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Questions and Answers
What is the primary characteristic of a commercial bank?
What is the primary characteristic of a commercial bank?
- Provision of various financing services
- Mobilisation of savings through current accounts
- Provision of current account facilities where payment can be made through issuing cheques (correct)
- Financing of government through purchase of government securities
What do commercial banks act as in the payment system?
What do commercial banks act as in the payment system?
- Only lending agents
- Only paying agents
- Both borrowing and lending agents
- Both collection and paying agents (correct)
What is one of the ways commercial banks provide financing to businesses?
What is one of the ways commercial banks provide financing to businesses?
- Through provision of current account facilities
- Through granting loans and advances (correct)
- Through mobilisation of savings
- Through purchase of government securities
What is the role of commercial banks in the economy?
What is the role of commercial banks in the economy?
What type of accounts do commercial banks mobilise savings through?
What type of accounts do commercial banks mobilise savings through?
What is the purpose of a commercial bank's involvement in the interbank clearing and settlement system?
What is the purpose of a commercial bank's involvement in the interbank clearing and settlement system?
What is the primary purpose of layering in money laundering?
What is the primary purpose of layering in money laundering?
What is the third stage of money laundering?
What is the third stage of money laundering?
What is one method of layering in money laundering?
What is one method of layering in money laundering?
What is the purpose of creating false invoices in money laundering?
What is the purpose of creating false invoices in money laundering?
What is one method of integration in money laundering?
What is one method of integration in money laundering?
What is the overall goal of money laundering?
What is the overall goal of money laundering?
What is the basis of Islamic banking?
What is the basis of Islamic banking?
What is the primary difference between Islamic and Conventional banking?
What is the primary difference between Islamic and Conventional banking?
What is the purpose of channeling penalty charges to charity?
What is the purpose of channeling penalty charges to charity?
What is the restriction in Islamic banking in terms of activities?
What is the restriction in Islamic banking in terms of activities?
What is the consideration given to in Islamic banking?
What is the consideration given to in Islamic banking?
What is the maximum compensation charge allowed on overdue instalments?
What is the maximum compensation charge allowed on overdue instalments?
What is the primary focus of the AMLATFPUAA?
What is the primary focus of the AMLATFPUAA?
What is the purpose of the First Schedule of the AMLATFPUAA?
What is the purpose of the First Schedule of the AMLATFPUAA?
What is the purpose of the Second Schedule of the AMLATFPUAA?
What is the purpose of the Second Schedule of the AMLATFPUAA?
Which of the following is NOT a primary focus of the AMLATFPUAA?
Which of the following is NOT a primary focus of the AMLATFPUAA?
What is the scope of the AMLATFPUAA?
What is the scope of the AMLATFPUAA?
What is the consequence of committing an offense listed in the Second Schedule of the AMLATFPUAA?
What is the consequence of committing an offense listed in the Second Schedule of the AMLATFPUAA?
What is the primary function of a commercial bank?
What is the primary function of a commercial bank?
What defines a bank according to the Financial Services Act 2013?
What defines a bank according to the Financial Services Act 2013?
What is the main purpose of banking regulations?
What is the main purpose of banking regulations?
What is the role of the government in the banking industry?
What is the role of the government in the banking industry?
What is a primary activity of a commercial bank?
What is a primary activity of a commercial bank?
What is the significance of the banking sector in a country?
What is the significance of the banking sector in a country?
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Study Notes
Introduction to Commercial Banking
- Commercial banking has a significant impact on a country's financial system, economy, and citizens.
- Banking industry is highly regulated by the government.
Definition of Bank and Commercial Bank
- Banking is defined as a jurisdiction by legislation created and regulated by the government.
- Banking activities include receiving deposits, making advances or lending, and paying or collecting cheques.
- A commercial bank is defined as "a person which carries on banking business" (Financial Services Act 2013).
Functions of Commercial Bank
- Mobilization of savings through current, savings, and fixed deposit accounts.
- Provision of various banking facilities and services, such as loans and advances to businesses and individuals.
- Provision of trade financing services, treasury services, and custody services.
- Financing of government through purchase of government securities and TBills.
- Importance of banking business to the economy includes credit intermediation, borrowing, and settlement of payments.
Anti-Money Laundering and Anti-Terrorism Financing
- The Anti-Money Laundering and Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) provides for the offense of money laundering and terrorism financing.
- The AMLATFPUAA lists reporting institutions, including financial institutions and designated non-financial businesses and professions.
- Three stages of money laundering:
- Placement: introducing illegal money into the financial system.
- Layering: separating illicit proceeds from their source.
- Integration: turning criminally derived wealth into legitimate funds.
Islamic Banking vs. Conventional Banking
- Islamic banking follows the principles of shariah, with trading and profit-sharing arrangements between capital providers and users of funds.
- Restrictions on dealing with shariah non-compliant activities, such as riba (usury), Gharar (uncertainty), Maysir (Gambling), and Haram (Forbidden).
- Conventional banking is guided by conventional banking rules and regulations, with no restrictions on shariah non-compliant activities.
Key Regulations and Laws
- Financial Services Act 2013 (FSA)
- Islamic Financial Services Board (IFSB)
- Anti-Money Laundering and Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA)
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