Question 1

When conducting a records search pursuant to a FinCEN request, what must a bank search?

Accepted Answer

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

Question 2

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

Accepted Answer

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

Question 3

How may a bank limit the definition of executive officer?

Accepted Answer

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

Question 4

With regard to standards for wear and use of leased property, which of the following statements is true?

Accepted Answer

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.

Question 5

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 Bank Secrecy Act, also establishes their expectations that a bank's program be risk based. Who are they?

Accepted Answer

A)  Outsourcing firms 
B)  Foreign financial service providers 
C)  Bank regulatory agencies 
D)  Risk management organizations

Question 6

Regulation O both restricts lending to insiders and requires that certain loans to insiders be disclosed. Each banking agency has adopted the provisions of Regulation 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:

Accepted Answer

A)  Lending to insiders 
B)  Disclosures of loans made to insiders 
C)  Both of these 
D)  None of these

Question 7

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?

Accepted Answer

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.

Question 8

When must disclosures on consumer leasing transactions subject to Regulation M be made?

Accepted Answer

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

Question 9

According to federal regulations, what must a security officer do when establishing a bank security program?

Accepted Answer

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

Question 10

Under what circumstances will a G-FINW (a withdrawal as a government securities dealer) become effective in less than 60 days?

Accepted Answer

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

Question 11

Which of the following usually comes under the heading of abusive lending?

Accepted Answer

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

Question 12

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 National Investment 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?

Accepted Answer

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.

Question 13

In Guidance on Nontraditional Mortgage Product Risks, if the institution has a concentration in a nontraditional mortgage portfolio, the institution should:

Accepted Answer

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

Question 14

In Receiver's agreement-12 CFR 210.28 it is clearly mentioned that:

Accepted Answer

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

Question 15

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:

Accepted Answer

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

Question 16

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?

Accepted Answer

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.

Question 17

Which of the following advertising activities indicate that a bank would NOT be exempt from SEC registration requirements?

Accepted Answer

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

Question 18

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

Accepted Answer

A)  A returned item 
B)  A returning pay check 
C)  Clearing the payments 
D)  Under Regulation Z

Question 19

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?

Accepted Answer

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.

Question 20

Practice/s addressed in the guidance of OCC advisory on credit card practices-AL-2004- 10 is/are:

Accepted Answer

A)  "Up-to" marketing 
B)  Promotional rate marketing 
C)  Repricing of accounts and other changes in credit terms 
D)  Lending to insiders

Exam 1: Certified Regulatory Compliance Manager