Professional Ethics & Compliance Flashcards

OFAC's Specially Designated Nationals (SDN) List is used by exporters to:

Answer: Screen parties to a transaction against U.S. sanctions targets

The SDN List identifies individuals and entities with whom U.S. persons are generally prohibited from doing business, and exporters must screen all transaction parties against it.

An exporter ships goods to a legitimate buyer in Germany, but later learns the buyer re-exported those goods to a denied party in Iran. Under U.S. export law, the original U.S. exporter may face liability if:

Answer: The U.S. exporter had reason to know the goods might be re-exported to Iran

U.S. exporters can face liability for re-exports if they had reason to know, or were willfully blind to, the probability that goods would be diverted to a prohibited destination.

Under the Export Administration Regulations, which of the following constitutes a prohibited 'end use' that bars a transaction even without a required license?

Answer: Use in developing chemical or biological weapons

EAR Part 744 prohibits exports when the exporter knows the items will be used in the development of chemical, biological, nuclear, or missile weapons of mass destruction.

The Entity List maintained by BIS contains foreign parties that:

Answer: Require a license for items that would otherwise be No License Required

Parties on the Entity List are subject to a license requirement for all items subject to the EAR, effectively removing any otherwise-available license exceptions.

A company discovers that a transaction it completed six months ago violated OFAC sanctions due to an oversight in its screening process. The most appropriate compliance response is to:

Answer: Conduct an internal review and consider voluntary self-disclosure to OFAC

OFAC's enforcement guidelines give significant mitigation credit for timely voluntary self-disclosure after a compliance failure is discovered.

Which principle best describes the 'strict liability' nature of many OFAC sanctions violations?

Answer: Civil penalties may be imposed even without knowledge or intent to violate

OFAC can impose civil monetary penalties for sanctions violations regardless of whether the violation was intentional, making compliance screening critical.

When conducting denied party screening, best practice requires exporters to screen:

Answer: All parties to the transaction, including intermediaries, freight forwarders, and banks

Comprehensive screening of all transaction parties—including intermediaries, carriers, and financial institutions—is required to avoid inadvertently transacting with a sanctioned party.