Sanctions and OFAC Compliance Flashcards

What is a 'Consolidated Sanctions List' and where should compliance officers look to screen customers?

Answer: A compilation of multiple OFAC sanctions lists (SDN, SSI, FSE, etc.) plus other relevant lists like EU, UN, and UK sanctions, used for comprehensive screening

Comprehensive sanctions screening typically requires checking multiple lists including OFAC's SDN, Sectoral Sanctions Identifications (SSI), and Foreign Sanctions Evaders lists, as well as UN, EU, and UK consolidated sanctions lists for international transactions.

What is 'correspondent banking' sanctions risk and how should banks manage it?

Answer: The risk that correspondent relationships will be used to process transactions on behalf of sanctioned parties who are customers of the respondent bank, managed through due diligence on the respondent bank's compliance program

In correspondent banking, U.S. banks process payments for the respondent bank's customers without direct visibility, creating risk that sanctioned parties will use the respondent as a conduit — managed by evaluating the respondent's AML/sanctions program quality.

What must a financial institution do within 10 business days of identifying blocked property under OFAC regulations?

Answer: File a Blocked Property Report with OFAC

When a financial institution blocks property pursuant to OFAC sanctions, it must file a report with OFAC within 10 business days, providing details of the blocked transaction and the sanctions program involved.

What is a 'general license' under OFAC sanctions programs?

Answer: A pre-authorized permission for broad categories of transactions that would otherwise be prohibited, applicable to all eligible parties without individual application

General licenses authorize certain categories of transactions for all eligible persons without requiring individual application to OFAC, such as allowing U.S. persons to receive salary payments from sanctioned governments for work performed prior to sanctions.

How do 'secondary sanctions' on Iran affect non-U.S. financial institutions?

Answer: Non-U.S. institutions that engage in significant transactions with Iran may be denied access to the U.S. financial system and face other U.S. penalties

U.S. secondary sanctions on Iran can cut off non-U.S. financial institutions from the U.S. financial system if they engage in significant Iran-related transactions, giving these sanctions significant extraterritorial reach and deterrence effect.

What is a 'specific license' from OFAC and when would an institution seek one?

Answer: An individual authorization granted by OFAC to a specific applicant to engage in a transaction that would otherwise be prohibited, typically for humanitarian, legal, or diplomatic purposes

A specific license is a case-by-case authorization from OFAC allowing a named applicant to engage in an otherwise prohibited transaction, typically sought for legitimate purposes like releasing blocked humanitarian funds or settling litigation with sanctioned parties.