AIFB Certified Financial Regulation CFRP Exam
**Question 1.** Which legal system primarily relies on codified statutes rather than judicial precedent
in financial regulation?
A) Common law
B) Civil law
C) Sharia law
D) Mixed law
Answer: B
Explanation: Civil law systems depend on comprehensive statutes and codes; common law emphasizes
case law and judicial precedent.
**Question 2.** The primary function of the European Securities and Markets Authority (ESMA) is to:
A) Set monetary policy for the Eurozone
B) Supervise insurance companies in Europe
C) Ensure consistent application of EU securities laws
D) Issue banking licenses
Answer: C
Explanation: ESMA harmonises the application of EU securities legislation, promoting investor
protection and market stability.
**Question 3.** Under Basel III, the Common Equity Tier 1 (CET1) capital ratio must be at least:
A) 2%
B) 4.5%
C) 6%
D) 8%
, AIFB Certified Financial Regulation CFRP Exam
Answer: B
Explanation: Basel III requires banks to hold CET1 capital of at least 4.5% of risk‑weighted assets, plus
buffers.
**Question 4.** The Liquidity Coverage Ratio (LCR) is designed to ensure that a bank can survive a
liquidity stress period of:
A) 1 day
B) 7 days
C) 30 days
D) 90 days
Answer: B
Explanation: LCR requires banks to hold high‑quality liquid assets sufficient to cover net cash outflows
over a 30‑day stress scenario.
**Question 5.** Insider trading is prohibited because it:
A) Increases market volatility
B) Undermines confidence in market fairness
C) Reduces transaction costs
D) Enhances price discovery
Answer: B
Explanation: Trading on material non‑public information gives an unfair advantage, eroding trust in
market integrity.
, AIFB Certified Financial Regulation CFRP Exam
**Question 6.** Which of the following best describes “Treating Customers Fairly” (TCF) in the UK?
A) A marketing strategy to increase sales
B) A regulatory principle ensuring products meet consumer needs
C) A requirement to disclose fees only after sale
D) An optional guideline for banks
Answer: B
Explanation: TCF obliges firms to deliver products and services that are fit for purpose and to act in the
best interest of customers.
**Question 7.** In the three‑lines‑of‑defence model, the second line is primarily responsible for:
A) Executing business transactions
B) Independent internal audit
C) Risk management and compliance oversight
D) Board governance
Answer: C
Explanation: The second line (risk and compliance functions) monitors and facilitates effective risk
management across the organization.
**Question 8.** The Financial Action Task Force (FATF) recommends that financial institutions identify
the:
A) Beneficial owner of a corporate client
B) Credit rating of a borrower
C) Net worth of a shareholder
D) Geographic location of all employees
, AIFB Certified Financial Regulation CFRP Exam
Answer: A
Explanation: FATF’s AML standards require identification of Ultimate Beneficial Owners (UBOs) to
prevent money laundering.
**Question 9.** A Suspicious Activity Report (SAR) must be filed within:
A) 24 hours of detection
B) 48 hours of detection
C) 5 business days of detection
D) 30 days of detection
Answer: C
Explanation: Many jurisdictions, including the U.S., require SARs to be submitted within 5 business days
after the detection of suspicious activity.
**Question 10.** The primary purpose of a regulatory risk assessment is to:
A) Forecast market trends
B) Quantify potential fines for non‑compliance
C) Identify and evaluate risks arising from regulatory breaches
D) Determine optimal pricing for products
Answer: C
Explanation: Regulatory risk assessments focus on spotting, measuring, and monitoring risks linked to
non‑compliance with laws and regulations.
**Question 11.** Which of the following is a key responsibility of an internal audit function?
**Question 1.** Which legal system primarily relies on codified statutes rather than judicial precedent
in financial regulation?
A) Common law
B) Civil law
C) Sharia law
D) Mixed law
Answer: B
Explanation: Civil law systems depend on comprehensive statutes and codes; common law emphasizes
case law and judicial precedent.
**Question 2.** The primary function of the European Securities and Markets Authority (ESMA) is to:
A) Set monetary policy for the Eurozone
B) Supervise insurance companies in Europe
C) Ensure consistent application of EU securities laws
D) Issue banking licenses
Answer: C
Explanation: ESMA harmonises the application of EU securities legislation, promoting investor
protection and market stability.
**Question 3.** Under Basel III, the Common Equity Tier 1 (CET1) capital ratio must be at least:
A) 2%
B) 4.5%
C) 6%
D) 8%
, AIFB Certified Financial Regulation CFRP Exam
Answer: B
Explanation: Basel III requires banks to hold CET1 capital of at least 4.5% of risk‑weighted assets, plus
buffers.
**Question 4.** The Liquidity Coverage Ratio (LCR) is designed to ensure that a bank can survive a
liquidity stress period of:
A) 1 day
B) 7 days
C) 30 days
D) 90 days
Answer: B
Explanation: LCR requires banks to hold high‑quality liquid assets sufficient to cover net cash outflows
over a 30‑day stress scenario.
**Question 5.** Insider trading is prohibited because it:
A) Increases market volatility
B) Undermines confidence in market fairness
C) Reduces transaction costs
D) Enhances price discovery
Answer: B
Explanation: Trading on material non‑public information gives an unfair advantage, eroding trust in
market integrity.
, AIFB Certified Financial Regulation CFRP Exam
**Question 6.** Which of the following best describes “Treating Customers Fairly” (TCF) in the UK?
A) A marketing strategy to increase sales
B) A regulatory principle ensuring products meet consumer needs
C) A requirement to disclose fees only after sale
D) An optional guideline for banks
Answer: B
Explanation: TCF obliges firms to deliver products and services that are fit for purpose and to act in the
best interest of customers.
**Question 7.** In the three‑lines‑of‑defence model, the second line is primarily responsible for:
A) Executing business transactions
B) Independent internal audit
C) Risk management and compliance oversight
D) Board governance
Answer: C
Explanation: The second line (risk and compliance functions) monitors and facilitates effective risk
management across the organization.
**Question 8.** The Financial Action Task Force (FATF) recommends that financial institutions identify
the:
A) Beneficial owner of a corporate client
B) Credit rating of a borrower
C) Net worth of a shareholder
D) Geographic location of all employees
, AIFB Certified Financial Regulation CFRP Exam
Answer: A
Explanation: FATF’s AML standards require identification of Ultimate Beneficial Owners (UBOs) to
prevent money laundering.
**Question 9.** A Suspicious Activity Report (SAR) must be filed within:
A) 24 hours of detection
B) 48 hours of detection
C) 5 business days of detection
D) 30 days of detection
Answer: C
Explanation: Many jurisdictions, including the U.S., require SARs to be submitted within 5 business days
after the detection of suspicious activity.
**Question 10.** The primary purpose of a regulatory risk assessment is to:
A) Forecast market trends
B) Quantify potential fines for non‑compliance
C) Identify and evaluate risks arising from regulatory breaches
D) Determine optimal pricing for products
Answer: C
Explanation: Regulatory risk assessments focus on spotting, measuring, and monitoring risks linked to
non‑compliance with laws and regulations.
**Question 11.** Which of the following is a key responsibility of an internal audit function?
