Global Sanctions Compliance Flashcards

What is an 'OFAC general license' and how does it differ from a 'specific license'?

Answer: A general license authorizes a broad category of transactions without individual application; a specific license is OFAC authorization granted to a named applicant for a specific transaction or category

OFAC general licenses are published authorizations that apply broadly to categories of transactions without requiring individual application. Specific licenses are case-by-case authorizations granted by OFAC to a named applicant for particular transactions that would otherwise be prohibited.

What is the 'knowledge standard' that determines whether a non-U.S. financial institution violates U.S. secondary sanctions?

Answer: U.S. secondary sanctions generally apply when a non-U.S. institution engages in significant transactions with sanctioned parties, with 'knowledge' of the sanctions status being a relevant but not always required element depending on the sanctions program

Secondary sanctions vary by program — some apply strictly to 'significant transactions' regardless of knowledge, while others require knowing participation in prohibited transactions. Non-U.S. institutions face the risk of OFAC designation or loss of U.S. market access for significant dealings with sanctioned parties.

What is a 'sanctions risk assessment' and what factors should it include for a global financial institution?

Answer: An evaluation of the institution's exposure to sanctions risks across its customer base, products, geographies, and transaction types, used to calibrate sanctions controls and monitoring

A sanctions risk assessment evaluates the institution's total exposure to sanctions violations across its business — identifying high-risk customers, products, geographies, and transaction types to ensure controls are appropriately designed and resourced.

What is 'screening' vs. 'filtering' in the context of sanctions compliance?

Answer: Both terms are used somewhat interchangeably, but screening typically refers to matching names/entities against sanctions lists, while filtering refers to blocking or rejecting payments identified as sanctioned in automated payment processing systems

In sanctions compliance, screening generally refers to the process of checking names, entities, and transaction details against sanctions lists, while filtering specifically describes the automated blocking or flagging of prohibited transactions in payment processing systems.

What are 'humanitarian exemptions' under OFAC sanctions and why are they important for non-profit organizations?

Answer: Specific authorizations that permit certain humanitarian activities (food, medicine, emergency relief) in sanctioned countries that would otherwise be prohibited, protecting legitimate aid organizations from sanctions violations

Humanitarian exemptions allow non-profit organizations and others to conduct legitimate aid activities in sanctioned countries, covering items like food, medicine, and emergency relief — activities that OFAC has authorized through general licenses in most sanctions programs.

What is the significance of 'broken payment chains' or 'stripping' in sanctions evasion schemes?

Answer: Stripping involves removing or altering sanctioned party information from payment messages before they pass through U.S. correspondent banks, deliberately concealing sanctions violations from the processing bank

Stripping is the illegal practice of removing, altering, or replacing information identifying sanctioned parties in wire transfer messages so that the payment can pass through U.S. correspondent banks without triggering sanctions screening alerts.