What is Anti-Money Laundering (AML)?

C is correct. The six transfers totaling $25,200 ($4,200 × 6) to an overseas account, out of line with Jennifer's history and paired with her evasive behavior, are suspicious activity. A broker-dealer must report a suspicious transaction or pattern that involves or aggregates $5,000 or more, whether or not a suspect is identified, so David escalates to the firm's AML officer and the firm files the SAR. No one may tell Jennifer, because disclosing a SAR or any information that would reveal its existence is prohibited.

A is incorrect because refusing service without reporting is insufficient; the suspicious pattern requires a SAR. B is incorrect because the confidentiality rule prohibits telling the client anything that would reveal a SAR, which could compromise investigations. D is incorrect because the $5,000 threshold applies to the aggregated pattern, not to each transfer, and the firm must file within 30 calendar days of initial detection.

B is correct. Before opening an account, a CIP must obtain at least four items: (1) name, (2) date of birth for an individual, (3) for an individual, a residential or business street address, and (4) an identification number (a taxpayer identification number for a U.S. person). The firm then verifies identity within a reasonable time before or after the account is opened, using documents, non-documentary methods, or both.

A is incorrect because a PO Box is not a street address; only an individual with no street address may give an APO or FPO box number or the street address of a next of kin or other contact. C is incorrect because approximate age and employment history are not CIP items; the rule requires the date of birth. D is incorrect because bank references and income level are suitability considerations, not CIP requirements.

A is correct. The $11,500 cash deposit exceeds the $10,000 CTR threshold, requiring a Currency Transaction Report (CTR) to be filed within 15 days using FinCEN Form 112. The subsequent wire transfer does not trigger additional reporting unless there are suspicious circumstances.

B is incorrect because total transaction amount alone does not trigger SAR filing; there must be suspicious activity such as money laundering, fraud, or structuring. C is incorrect because these transactions do not show a structuring pattern (deliberately breaking transactions into smaller amounts to avoid the $10,000 CTR threshold); one large cash deposit followed by a legitimate wire transfer is not inherently suspicious. D is incorrect because the CTR is required for the $11,500 cash deposit regardless of the wire transfer.

C is correct (the exception). Financial institutions are strictly prohibited from notifying customers that a SAR has been filed. This "no tip-off rule" bars disclosing a SAR or any information that would reveal its existence, apart from narrow authorized disclosures such as those to FinCEN, law enforcement and examining regulators. Alerting a subject to SAR filing could compromise law enforcement investigations by allowing money launderers to move funds or destroy evidence.

A is accurate: When suspicious activity is detected and a suspect is identified, the SAR must be filed within 30 days. If no suspect is identified, there is an additional 30-day extension (60 days total). B is accurate: The Bank Secrecy Act provides safe harbor protection, granting immunity from civil liability for financial institutions that file SARs in good faith, encouraging reporting without fear of lawsuits. D is accurate: SARs and all supporting documentation must be retained for 5 years to comply with recordkeeping requirements.

B is correct. Only statements 1 and 3 are accurate regarding FinCEN Investment Adviser Rule coverage.

Statement 1 is true: SEC-registered investment advisers (RIAs) of this size are covered by the FinCEN 2024 rule and must establish AML/CFT programs, file SARs for suspicious transactions aggregating $5,000+, and comply with BSA recordkeeping requirements starting January 1, 2028. The rule does exclude some RIAs: those registered with the SEC only as mid-sized advisers, multi-state advisers or pension consultants, and those reporting no assets under management.

Statement 2 is false: State-registered investment advisers are not covered by the FinCEN 2024 rule. The rule applies only to certain SEC-registered advisers and to exempt reporting advisers, not to state-registered advisers.

Statement 3 is true: Exempt reporting advisers (ERAs) such as venture capital fund advisers and private fund advisers are covered by the FinCEN 2024 rule despite being exempt from full SEC registration.

Statement 4 is false: A family office is excluded from the Advisers Act definition of investment adviser, so it is neither an SEC-registered adviser nor an exempt reporting adviser and falls outside the rule.