A policy analyst is resolving BSA AML Red Flags during an internal audit sample. Which action best fits the rule?
Correct Answer
D) File or escalate when SAR criteria are met
Why this is correct: The Bank Secrecy Act (BSA) requires financial institutions, including mortgage lenders, to implement an Anti-Money Laundering (AML) program. A critical component is the Suspicious Activity Report (SAR). When internal monitoring detects "red flags" that meet the criteria for a SAR—such as suspected money laundering or fraud—the institution must file a SAR with FinCEN and escalate the matter internally. The correct answer, "File or escalate when SAR criteria are met," is the mandatory action. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because BSA/AML rules are federal mandates; internal policies cannot override them. "Delay the BSA AML Red Flags step until a later government-loan eligibility review instead of acting now" is wrong because SARs must be filed within a strict deadline (generally 30 days) after detection, not delayed. "Rely on oral agreement when the rule requires documented compliance" is wrong because SAR filings and AML programs require written documentation. Exam tip: Remember the SAR filing deadline: within 30 calendar days after the date of initial detection of suspicious activity. Confidentiality is also key—never disclose a SAR filing to the involved party.
Why This Is the Correct Answer
The correct response is "File or escalate when SAR criteria are met" because RMLO AML and SAR rules require suspicious activity escalation and confidentiality.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Delay the BSA AML Red Flags step until a later government-loan eligibility review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
BSA/AML Red Flags: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to BSA/AML Red Flags; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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