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Sanctions and OFAC Compliance Flashcards

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Read the first 6 Sanctions and OFAC Compliance flashcards as text

  1. What is the Office of Foreign Assets Control (OFAC) and what is its primary function?

    Answer: A U.S. Treasury office that administers and enforces economic and trade sanctions against targeted foreign countries, entities, and individuals

    OFAC is a Treasury Department office that administers U.S. sanctions programs against foreign governments, entities, and individuals, prohibiting U.S. persons and institutions from engaging in transactions with sanctioned parties.

  2. What is the Specially Designated Nationals (SDN) list maintained by OFAC?

    Answer: A list of individuals, entities, and countries with whom U.S. persons and institutions are prohibited from conducting business

    The SDN list identifies individuals, companies, and countries subject to U.S. sanctions, whose assets must be blocked and with whom U.S. persons may not conduct transactions without OFAC authorization.

  3. What is 'blocking' in the context of OFAC sanctions compliance?

    Answer: Freezing and segregating funds or assets of a sanctioned party pending further OFAC guidance

    When a financial institution identifies a transaction or account involving a sanctioned party, it must 'block' (freeze) the funds, report to OFAC within 10 business days, and hold the funds in a segregated interest-bearing account.

  4. A U.S. bank receives a wire transfer from a foreign bank in which 51% is owned by a sanctioned entity. Under OFAC's '50 percent rule,' should this transaction be blocked?

    Answer: Yes, because any entity 50% or more owned (directly or indirectly) by an SDN is itself treated as sanctioned, even if not explicitly listed

    OFAC's 50 Percent Rule provides that any entity owned 50% or more (directly or indirectly) by a sanctioned party is treated as sanctioned itself, even if not explicitly named on the SDN list.

  5. What does OFAC's 'license' process allow?

    Answer: It grants specific authorization for transactions that would otherwise be prohibited under sanctions programs

    An OFAC license is a specific authorization to engage in a transaction that would otherwise be prohibited, available either as a general license (broad authorization for certain categories) or specific license (case-by-case approval).

  6. Which of the following is a strict liability offense under OFAC sanctions regulations?

    Answer: Processing a transaction with a sanctioned party, even if the institution did not know the party was sanctioned

    OFAC sanctions violations are largely strict liability offenses — the institution can be penalized even without knowledge or intent, making robust screening programs essential because 'I didn't know' is generally not a defense.