Rules and Regulations Brought About by the USA Patriot Act
The number of questions in the rules and regulations category on the Series 7 exam increased greatly when the USA Patriot Act was enacted. Due to the act, each firm must have and follow customer identification programs (CIPs) and anti-money laundering rules.
An investor making several large cash deposits into her brokerage account may indicate that she is engaged in
A. money laundering
B. insider trading
D. a takeover
Answer: A. money laundering
Although the depositing of large amounts of cash in itself isn’t illegal, it may be a sign of the possibility of money laundering.
All of the following are stages of money laundering EXCEPT
Answer: B. intermediation
The three stages of money laundering are placement, layering, and integration.
Placement is when illegally obtained money is placed into a financial institution.
Layering is an activity intended to disguise an illegal activity.
Integration is when illegal money is mixed with legal money.
Suspicious activity of __________ or more must be reported to FinCEN through the filing of a SAR.
Answer: B. $5,000
Suspicious activity of $5,000 or more must be reported to FinCEN (U.S. Treasury Financial Crimes Network) through a SAR (suspicious activity report). Suspicious activity includes financial transactions that are illogical and serve no apparent purpose.