Regulatory Compliance Risk in Banking

D

A bank may be subject to a cease and desist order if it is found to be in violation of banking regulations, including those related to Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements. The answer that most accurately reflects a violation of BSA/AML requirements and that could lead to a cease and desist order is:

D. Failure to file suspicious activity reports (SARs)

SARs are critical to the prevention and detection of money laundering and other financial crimes. Banks are required by law to file SARs with the Financial Crimes Enforcement Network (FinCEN) when they detect suspicious activity involving transactions of $5,000 or more. If a bank fails to file SARs, it may be in violation of BSA/AML requirements and may be subject to regulatory action, including a cease and desist order.

Answer A, repetition in a BSA examination of a noncritical deficiency reported in a previous BSA examination, while not ideal, is not likely to result in a cease and desist order unless the same deficiency has been repeatedly identified and remains uncorrected.

Answer B, failure to document AML training to part-time clerical employees, is a deficiency in the bank's training program but is not a critical violation of BSA/AML requirements. However, it may result in a warning or citation from the regulator.

Answer C, a 2 percent error rate on the bank's Currency Transaction Reports (CTRs), while not ideal, may not be considered a critical violation unless the errors are material or systemic. However, the bank may still receive a warning or citation from the regulator.

In summary, failure to file SARs is the most critical violation of BSA/AML requirements and is most likely to result in a cease and desist order.