160 Questions
What happens to a minor who fails to give notice after attaining majority regarding their partnership?
They remain a partner with liabilities.
What should branches do to determine the time period for a minor to elect partnership?
Consult local laws and regulations.
What is the status of an account with no operation for a year?
Dormant
Who should grant permission for the first withdrawal from a 'DORMANT' account?
Manager / Sub-Manager
What happens to a 'DORMANT' account after the first withdrawal?
It's retransferred to Regular Client/s A/c Ledger.
When is Enhanced Due Diligence (EDD) conducted by banks?
For high-risk individuals or entities, PEPs, and unusual transactions
What is one of the measures included in Enhanced CDD?
Obtaining additional information on the source of funds or source of wealth
What is the purpose of Enhanced Due Diligence (EDD)?
To minimize risk by obtaining additional information
When should senior management approval be obtained, according to Enhanced CDD measures?
To commence or continue the business relationship when applicable
What is the benefit of Enhanced Due Diligence (EDD) measures?
To minimize risk by obtaining more information
What is a crucial concern for banks in general banking?
Fraud, money laundering, and other malpractices
Why are malpractices particularly detrimental to banks?
Because they are widely perceived to be more fragile than other non-financial organizations
What has been done to handle the challenges of malpractices in general banking?
Increasing stringency of compliance requirements
Why is avoidance of procedures and compliance requirements in general banking challenging for banks?
Because they are difficult to implement
What should receive adequate attention from the policy makers of the bank?
All associated risks of general banking
What is the primary purpose of CDD obligations on banks?
To prevent the abuse of the banking industry for money laundering or terrorist financing
What type of CDD measures should banks implement based on the risks of money laundering and terrorist financing?
Risk-based approach
When should banks conduct Enhanced CDD measures?
When necessary, in addition to normal CDD measures
What is the primary goal of banks in implementing CDD measures?
To understand who their customers are
What is the purpose of documentary evidences in CDD?
To verify the customer's identity
What is a key defense against fraud, forgery, and identity theft?
Customer awareness
Why should banks educate customers about financial literacy?
To reduce fraud, forgery, and harassment
What is the purpose of a Customer Awareness and Education Program?
To provide customers with knowledge and understanding of banking products and services
What should banks do to minimize online threats?
Monitor offline risks and online threats
What should banks publish or declare to customers through various communication channels?
Customer alert and precautionary messages on various banking products and services
What should be examined by the banker before granting loans to the trustee?
The borrowing powers as given in the Trust Deed
Why should no overdraft be allowed on a minor's account?
To minimize the risk of default
What should be recorded on the Account Opening Form for a minor's account?
The date of birth and the date when the minor attains majority
What should happen to a minor's account when the minor attains majority?
The account should be closed and the funds transferred to a new account
What is required for opening an account in the name of an illiterate person?
Proper introduction from a trusted authority
What can happen to banks if they do not conduct adequate due diligence on their customers?
Exposure to reputational, operational, legal, and concentration risks
What is the primary obligation of a banker with respect to a customer's account?
To maintain secrecy of the customer's account
Why is it essential for banks to maintain proper records of customer transactions?
To reduce the risk of financial loss due to mistakes
What is the consequence of a banker's wrongful dishonor of a customer's cheque?
The banker is liable to compensate the customer
What is the primary goal of a banker in maintaining a customer's account?
To offer excellent personalized services
What can happen if a bank fails to maintain proper records of customer transactions?
The bank is held liable for any mistakes
Why is it important for banks to have adequate controls and procedures in place?
To know the customers with whom they are dealing
What is the primary risk of not conducting adequate due diligence on customers?
Reputational risk
What is the primary goal of banks in implementing customer due diligence?
To minimize risks
What can happen if a bank fails to maintain secrecy of a customer's account?
The customer's credit and business are adversely affected
What is the status of an account with no operation for a specified period of time?
Dormant Account
What should be recorded on the Account Opening Form for a minor's account?
Date of birth of the minor
What happens if a minor fails to give notice after attaining majority regarding their partnership?
The minor is liable to the liabilities of the firm
What is required for the first withdrawal from a 'DORMANT' account?
Prior permission from the Manager or Sub-Manager
Why should branches consult the local lawyer regarding a minor's partnership?
To determine the period within which a minor should elect to become a partner
What is the primary challenge in general banking that banks are more fragile than other non-financial organizations?
Fraud and money laundering
What is the main goal of implementing legislative measures and stringent compliance requirements in general banking?
To minimize the risk of malpractices and fraud
Why are malpractices particularly detrimental to banks?
Because they can be particularly detrimental to banks that are widely perceived to be more fragile than other non-financial organizations
What is the main risk associated with not implementing adequate due diligence on customers?
Increased risk of fraud and money laundering
What is the primary goal of banks in implementing risk minimization measures?
To minimize the risk of fraud and money laundering
What is the primary goal of implementing Customer Due Diligence (CDD) measures?
To reduce the risk of money laundering and terrorist financing
What should banks consider when implementing risk-sensitive CDD measures?
The type of customers, business relationship, and banking products
What is the purpose of Enhanced Due Diligence (EDD) measures?
To conduct additional due diligence when necessary
What is a key factor in determining the level of risk associated with a customer?
The business relationship with the customer
Why is it important for banks to implement adequate CDD measures?
To reduce the risk of money laundering and terrorist financing
Under what circumstances should banks conduct Enhanced Due Diligence (EDD)?
When dealing with high-risk customers or politically exposed persons
What is included in Enhanced CDD measures?
Obtaining additional information on the customer and updating identification data regularly
Why is it important for banks to conduct regular monitoring of business relationships?
To identify unusual transaction patterns and minimize risk
What is the purpose of obtaining information on the source of funds or source of wealth of the customer?
To identify possible money laundering or terrorist financing activities
Why is it important for banks to obtain senior management approval to commence or continue a business relationship?
To reduce the risk of money laundering and terrorist financing
What is the primary goal of a Customer Awareness and Education Program?
To provide customers with knowledge and understanding of banking products and services
What should banks do to minimize online threats?
Monitor off-line risks and online threats regularly
Why is customer awareness crucial in minimizing fraud and identity theft?
To strengthen customers' knowledge and experience
What should banks publish or declare to customers through various communication channels?
Customer alert and precautionary messages on banking products and services
What is a key defense against fraud, forgery, and identity theft?
Customer awareness and education
Why should no overdraft be allowed on a minor's account?
To reduce the bank's risk of loss
What should be examined by the banker before granting loans to the trustee?
The borrowing powers as given in the Trust Deed
What should happen to a minor's account when the minor attains majority?
The account should be transferred to a new account
What should be recorded on the Account Opening Form for a minor's account?
Both a and b
What should be done before authorizing a legal guardian to open an account in the name of a minor?
Examine the appointment order issued by the Court
What is the primary risk of not conducting adequate due diligence on customers?
Legal and reputational risk
What is the primary goal of banks in implementing customer due diligence?
To know the customers with whom they are dealing
What can happen to banks if they do not conduct adequate due diligence on their customers?
All of the above
What is the main benefit of conducting adequate due diligence on customers?
Identifying and managing risk
What is the primary challenge in general banking that banks are more fragile than other non-financial organizations?
Malpractices
What is the consequence of a banker's wrongful dishonor of a customer's cheque?
The banker is liable to compensate the customer
Why should banks maintain secrecy of customers' accounts?
To maintain customer trust
What is the primary goal of banks in maintaining proper records of customer transactions?
To identify and manage risk
What can happen if a bank fails to maintain proper records of customer transactions?
The bank may face legal action
What is the primary goal of banks in implementing risk minimization measures?
To identify and manage risk
What is the primary risk associated with admitting a minor as a partner in a firm?
The minor may not be liable for the firm's liabilities.
What is the purpose of treating an account as 'DORMANT' after a year of inactivity?
To prevent fraudulent activities.
What is the consequence of a minor failing to give notice after attaining majority regarding their partnership?
The minor becomes a partner in the firm.
What is the primary goal of banks in maintaining proper records of customer transactions?
To prevent fraudulent activities.
Why should branches consult the local lawyer regarding a minor's partnership?
To determine the period within which a minor should elect to become a partner.
What is the primary consideration for banks in implementing risk-sensitive CDD measures?
Type of customer
What is the primary purpose of implementing Enhanced Due Diligence (EDD) measures in banks?
To reduce the risk of money laundering
What is the primary benefit of conducting adequate due diligence on customers for banks?
To minimize the risk of money laundering
What is the primary goal of banks in implementing risk minimization measures?
To reduce the risk of money laundering
What is the primary consequence of not implementing adequate CDD measures in banks?
Increased risk of money laundering and terrorist financing
What is a significant challenge that banks face in general banking due to their perceived fragility?
Vulnerability to fraud and money laundering activities
Why is it crucial for banks to implement risk minimization measures in general banking?
To manage fraud and money laundering risks effectively
What is a major consequence of banks failing to implement adequate risk minimization measures?
Increased vulnerability to fraud and money laundering
What is the primary purpose of implementing legislative measures and stringent compliance requirements in general banking?
To minimize risks associated with fraud and money laundering
What is a critical challenge that banks face in general banking, particularly in managing risks associated with fraudulent activities?
Malpractices, including fraud and money laundering
Under which of the following circumstances should a bank conduct Enhanced Due Diligence (EDD)?
When an individual is identified as a politically exposed person
What is included in Enhanced CDD measures to minimize risk?
Obtaining additional information on the source of funds or source of wealth of the customer
Why is it necessary to obtain information on the intended nature of the business relationship?
To minimize the risk of money laundering and terrorist financing
What is the purpose of making bank officials aware of the risk level of the customer?
To minimize the risk of fraud and money laundering
Why is it necessary to conduct regular monitoring of high-risk business relationships?
To identify potential fraud risks
What is the primary objective of a Customer Awareness and Education Program in the context of risk minimization?
To strengthen customers' knowledge and experience to reduce fraud, forgery, and harassment
What is the primary benefit of publishing customer alert and precautionary messages through various communication channels?
To reduce the risk of fraud, forgery, and identity theft
What is the primary reason why banks should continue to monitor offline risks and online threats?
To reduce the risk of fraud, forgery, and identity theft
What is the primary goal of a bank's customer awareness program in the context of financial literacy?
To make customers aware of their rights and responsibilities
What is the primary objective of a bank's efforts to educate customers about financial literacy?
To strengthen customers' knowledge and experience
What is the primary reason for not allowing overdrafts on a minor's account?
To comply with the Contract Act, 1872
What is the purpose of obtaining the appointment order issued by the Court in the name of the legal guardian of a minor?
To ensure the guardian's authority to operate the minor's account
What should be done with the outstanding balance in a minor's account when the minor attains majority?
The account should be closed and the balance should be transferred to a new account
What is the primary reason for recording the date of birth of the minor and the date when the minor attains majority on the Account Opening Form?
To determine when the minor's account should be closed and a new account opened
What should be examined by the banker before granting loans to the trustee?
The borrowing powers as given in the Trust Deed
What is the primary goal of customer due diligence for banks?
To minimize reputational, operational, legal and concentration risks
What is the consequence of a banker's wrongful dishonor of a customer's cheque?
The banker will be liable to compensate the customer
What is the primary goal of banks in maintaining proper records of customer transactions?
To facilitate error-free transactions
Why is it important for banks to implement adequate customer due diligence measures?
To minimize reputational, operational, legal and concentration risks
What is the primary benefit of conducting adequate due diligence on customers for banks?
Minimized reputational, operational, legal and concentration risks
What is the primary goal of enhanced due diligence measures?
To minimize reputational, operational, legal and concentration risks
Why is it important for banks to have adequate controls and procedures in place?
To minimize reputational, operational, legal and concentration risks
What is the primary risk associated with not implementing adequate due diligence on customers?
All of the above
Why is customer awareness crucial in minimizing fraud and identity theft?
All of the above
What is the primary goal of banks in implementing risk minimization measures?
To minimize reputational, operational, legal and concentration risks
What is the significance of recording the date of birth of a minor on the Account Opening Form in a partnership firm?
To determine the period within which the minor should elect to become a partner after attaining majority.
What happens to a dormant account after a year of inactivity?
It is transferred to 'DORMANT' account and requires prior permission from the Manager/Sub-Manager for the first withdrawal.
Why should branches consult the local lawyer regarding a minor's partnership?
To determine the period within which a minor should elect to become a partner after attaining majority.
What is the consequence of a minor failing to give notice after attaining majority regarding their partnership?
The minor becomes a partner after the expiry of the specified period.
What is the primary goal of treating an account as 'DORMANT' after a year of inactivity?
To minimize risk and prevent fraudulent activities.
What is the primary goal of implementing risk minimization measures in banks?
The primary goal of implementing risk minimization measures in banks is to protect and build up their deposit base, grow their capacity for creating products in different areas of operation, strengthen their ability to manage different areas of general banking, and enhance their ability for providing services as per customer needs.
What is the primary challenge that banks face in general banking, making them more fragile than other non-financial organizations?
The primary challenge that banks face in general banking is malpractices that take the form of irregularities or non-compliance of procedures and fraudulent activities like bank fraud, money laundering.
What measures have been taken to handle the challenges of malpractices in general banking?
Relevant legislative measures have been made and stringent compliance requirements have been increased tremendously.
Why is it crucial for banks to receive adequate attention from policy makers?
It is crucial for banks to receive adequate attention from policy makers to handle the challenges of malpractices, particularly fraud, money laundering, and other non-compliance of procedures.
What should banks focus on to minimize risks and provide services to customers?
Banks should focus on attracting quality management and service, building up their deposit base, growing their capacity for innovation, strengthening their ability to manage different areas of general banking, and enhancing their ability for providing services as per customer needs.
What measures should banks implement to minimize the risk of money laundering and terrorist financing?
Risk-sensitive CDD measures based on the type of customers, business relationship, type of banking products, and transactions carried out by the customer.
What is the purpose of Enhanced Due Diligence (EDD) measures in banks?
To conduct additional measures, when necessary, in addition to normal CDD measures to further minimize the risk of money laundering and terrorist financing.
What are the circumstances under which a bank should conduct Enhanced Due Diligence (EDD)?
Individuals or legal entities scored with high risk, individuals identified as politically exposed persons, influential persons, and chief executives or top level officials of any international organization, and transactions with unusual patterns, volume, and complexity.
Why is it essential for banks to know their customers and verify their identities?
To prevent the abuse of the banking industry for money laundering or terrorist financing.
What is the primary goal of Enhanced CDD measures in a bank?
To minimize risk by obtaining additional information on customers and updating identification data more regularly.
What should banks consider when implementing risk-sensitive CDD measures?
The type of customers, business relationship, type of banking products, and transactions carried out by the customer.
What should banks do to make aware the concerned bank officials about the risk level of the customer?
Conduct regular monitoring of the business relationship and obtain approval of senior management to commence or continue the business relationship.
What is the consequence of not implementing adequate CDD measures in banks?
Banks may be used for money laundering or terrorist financing, and they may face legal and reputational risks.
Why is it necessary to conduct regular monitoring of high-risk business relationships?
To identify and mitigate potential risks associated with money laundering and terrorist financing.
What is the primary benefit of conducting Enhanced CDD measures on high-risk customers?
To minimize the risk of money laundering and terrorist financing.
What is the primary objective of a Customer Awareness and Education Program in the context of risk minimization?
To strengthen customers' knowledge and experience, thereby reducing fraud, forgery, and harassment.
Why should banks publish or declare customers alert and precautionary message, guidelines, etc. on their products and services?
To make customers aware of their rights and responsibilities, safety measures, and risks associated with banking products and services.
What is the primary goal of banks in implementing risk minimization measures?
To reduce fraud, forgery, and harassment by strengthening customers' knowledge and experience.
Why is customer awareness crucial in minimizing fraud and identity theft?
Customer awareness is a key defense against fraud, forgery, and identity theft.
What should banks do to minimize online threats?
Monitor offline risks and online threats, and review security procedures daily.
Why is it important to record the date of birth of the minor and the date when the minor attains majority on the Account Opening Form?
To ensure that the account is closed and the outstanding balance is transferred to a new account to be operated upon by the erstwhile minor as per a fresh mandate under his authority.
Why should no overdraft be allowed on a minor's account?
To prevent unauthorized transactions and protect the minor's interest.
What is the significance of verifying the signature of the natural / legal guardian who operates a minor's account?
To ensure that the account is operated by the authorized person and the transactions are valid.
What is the purpose of retaining a copy of the appointment order issued by Court in the name of a minor?
To verify the legal guardian's authority to operate the minor's account.
Why should the account of a minor be closed and the balance transferred to a new account when the minor attains majority?
To ensure that the minor has control over their account and transactions are authorized by them.
What is the primary reason for banks to maintain secrecy of customer's accounts?
To prevent adverse effects on the customer's credit and business
What is the consequence of a banker's wrongful dishonor of a customer's cheque?
The banker is liable to compensate the customer
Why is customer due diligence important for banks?
To prevent reputational, operational, legal, and concentration risks
What is the primary goal of implementing risk minimization measures in banks?
To prevent financial loss
What happens if a bank fails to maintain proper records of customer transactions?
The customer is not liable, but the bank may face legal and financial consequences
What is the primary purpose of implementing Enhanced Due Diligence (EDD) measures?
To mitigate higher risks of money laundering and terrorist financing
Why is it important for banks to have adequate controls and procedures in place?
To prevent reputational, operational, legal, and concentration risks
What is the primary benefit of conducting adequate due diligence on customers for banks?
To minimize reputational, operational, legal, and concentration risks
What is the primary goal of banks in implementing customer due diligence?
To know their customers and prevent risks
What is the primary consequence of not implementing adequate Customer Due Diligence (CDD) measures?
Financial loss and reputational damage
Test your knowledge on the liability of a minor partner in a partnership firm. Understand the role of a minor in a partnership and their liabilities. Study material for GB (Advance) course.
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