An employee sees a pattern that looks like structuring but decides it is probably innocent and says nothing, keeping no note. What does the programme require of her regardless of her conclusion?
Correct Answer
A) Document the suspicious pattern for AML review
Why this is correct: The Bank Secrecy Act (BSA) requires financial institutions to monitor for and report suspicious activity via a Suspicious Activity Report (SAR). A core rule is the prohibition against "tipping off" the subject of the investigation. When a suspicious pattern is identified during a borrower call, the compliant action is to document it for an internal Anti-Money Laundering (AML) review, which is the first step in the potential SAR filing process without alerting the borrower. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because a borrower's willingness does not override the legal obligation to report suspicious activity. "Ignore the consumer-protection issue unless the borrower complains" is wrong because SAR requirements are proactive, not reactive to complaints. "Document the issue later instead of correcting the compliance problem first" is wrong because delaying documentation of a suspicious pattern risks non-compliance with timely reporting obligations. Exam tip: Remember the "no tipping off" rule. Your action should always be to document and escalate internally for review, never to alert the customer or proceed as if nothing is wrong.
Why This Is the Correct Answer
The correct response is "Document the suspicious pattern for AML review" because SAR rules require reporting or escalation of suspicious activity and prohibit tipping off subjects.
Why the Other Options Are Wrong
Option B: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option D: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
SAR escalation and anti-tipping rules: 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 SAR escalation and anti-tipping rules; 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
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A branch pays its originators 1.1% of the loan amount on every file, and an extra $400 whenever the loan closes with an escrow waiver. Escrow waivers at this branch are granted only on loans priced above par, and the originator decides whether to offer one. Under Regulation Z, which part of this compensation arrangement, if any, is prohibited?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
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Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
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The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
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