Screening Processes & Compliance Systems Flashcards
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What is a 'fuzzy matching' algorithm used for in sanctions screening?
Answer: To identify approximate name matches that account for spelling variations and transliterations
Fuzzy matching identifies names that are similar but not identical, accommodating misspellings, transliterations, and aliases common in sanctions lists.
A bank receives a wire transfer where the beneficiary name partially matches a Specially Designated National (SDN). What is the FIRST action the bank should take?
Answer: Place the transaction in a pending/hold status while conducting a more thorough review
A partial SDN match requires placing the transaction on hold while compliance staff investigate further before processing or rejecting.
Which OFAC requirement mandates that blocked funds must be reported within a specific timeframe?
Answer: Blocked funds must be reported to OFAC within 10 business days of the blocking
OFAC regulations require that blocked transactions be reported to OFAC within 10 business days of the date the property was blocked.
What does the term 'nested correspondent banking' present as a unique sanctions risk?
Answer: It allows smaller foreign banks to access U.S. dollar clearing through a larger correspondent, obscuring the true originator
Nested correspondent relationships layer additional banks into payment chains, making it difficult to identify the true originating customer and their sanctions exposure.
An organization uses a sanctions screening system with a 'threshold score' of 85%. What does this mean operationally?
Answer: Matches scoring at or above 85% similarity will generate an alert for human review
A threshold score determines the minimum similarity percentage at which the system flags a potential match for analyst review rather than auto-clearing.
Which element is LEAST relevant when a sanctions analyst is adjudicating a potential name match alert?
Answer: The customer's credit score and loan repayment history
Credit score and repayment history are AML/credit risk factors, not relevant to determining whether a person is a sanctions-listed individual.
What is the purpose of maintaining an 'audit trail' in a sanctions screening system?
Answer: To document all screening decisions, analyst actions, and rationale to demonstrate regulatory compliance
An audit trail records every screening decision and the basis for it, providing regulators with evidence that the institution's compliance process functioned properly.