SIE Exam: Anti-Money Laundering
Section 3 — Understanding Trading, Customer Accounts and Prohibited Activities (31% of exam)
Anti-money laundering (AML) compliance is a critical regulatory topic on the SIE exam. The Bank Secrecy Act (BSA) and the USA PATRIOT Act form the legislative foundation requiring financial institutions to detect and prevent money laundering and terrorist financing. Every broker-dealer must establish an AML compliance program built on the five pillars required by FINRA Rule 3310: (1) internal policies, procedures, and controls; (2) designation of an AML compliance officer; (3) ongoing employee training; (4) independent testing of the program; and (5) appropriate risk-based customer due diligence procedures, including identifying beneficial owners (the fifth pillar was added by FinCEN's 2018 Customer Due Diligence rule). Key reporting requirements include Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000 and Suspicious Activity Reports (SARs) for transactions of $5,000 or more when the firm suspects money laundering, fraud, or other illegal activity. SARs are confidential, and firms must not notify the customer that a report has been filed (known as tipping off). The Office of Foreign Assets Control (OFAC) maintains the Specially Designated Nationals (SDN) list, and broker-dealers must screen all accounts and transactions against this list. Customer Due Diligence (CDD) rules require firms to identify beneficial owners of legal entity customers and monitor accounts for suspicious activity on an ongoing basis.
Key Concepts
Currency Transaction Report (CTR)
Must be filed for any cash transaction exceeding $10,000 in a single business day. Designed to detect potential money laundering through large cash movements.
Suspicious Activity Report (SAR)
Filed when a transaction of $5,000 or more is suspected to involve money laundering, fraud, or other illegal activity. The customer must not be notified.
OFAC (SDN List)
The Office of Foreign Assets Control maintains the Specially Designated Nationals and Blocked Persons list. Firms must screen all accounts and transactions against this list.
AML Compliance Program
Every broker-dealer must have internal policies, a designated AML compliance officer, employee training, and independent testing of the program.
Customer Due Diligence (CDD)
Requires firms to identify and verify beneficial owners of legal entity customers and conduct ongoing monitoring of customer accounts for suspicious activity.
USA PATRIOT Act
Expanded AML requirements including the Customer Identification Program (CIP) mandating collection of name, date of birth, address, and taxpayer ID at account opening.
Practice Questions
Question 1 of 3
What is the minimum threshold amount that triggers a Currency Transaction Report (CTR) filing requirement?
Correct answer: C.
A Currency Transaction Report must be filed for any cash transaction exceeding $10,000 in a single business day. This requirement is designed to detect potential money laundering through large cash transactions.
Question 2 of 3
Under the Bank Secrecy Act, a Suspicious Activity Report (SAR) must be filed when a transaction involves at least what dollar amount and the firm suspects potential money laundering or fraud?
Correct answer: B.
Broker-dealers must file a SAR with FinCEN for any suspicious transaction involving $5,000 or more when the firm knows, suspects, or has reason to suspect the transaction involves illegal activity.
Question 3 of 3
Which federal agency maintains the list that broker-dealers must screen against to ensure they are not conducting business with individuals or entities subject to economic sanctions?
Correct answer: B.
OFAC, part of the U.S. Department of the Treasury, administers the Specially Designated Nationals and Blocked Persons (SDN) list. Broker-dealers must screen new accounts and transactions against this list.
Frequently Asked Questions
What AML topics are tested on the SIE exam?
The SIE covers the Bank Secrecy Act, USA PATRIOT Act, CTRs ($10,000 threshold), SARs ($5,000 threshold), OFAC screening, AML compliance program requirements, Customer Due Diligence rules, and the prohibition against tipping off customers about SAR filings.
What is the difference between a CTR and a SAR?
A CTR is filed for any cash transaction over $10,000 — it is automatic and does not require suspicion of wrongdoing. A SAR is filed when the firm suspects a transaction of $5,000 or more involves illegal activity. SARs are confidential and customers must not be notified.
What is structuring in the context of AML?
Structuring (also called smurfing) is the illegal practice of breaking up large cash transactions into smaller amounts below the $10,000 CTR threshold to avoid reporting requirements. Firms must monitor for patterns suggesting structuring and file SARs accordingly.
Sources
- FINRA Rule 3310 - Anti-Money Laundering Compliance Program. FINRA (accessed 2026-05-14)
- FinCEN Customer Due Diligence (CDD) Final Rule. Financial Crimes Enforcement Network (accessed 2026-05-14)
- Specially Designated Nationals (SDN) List. U.S. Department of the Treasury (OFAC) (accessed 2026-05-14)
- USA PATRIOT Act AML Provisions Overview. U.S. Department of the Treasury (accessed 2026-05-14)