Exam (elaborations)
APRP 2023: QUESTIONS & ANSWERS
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APRP 2023: QUESTIONS & ANSWERS
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APRP 2023: QUESTIONS & ANSWERSFraud Risk Correct Ans - Occurs when a payment transaction is initiated or altered by any party to the transaction (i.e.,
employees, interlopers, or organizations) in an attempt to misdirect or misappropriate funds with fraudulent intent.
Systemic Risk Correct Ans - Occurs when a funds transfer system participant is unable to settle its commitments causing other
participants to fail. Financial institutions must be aware of all rules, regulations and laws governing the payments industry.
Cross-Channel Risk Correct Ans - Occurs when the movement of fraudulent or illegal payment transactions from one
payments channel to another (e.g., check payments to ACH) is met with inconsistent risk management practices and lack of
information sharing across payment channels about fraud.
Compliance Risk Correct Ans - Occurs when a party to a transaction fails to comply, either knowingly or inadvertently with
payment system rules and policies, regulations and applicable U.S. and state law.
ACH Network Correct Ans - This network is a processing and delivery system that provides for the distribution and settlement of electronic credits and debits among financial institutions
Originator Correct Ans - A natural person or an organization that has authorized an ODFI to transmit, for the account of that person, a credit entry, debit entry, or non-monetary entry to the Receiver's account at the RDFI.
Number of risk types Correct Ans - 14
Risk Correct Ans - The potential that expected or unanticipated events may have an adverse effect on a financial institution's earnings, capital, or reputation. Two greatest risks to wire payments Correct Ans - Credit risk and Operational risk.
Risk Mitigation Correct Ans - The process of reducing risks through the introduction of specific controls and risk transfer.
Operating Circular 5 Correct Ans - Governs electronic access to certain services and applications provided by a Federal Reserve Bank.
Regulation P Correct Ans - Regulation that requires certain financial institutions to provide notice to customers about its privacy policies and practices of nonpublic personal information about consumers by financial institutions for which the Bureau (CFPB) has primary supervisory authority.
UCC Article 3 Correct Ans - State law governing negotiable instruments.
Office of Foreign Assets Control (OFAC) Correct Ans - Office within the U.S. Department of the Treasury that administers and enforces economic and trade sanctions based on US Foreign policy and national security goals.
PCI Security Standards Council Correct Ans - The governing body, representing key participants of the payment card industry, which establishes and maintains security standards for payment cards.
Regulation D Correct Ans - Imposes reserve requirements on certain deposits and other liabilities of depository institutions solely for the purpose of implementing monetary policy. It specifies how depository institutions must classify different types of deposit accounts for reserve requirement purposes.
Regulation J Correct Ans - Regulation covering Federal Reserve Bank processing of checks and wires.
Regulation Z Correct Ans - Truth in Lending regulation to promote informed use of consumer credit by requiring disclosures about terms and cost. 31 CFR 208 Correct Ans - Publishes the final rule to implement Debt Collection Improvement Act (DCIA) of 1996.
31 CFR 235 Correct Ans - Governs the issuance of settlement checks for forged checks drawn on designated depositaries.
Detective Controls Correct Ans - Controls designed to identify operational weaknesses and effect corrective actions.
Goal of the BCP Correct Ans - Minimize financial losses to the institution, Serve customers and financial markets with minimal disruptions, and Mitigate the negative effects of disruptions on business operations.
Internal Controls Correct Ans - The policies and procedures that organizations establish to reduce risks and ensure they meet operating, reporting, and compliance objectives.
5 components an internal control program should address Correct Ans - Control environments, Risk assessments, Control activities, Information & communication, and Monitoring.
BCP Correct Ans - Business Continuity Plan
SWIFT Correct Ans - Messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes.
SWIFT acronym Correct Ans - Society of Worldwide Interbank Financial Telecommunication
Closed Loop Card Network Correct Ans - Payment services provided directly to merchants and cardholders by the owner of the network without the involvement of financial institutions as intermediaries (e.g. American Express, Target, Exxon)
Card Associations Correct Ans - Governing bodies for the community of financial institutions, ISOs (Independent Sales Organizations), and MSPs that support card processing (e.g. Visa, MasterCard, Discover, American Express).
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