DCP 1 - Compliance Regulation and Financial Systems Practice Exam Flashcards

A set of 120 practice flashcards covering banking and compliance regulation concepts, anti-money laundering, counter-terrorist financing, international bodies, and Nigerian regulatory frameworks.

What entity directly establishes primary regulations?

The lawmaking arm of the state (such as Parliament) with parliamentary or head-of-state approval.

What approval is required for primary regulations to be put in place?

Parliamentary or head-of-state approval.

What is a cost suffered by an uninvolved third party as a result of an economic transaction between a producer and consumer termed?

A negative externality (or external cost).

Why are negative externalities also referred to as external costs?

Because they represent spillover costs borne by third parties due to unregulated economic actions.

Which historical era of financial regulation focused primarily on government restrictions to reduce asymmetric information and prevent excess risk-taking?

The Risk Management Era.

Which historical era preceded the Risk Management Era in financial regulation?

The Structural Control Era.

What was the main purpose of the Risk Management Era in financial regulation?

To moderate operator behavior and lower asymmetric information challenges.

Which legislative act originally signaled the true commencement of an indigenous banking regulatory regime in Nigeria?

The Central Bank of Nigeria (CBN) Act of 1958.

In what year was the Central Bank of Nigeria Act passed that signaled the start of indigenous banking regulation?

1958.

When was the Financial Services Coordinating Committee (FSCC) originally formed?

April 1994.

On what date was the FSCC formally renamed the Financial Services Regulation Coordinating Committee (FSRCC)?

May 27, 1994.

Under which legal amendment was legal status granted to the FSRCC?

The 1998 Central Bank of Nigeria (CBN) Act amendment.

How many pillars constitute the revised banking sector framework under Basel II?

3 Pillars.

What are the three pillars of the Basel II banking sector framework?

Minimum Capital Requirements, Supervisory Review, and Market Discipline.

Which group sits at the apex of the regulatory architecture pyramid of the Nigerian financial system?

Parliament / Government.

What is the primary role of Parliament/Government at the apex of the regulatory pyramid?

Enacting laws and establishing regulatory bodies.

Which regulatory approach is characterized by industry formulating its own rules and codes of conduct with sole internal responsibility for enforcement?

Self-Regulation.

When is Self-Regulation recommended as the first regulatory approach option?

When there is low public interest concern and low-risk impact that can be fixed directly by the market.

How does Co-Regulation differ from pure Self-Regulation?

Co-regulation involves industry developing arrangements with government providing legislative backing and underpinning for enforcement.

According to Section 13 of the Money Laundering (Prevention and Prohibition) Act 2022, at what organizational level must the Chief Compliance Officer (CCO) be appointed?

Management Level.

What is the primary objective of a preventive control activity within a compliance department?

To stop the crystallization of risk before it occurs.

What primary legal instrument governs the fight against terrorism and terrorism financing in Nigeria?

Terrorism Prevention and Prohibition Act 2022.

What primary legal instrument governs money laundering prevention and prohibition in Nigeria?

Money Laundering (Prevention and Prohibition) Act 2022.

In capital markets insider trading rules, what does "precise" non-public information mean?

Information indicating circumstances or events that exist or may reasonably be expected to occur, specific enough to draw a conclusion on their possible price effect.

In what year was the Financial Action Task Force (FATF) established?

1989.

Which entity established the Financial Action Task Force (FATF) in 1989?

The G-7.

Where is the Secretariat of the Financial Action Task Force (FATF) located?

At the OECD headquarters in Paris, France.

Which African country is currently the sole full member country of the FATF?

South Africa.

What does a rating of "Largely Compliant (LC)" signify under FATF Technical Compliance Ratings?

There are only minor shortcomings in technical legal compliance.

What does a rating of "Non-Compliant (NC)" signify under FATF Technical Compliance Ratings?

There are major shortcomings in technical legal compliance.

Which international UN convention was the FIRST international legal instrument to criminalize money laundering?

The 1988 Vienna Convention.

What is the full formal title of the 1988 Vienna Convention?

United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.

In what year was the Wolfsberg Group established, and where?

2000 in Switzerland.

How many global financial institutions founded the Wolfsberg Group?

13 global financial institutions.

Under the European Union 4th AML Directive (2015), what is the cash payment reporting threshold for DNFBPs?

$$\text{€}10,000$$

What does the acronym DNFBP stand for in AML compliance?

Designated Non-Financial Businesses and Professions.

On what date was GIABA created by the Authority of Heads of State and Government of ECOWAS?

December 6, 2000.

Where is the headquarters of GIABA located?

Dakar, Senegal.

In which two cities are GIABA's regional field offices located?

Lagos and Abidjan.

Which agency administers economic and trade sanctions under the US Department of the Treasury?

Office of Foreign Assets Control (OFAC).

Under CAMA 2020, how is a Person with Significant Control (PSC) defined?

Any individual directly or indirectly holding at least $5\%$ of shares, voting rights, or interest in a company.

What is the minimum share capital required for incorporated Public Limited Companies (PLC) under CAMA 2020?

$$\text{₦}2,000,000$$

What is the minimum share capital required for private companies under CAMA 2020?

$$\text{₦}100,000$$

How many predicate offences are explicitly recognized by the FATF 40 Recommendations as primary sources for money laundering?

21 specific categories.

What are the three classic stages of Money Laundering in chronological order?

Placement, Layering, and Integration.

How does Terrorist Financing primarily differ from Money Laundering regarding the source of funds?

Money laundering proceeds are derived strictly from illegal criminal acts, whereas terrorist financing can utilize both legitimate sources and illegal acts.

What are the four operational stages associated with Terrorist Financing?

Collecting, Storing, Moving, and Using.

What is the practice of breaking down large cash deposits into smaller transactions performed by multiple individuals to avoid threshold reporting called?

Smurfing.

What is the operational distinction between Structuring and Smurfing?

Structuring involves a single individual breaking down transactions, whereas smurfing involves multiple individuals performing smaller transactions.

What is the minimum record-keeping period for transaction and CDD records mandated under FATF Recommendation 11?

At least 5 years.

What type of regulation consists of primary laws, decrees, or statutes passed by parliament or approved by the Head of State?

Primary Regulation.

What is the fundamental objective behind establishing financial sector regulation?

To ensure smooth, fair, and honest operations while protecting stakeholders across the financial system.

What type of government rules during the Structural Control Era specifically targeted entry requirements into financial markets?

Rules determining who can participate in the financial sector and under what conditions.

Which regulatory committee was accorded legal status under the 1998 CBN Act amendment to coordinate inter-agency regulatory activities?

Financial Services Regulation Coordinating Committee (FSRCC).

What international organization was established in 1994 to set global rules specifically for the insurance industry?

International Association of Insurance Supervisors (IAIS).

Which factor influencing regulation is responsible for driving the Central Bank of Nigeria's Sustainable Banking Guidelines?

Environmental factors and climate change debates.

How do supervisors and examiners function within the Nigerian regulatory architecture?

As quasi-regulators or arms of regulatory bodies driving, examining, and monitoring operator compliance.

What regulatory model should be considered FIRST when there is low public interest concern and low risk?

Self-Regulation.

What alternative term is used for explicit government regulation comprising primary and subordinate statutory legislation?

Black Letter Law.

What type of law governs the legal framework enabling the government to prosecute or imprison entities for financial crimes like money laundering?

Public Law.

What relationship does Public Law govern?

The relationship between the state/government and individuals or legal entities.

What are essential attributes required of a good Compliance Officer?

Proactivity, objectivity, high integrity, diligence, and strong communication skills.

Which three international organizations established the Joint Forum in 1996?

BCBS, IOSCO, and IAIS.

What is the main purpose of directive control measures in compliance management?

To establish standards, policies, and employee training programs to direct staff behavior toward compliance.

What market abuse practice involves placing orders to give a fictitious or misleading impression of supply or demand to artificially raise asset prices?

Market Manipulation.

What is the primary focus of FATF Recommendation 1?

Requiring countries and financial institutions to assess risks and apply a risk-based approach.

Which UN convention expanded money laundering predicate offenses beyond narcotics to cover all serious transnational organized crimes?

The 2000 UN Palermo Convention.

What key obligation did UN Security Council Resolution 1373 impose on member states in September 2001?

To freeze assets, prevent, and criminalize the financing of terrorist acts.

What Basel Committee guidance document was published in January 2014 regarding ML and TF risks?

"Sound management of risks related to Money Laundering and Financing of Terrorism".

Which FATF-Style Regional Body (FSRB) is responsible for the West Africa region?

Inter-Governmental Action Group against Money Laundering in West Africa (GIABA).

Which US enactment amended the Bank Secrecy Act post-September 11 to expand financial crime and anti-terrorism rules?

USA PATRIOT Act of 2001.

What does the Foreign Corrupt Practices Act (FCPA) primarily prohibit?

The bribery of foreign officials by companies with US connections to obtain or retain business.

What requirement applies to assets of entities listed on the US OFAC Specially Designated Nationals (SDN) List?

Their assets are blocked, and US persons/institutions are prohibited from executing transactions with them.

What category do Interpol Red Notices fall under in compliance screening?

Official law enforcement watch lists and wanted lists.

Why are Politically Exposed Person (PEP) lists categorized as intelligence screening lists requiring Enhanced Due Diligence (EDD)?

Because PEP lists carry no inherent presumption of criminality and serve as risk control lists.

Which principle of banking regulation focuses on requiring banks to disclose accurate operational information to foster market confidence?

Market Discipline.

Which Nigerian regulatory agency supervises Insurance Companies, Re-insurance Companies, and Loss Adjusters?

National Insurance Commission (NAICOM).

Under Section 11 of the MLPPA 2022, within how many days must mandatory Cash Transaction Reports (CTR) be filed with the NFIU?

Within 7 days.

How does the mandate of the ICPC differ from that of the EFCC in Nigeria?

The ICPC targets corruption in the public sector (bribery, gratification, abuse of office), whereas the EFCC targets economic and financial crimes across all sectors.

What does the acronym ICPC stand for in Nigeria?

Independent Corrupt Practices and Other Related Offences Commission.

What does the acronym EFCC stand for in Nigeria?

Economic and Financial Crimes Commission.

According to the Financial Reporting Council of Nigeria (FRCN) Act, public interest entities must submit annual reports to the FRC within how many days of board approval?

Within 60 days.

What does the acronym FRCN stand for?

Financial Reporting Council of Nigeria.

Under what law was the Consumer Protection Council (CPC) established in 1992 in Nigeria?

Act No. 66 of 1992.

What is the core mandate of the Consumer Protection Council (CPC)?

To protect consumer rights, eliminate hazardous products, and provide speedy redress for consumer complaints.

How many credit bureaus are currently licensed to operate by the Central Bank of Nigeria?

Three credit bureaus.

What was ACCOBIN formerly named before its re-branding?

Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN).

What does the acronym ACCOBIN stand for?

Association of Chief Compliance Officers of Banks in Nigeria.

Which Nigerian institution is constitutionally empowered to monitor accruals into and disbursements from the Federation Account?

Revenue Mobilisation Allocation and Fiscal Commission (RMAFC).

What is the constitutional source of power for the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC)?

The 1999 Constitution of the Federal Republic of Nigeria.

What is the core mandate of the FMDQ OTC Securities Exchange in Nigeria?

To act as Nigeria's foremost debt capital, foreign exchange, and derivatives over-the-counter securities exchange.

Under CAMA 2020, what non-profit corporate form restricts members' liability to a set contribution upon winding up and prohibits profit distribution to members?

Company limited by guarantee.

In what year was the Nigerian Financial Intelligence Unit (NFIU) admitted into the Egmont Group?

2007.

What is the primary role of the Egmont Group of FIUs?

Setting standards and fostering international collaboration and intelligence exchange among member Financial Intelligence Units.

Which federal agency manages Nigeria's public portal for whistleblower reporting covering TSA violations and procurement fraud?

Federal Ministry of Finance.

What does the acronym TSA represent in Nigerian public financial management?

Treasury Single Account.

What is the role of Self-Regulatory Organizations (SROs) in financial systems?

To formulate internal industry rules and codes of conduct and enforce compliance internally among members.

What does the acronym NFIU stand for?

Nigerian Financial Intelligence Unit.

What does the acronym CBN stand for?

Central Bank of Nigeria.

What does the acronym SEC stand for?

Securities and Exchange Commission.