SIE - Understanding Trading, Customer Accounts and Prohibited Activities (31% of the exam) - Section 3.3

Apply anti-money laundering rules, books and records and privacy requirements, and the best interest and suitability obligations governing communications and recommendations.

Apply the AML compliance program, the stages of money laundering, and the filing of a Suspicious Activity Report and Currency Transaction Report, and recognise the role of FinCEN and OFAC. Identify books and records retention, customer confirmation and statement, and Regulation S-P privacy requirements, and apply the know-your-customer, best interest, and suitability obligations and telemarketing do-not-call rules to recommendations.

Anti-money launderingSuspicious Activity ReportRegulation S-PKnow-your-customerRegulation Best Interest

Practice question for this objective

Free sampleUnderstanding Trading, Customer Accounts and Prohibited Activitiesmedium

How does a Suspicious Activity Report differ from a Currency Transaction Report in the way it is triggered?

AIt is triggered automatically whenever a customer deposits more than 10,000 dollars in cash in one day.
BIt is triggered only when a regulator specifically requests information about a named customer.
CIt is triggered whenever a customer opens a margin account without providing a tax identification number.
DIt is triggered by a judgement that a transaction may involve illicit funds or has no lawful purpose, not by a fixed cash amount. Correct

A Suspicious Activity Report is triggered by reasonable suspicion of illicit activity, whereas a Currency Transaction Report is triggered by a cash threshold. The key distinction is qualitative versus quantitative: the Suspicious Activity Report depends on the firm forming a reasonable suspicion of unlawful or purposeless activity, while the Currency Transaction Report is a purely numeric cash-threshold filing.

Why A is wrong: That threshold defines the Currency Transaction Report; the Suspicious Activity Report turns on suspicion, which can arise well below or above any set figure.

Why B is wrong: A firm files a Suspicious Activity Report on its own initiative when it detects suspicious activity, not merely in response to a regulator's request.

Why C is wrong: A missing tax identification number raises account-opening and verification issues, but it is not what defines the suspicious-activity trigger.

Why D is correct: The Suspicious Activity Report rests on the firm's reasonable suspicion of illegality, so the trigger is qualitative judgement rather than a mechanical dollar count.

See more SIE practice questions, answers explained.

Exam traps in Understanding Trading, Customer Accounts and Prohibited Activities

Answers that look right on this material and are not. Each one is a distractor from a different question in the SIE bank for this domain.

A Suspicious Activity Report is filed only for transactions settled in foreign currency, while a Currency Transaction Report covers US dollars.
Why it is wrong: The distinction is not domestic versus foreign currency; both reports concern activity through US firms, so this misstates the basis for each filing.
Tell the client the transfer is blocked and explain that a Suspicious Activity Report is being filed about the conduct.
Why it is wrong: Tempting because the activity is clearly suspicious, but tipping off a customer that a SAR is being filed is prohibited, so disclosing the filing breaches confidentiality rules.
Regulation Best Interest applies to institutional accounts, while Rule 2111 applies to retail accounts.
Why it is wrong: This reverses the scope; Regulation Best Interest is aimed at retail customers, so tying it to institutional accounts is wrong.

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