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An anti-money laundering officer is conducting employee reviews.
Which employee action warrants enhanced due diligence?
A. The bank chief executive officer lives in a lavish home and has requested the board to approve a membership payment at an exclusive country club.
B. The branch manager reviews the daily hold report and releases holds on non-cash items once the bank receives credit from the paying bank.
C. The teller reviews customer profiles and makes notations of personal information to reportedly become familiar with bank customers.
D. The private banker has recently taken long vacations which caused staff members to fall behind in their work to help cover bank duties.
Answer: A

An internationally diverse group of students attending the London School of Economics has formed a Level
1 CFA Study Group. Three of the students (from Germany, Japan, and the U.S) are assigned the Portfolio Management Study Session reading on selecting global investments. As part of determining how changes in currency rates can affect returns on foreign investments, the group analyzes the return in the U.S. bond market from the late 1980s to the mid 1990s and ranks the U.S. bond market returns in the following three ways: 1- measured in each individual's home currency, 2- adjusted for exchange rate changes and expressed in U.S. dollar terms, and 3 - on a risk adjusted basis. They summarized their results in the following table:
* Rank is out of the set: Germany, Japan, & U.S.
Following is a set of possible conclusions drawn from their results. Which of the statements is INCORRECT?
A. Investors in different countries may earn different local currency returns even if they invest in the same investments.
B. Foreign exchange rate effects can have negative impacts on investment returns.
C. Even though the non-U.S. markets experienced higher returns over this period, the increased risk of the non-U.S. securities offset the higher return and lowered the return/risk ratio.
D. The U.S. dollar strengthened during the time period observed.
Answer: D
Since the U.S. Bond rank decreased when expressed in U.S. dollar terms, the U.S. dollar weakened over the time period observed. As the dollar weakens, a U.S. investor would earn higher returns on foreign investments because each unit of foreign currency buys more dollars. A foreign investor would also be able to earn higher returns in the U.S., as it would take less of a foreign currency to buy dollars.

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