ACAMS Global Sanctions Compliance 2

Question 1

What is OFAC's 'Specially Designated Nationals and Blocked Persons' (SDN) list and what obligations does it create?

Accepted Answer

A list maintained by the U.S. Treasury of individuals, entities, and countries subject to U.S. economic sanctions; financial institutions must block transactions and freeze assets of listed parties

Answer

A list of foreign companies approved for U.S. government contracts; creates procurement requirements

Answer

A list of convicted money launderers maintained by FinCEN; triggers enhanced due diligence

Answer

A list of non-U.S. banks that have failed AML examinations; prohibits correspondent relationships

Question 2

What is OFAC's '50% Rule' and why is it significant for sanctions compliance?

Accepted Answer

Any entity that is 50% or more owned (directly or indirectly) by one or more SDNs is itself considered blocked, even if the entity is not explicitly listed on the SDN list

Answer

OFAC permits 50% of a sanctioned entity's transactions to proceed without penalty

Answer

OFAC imposes civil penalties at 50% of the transaction value for first-time violations

Answer

U.S. financial institutions must block 50% of funds in accounts of suspected sanctions violators

Question 3

What is the difference between 'primary sanctions' and 'secondary sanctions' in the U.S. sanctions framework?

Accepted Answer

Primary sanctions apply to U.S. persons and transactions in U.S. jurisdiction; secondary sanctions target non-U.S. persons conducting significant transactions with sanctioned parties even without U.S. nexus

Answer

Primary sanctions apply to criminal violations; secondary sanctions apply to civil violations

Answer

Primary sanctions are imposed by the UN Security Council; secondary sanctions are unilateral U.S. measures

Answer

Primary sanctions require congressional approval; secondary sanctions can be imposed by executive order

Question 4

What is a 'voluntary self-disclosure' to OFAC and why might an institution choose to make one?

Accepted Answer

A proactive disclosure to OFAC by an institution that discovers it may have violated sanctions regulations, before OFAC initiates an enforcement action, which can significantly reduce civil penalties

Answer

A required annual certification of sanctions compliance

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A customer disclosure form required before processing international wires

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A disclosure to FinCEN that the institution has identified a potential sanctions hit

Question 5

How do UN Security Council sanctions differ from OFAC sanctions?

Accepted Answer

UN sanctions are legally binding on all UN member states; OFAC sanctions are binding only on U.S. persons

Answer

UN sanctions apply only to countries; OFAC sanctions apply only to individuals

Answer

UN sanctions are civil penalties; OFAC sanctions are criminal penalties

Answer

UN sanctions require annual renewal; OFAC sanctions are permanent

Question 6

What is 'sanctions evasion' and what are three common methods used to evade U.S. sanctions?

Accepted Answer

Illegal attempts to circumvent sanctions prohibitions; common methods include using front companies, falsifying transaction records, and routing transactions through non-U.S. financial institutions

Answer

Filing for a sanctions license; methods include OFAC application, hardship exemption, and congressional waiver

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Legal use of OFAC general licenses; methods include humanitarian, IEEPA, and EO exemptions

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Corporate restructuring to avoid sanctions; methods include relocation, rebranding, and ownership dilution