CFCS CFCS Terrorist Financing & Sanctions Compliance 2 — Questions and Answers
Question 1: Which OFAC program specifically targets organizations and individuals linked to designated foreign terrorist organizations operating in the US context?
- Specially Designated Nationals (SDN) List (Correct answer)
- Foreign Narcotics Kingpin Designation Act list
- Global Magnitsky sanctions
- Export Administration Regulations list
Correct answer: Specially Designated Nationals (SDN) List
OFAC's SDN List consolidates all sanctioned individuals and entities across programs, including terrorist organizations, and prohibits US persons from transacting with any listed party.
Question 2: What is a 'false positive' in the context of sanctions screening and why does it matter?
- A legitimate transaction incorrectly flagged as a match to a sanctions list (Correct answer)
- An actual sanctions violation that was not detected
- A forged sanctions exemption license
- A fraudulent sanctions list submission
Correct answer: A legitimate transaction incorrectly flagged as a match to a sanctions list
False positives occur when screening systems flag legitimate customers or transactions as potential sanctions matches, requiring manual review and potentially delaying legitimate business.
Question 3: Under OFAC regulations, what is the standard for liability when a US financial institution processes a transaction involving a sanctioned party?
- Strict liability — violations can occur even without knowledge or intent (Correct answer)
- Knowledge-based liability only — intent must be proven
- Negligence standard — institutions must show due diligence failed
- Criminal intent required for any penalty
Correct answer: Strict liability — violations can occur even without knowledge or intent
OFAC sanctions violations are subject to strict liability, meaning civil penalties can be imposed regardless of whether the institution knew or intended to violate sanctions.
Question 4: What is 'correspondent banking' and why is it a particular terrorist financing risk?
- A direct retail banking service for expatriates
- Arrangements where one bank holds accounts for another bank to process transactions, potentially obscuring the ultimate originator of funds (Correct answer)
- A system for exchanging foreign currency between central banks
- A regulatory reporting framework for international transfers
Correct answer: Arrangements where one bank holds accounts for another bank to process transactions, potentially obscuring the ultimate originator of funds
Correspondent banking relationships allow banks to process transactions on behalf of other institutions, creating layering opportunities where the ultimate beneficial owner of funds can be obscured.
Question 5: What is the primary purpose of the Egmont Group in the context of terrorist financing?
- Setting international sanctions policy
- Facilitating information sharing and cooperation among Financial Intelligence Units (FIUs) globally (Correct answer)
- Prosecuting international terrorist financing cases
- Developing cryptocurrency regulation standards
Correct answer: Facilitating information sharing and cooperation among Financial Intelligence Units (FIUs) globally
The Egmont Group is an international network of Financial Intelligence Units that facilitates the secure exchange of financial intelligence to combat money laundering and terrorist financing.
Question 6: Which US statute specifically criminalizes providing 'material support' to designated foreign terrorist organizations?
- Bank Secrecy Act
- 18 U.S.C. § 2339B (Material Support to Terrorist Organizations) (Correct answer)
- RICO Act
- International Emergency Economic Powers Act (IEEPA)
Correct answer: 18 U.S.C. § 2339B (Material Support to Terrorist Organizations)
18 U.S.C. § 2339B prohibits knowingly providing material support or resources to a designated foreign terrorist organization, including financial services.
CFCS CFCS Terrorist Financing & Sanctions Compliance 2
Which OFAC program specifically targets organizations and individuals linked to designated foreign terrorist organizations operating in the US context?