FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProfessional Conduct and Ethical ConsiderationsHard
A registered representative (RR) notices that a long-time client, who frequently travels internationally, has started making unusually large and frequent cash deposits into their investment account, followed by immediate requests to transfer the funds to various overseas accounts. The client provides vague explanations for these transactions. What is the RR's most appropriate immediate action?
- ADiscuss the transactions with the client's family members to get more information.
- BAdvise the client to seek legal counsel regarding their international financial activities.
- CComplete the transactions as requested by the client to avoid inconveniencing them.
- DFile a Suspicious Activity Report (SAR) with FinCEN and continue to monitor the account.
Show answer & explanationAnswer & explanation
Correct answer: D. File a Suspicious Activity Report (SAR) with FinCEN and continue to monitor the account.
FINRA rules and anti-money laundering regulations require RRs to report suspicious activities. Large, frequent cash deposits followed by international transfers with vague explanations are red flags for money laundering. Filing a SAR is the appropriate action to comply with these regulations.
Why the other options are wrong
- A. Discussing client activities with family members without client authorization would violate privacy rules.
- B. While good advice in some situations, it does not address the immediate regulatory obligation to report suspicious activity.
- C. This would be a serious compliance violation and could facilitate illegal activities.
Suspicious Activity Report (SAR)
A report filed with the Financial Crimes Enforcement Network (FinCEN) by financial institutions when they detect certain suspicious transactions that may be indicative of money laundering, terrorist financing, or other illegal activities.
- Mandatory reporting for financial institutions.
- Protects the financial system from illicit use.
- Confidential and cannot be disclosed to the client.
Memory trick: Report the Red Flags, Protect the Funds.