the foreign bank to assess the risk of money laundering presented by the bank’s correspondent account in appropriate circumstances; (2) to monitor transactions to, from or through the correspondent account in a manner reasonably designed to detect money laundering and suspicious activity; and (3) to obtain information from the foreign bank about the identity of any person with authority to direct transactions through any correspondent account that is a payable-through account, and the sources and beneficial owner of the funds and other assets in the payable-through account.
Incorrect
Enhanced scrutiny should require the FCM or IB, (1) to obtain and consider information related to the anti-money laundering program of the foreign bank to assess the risk of money laundering presented by the bank’s correspondent account in appropriate circumstances; (2) to monitor transactions to, from or through the correspondent account in a manner reasonably designed to detect money laundering and suspicious activity; and (3) to obtain information from the foreign bank about the identity of any person with authority to direct transactions through any correspondent account that is a payable-through account, and the sources and beneficial owner of the funds and other assets in the payable-through account.
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Question 19 of 30
19. Question
Under Private Banking Rule, the due diligence program should ensure that FCMs and IBs take reasonable steps to do which of the following?
I. review the activity of the account to ensure that it is consistent with the information obtained about the client’s source of funds and with the stated purpose and expected use of the account
II. ascertain the source(s) of funds deposited into a private banking account and the purpose and expected use of the account
III. ascertain the identity of all nominal and beneficial owners of a private banking account
IV. ascertain whether any owner of the account is a senior foreign political figureCorrect
Under Private Banking Rule, the due diligence program should ensure that FCMs and IBs take reasonable steps to (1) ascertain the identity of all nominal and beneficial owners of a private banking account; (2) ascertain whether any owner of the account is a senior foreign political figure; (3) ascertain the source(s) of funds deposited into a private banking account and the purpose and expected use of the account; and (4) review the activity of the account to ensure that it is consistent with the information obtained about the client’s source of funds and with the stated purpose and expected use of the account
Incorrect
Under Private Banking Rule, the due diligence program should ensure that FCMs and IBs take reasonable steps to (1) ascertain the identity of all nominal and beneficial owners of a private banking account; (2) ascertain whether any owner of the account is a senior foreign political figure; (3) ascertain the source(s) of funds deposited into a private banking account and the purpose and expected use of the account; and (4) review the activity of the account to ensure that it is consistent with the information obtained about the client’s source of funds and with the stated purpose and expected use of the account
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Question 20 of 30
20. Question
NFA Compliance Rule 2-9(c) requires that FCMs and IBs designate an individual or individuals to oversee the anti-money laundering program, including the firm’s CIP. Among other duties with respect to the firm’s CIP and suspicious activity reporting, this person should also do which of the following?
I. Receive reports of suspicious activity from firm personnel
II. Determine whether the activity warrants reporting to senior management, and, if authorized to do so, the firm’s DSRO or FinCEN
III. Gather all relevant business information to evaluate and investigate suspicious activity
IV. Provide ongoing education and training for all appropriate personnel appointed when in transitionCorrect
NFA Compliance Rule 2-9(c) requires that FCMs and IBs designate an individual or individuals to oversee the anti-money laundering program, including the firm’s CIP. Among other duties with respect to the firm’s CIP and suspicious activity reporting, this person should
-Receive reports of suspicious activity from firm personnel;
-Gather all relevant business information to evaluate and investigate suspicious activity; and
-Determine whether the activity warrants reporting to senior management, and, if authorized to do so, the firm’s DSRO or FinCEN.Incorrect
NFA Compliance Rule 2-9(c) requires that FCMs and IBs designate an individual or individuals to oversee the anti-money laundering program, including the firm’s CIP. Among other duties with respect to the firm’s CIP and suspicious activity reporting, this person should
-Receive reports of suspicious activity from firm personnel;
-Gather all relevant business information to evaluate and investigate suspicious activity; and
-Determine whether the activity warrants reporting to senior management, and, if authorized to do so, the firm’s DSRO or FinCEN. -
Question 21 of 30
21. Question
Financial Requirements Section 11(b) states which of the following with regards to Forex Dealer Members?
Correct
Financial Requirements Section 11(b)
Section 11(b) prohibits a Forex Dealer Member from including assets held by an affiliate or an unregulated person in the firm’s current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7(b)(2)(v)(A).Incorrect
Financial Requirements Section 11(b)
Section 11(b) prohibits a Forex Dealer Member from including assets held by an affiliate or an unregulated person in the firm’s current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7(b)(2)(v)(A). -
Question 22 of 30
22. Question
Financial Requirements Section 13 states the following with regards to FDMs and DMs except?
Correct
Financial Requirements Section 13
Section 13 obligates FDMs to file daily reports regarding an FDM’s capital position and its ability to meet its obligation to retail Forex customers. Among other daily reporting obligations, FDMs must indicate the net aggregate notional value for all open futures and options Forex positions.
In addition, NFA requires FDMs to provide operational information on a monthly basis. These monthly reports must specify the number of retail and ECP Forex customers as well as how many customers are active, US domiciled or foreign domiciled. Also, FDMs must file monthly reports with respect to the FDM’s risk management of its market exposure.
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii).
Incorrect
Financial Requirements Section 13
Section 13 obligates FDMs to file daily reports regarding an FDM’s capital position and its ability to meet its obligation to retail Forex customers. Among other daily reporting obligations, FDMs must indicate the net aggregate notional value for all open futures and options Forex positions.
In addition, NFA requires FDMs to provide operational information on a monthly basis. These monthly reports must specify the number of retail and ECP Forex customers as well as how many customers are active, US domiciled or foreign domiciled. Also, FDMs must file monthly reports with respect to the FDM’s risk management of its market exposure.
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii).
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Question 23 of 30
23. Question
FDMs must file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii). This report must include which of the following?
I. the FDM’s capital position, its operations or any other information which NFA deems relevant
II. the percentage of non-discretionary retail forex customer accounts that were profitable during the quarter
III. the percentage of accounts that were not profitable during the quarter
IV. the total number of non-discretionary retail forex customer accounts maintained by the FDM for the prior quarterCorrect
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii). This report must include the total number of non-discretionary retail forex customer accounts maintained by the FDM for the prior quarter, the percentage of such accounts that were profitable during the quarter and the percentage of accounts that were not profitable during the quarter.
Incorrect
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii). This report must include the total number of non-discretionary retail forex customer accounts maintained by the FDM for the prior quarter, the percentage of such accounts that were profitable during the quarter and the percentage of accounts that were not profitable during the quarter.
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Question 24 of 30
24. Question
Members or their Associates are required to obtain certain personal and financial information from a customer. These include which of the following?
I. Customer’s address
II. Name
III. Previous investments
IV. Personal lifestyleCorrect
At a minimum, Members or their Associates must obtain the customer’s true name, address, principal occupation or business, and previous investment, futures trading and forex trading experience
Incorrect
At a minimum, Members or their Associates must obtain the customer’s true name, address, principal occupation or business, and previous investment, futures trading and forex trading experience
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Question 25 of 30
25. Question
With regards to individual customer information, the Member or Associate must obtain which of the following information?
I. customer’s net worth
II. customer’s current estimated annual income
III. customer’s equitites
IV. customer’s previous year’s annual incomeCorrect
For customers who are individuals, the Member or Associate must obtain the customer’s net worth or net assets and current estimated annual income or the previous year’s annual income.
Incorrect
For customers who are individuals, the Member or Associate must obtain the customer’s net worth or net assets and current estimated annual income or the previous year’s annual income.
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Question 26 of 30
26. Question
For FDMs, which of the following imposes a surcharge that is graduated according to the firm’s gross annual revenue?
Correct
For FDMs, NFA Bylaw 1301(e) imposes a surcharge that is graduated according to the firm’s gross annual revenue.
Incorrect
For FDMs, NFA Bylaw 1301(e) imposes a surcharge that is graduated according to the firm’s gross annual revenue.
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Question 27 of 30
27. Question
Which of the following is NOT based on the difference between the interest rates of the two currencies and the time until the maturity of the deal?
I, The currency rate
II. The spot rate
III. The forward rate
IV. The base rateCorrect
The forward rate is based on the difference between the interest rates of the two currencies (currency deals always involve two currencies) and the time until the maturity of the deal.
Incorrect
The forward rate is based on the difference between the interest rates of the two currencies (currency deals always involve two currencies) and the time until the maturity of the deal.
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Question 28 of 30
28. Question
The following is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate except?
I. Spot rate parity
II. Forward rate parity
III. Interest rate parity
IV. Rollover ratesCorrect
Interest rate parity (IRP) is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.
Incorrect
Interest rate parity (IRP) is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.
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Question 29 of 30
29. Question
The following represents a country’s net income over a period of time except?
I. The current account
II. The base account
III. The capital account
IV. The fixed accountCorrect
The current and capital accounts represent two halves of a nation’s balance of payments. The current account represents a country’s net income over a period of time, while the capital account records the net change of assets and liabilities during a particular year.
Incorrect
The current and capital accounts represent two halves of a nation’s balance of payments. The current account represents a country’s net income over a period of time, while the capital account records the net change of assets and liabilities during a particular year.
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Question 30 of 30
30. Question
Members must have policies and procedures that describe the following information except?
Correct
Members must have policies and procedures that describe their administrative, technical, and physical safeguards for protecting customer records and information. The procedures should also address the Member’s policies for disclosing non-public, personally identifiable financial information and for notifying customers of those policies.
Incorrect
Members must have policies and procedures that describe their administrative, technical, and physical safeguards for protecting customer records and information. The procedures should also address the Member’s policies for disclosing non-public, personally identifiable financial information and for notifying customers of those policies.