CSS CSS Correspondent Banking & Trade Finance 2

Question 1

Which type of trade finance instrument is most vulnerable to sanctions evasion through over- or under-invoicing of goods?

Accepted Answer

Documentary letters of credit and open account trade

Answer

Documentary LCs and open account trade are common vehicles for trade-based money laundering (TBML) and sanctions evasion through price manipulation (over/under-invoicing), allowing illicit value transfers disguised as legitimate trade.

Question 2

A correspondent bank's 'nested correspondent banking' arrangement creates sanctions risk because:

Accepted Answer

Third-party banks gain access to the correspondent's network, making it difficult to identify the ultimate originator of transactions

Answer

Nested correspondent banking occurs when a smaller foreign bank uses another foreign bank's correspondent account to access U.S. dollar clearing, hiding the ultimate transaction originator from the U.S. correspondent bank.

Question 3

What is the significance of Automatic Identification System (AIS) data in maritime sanctions compliance?

Accepted Answer

AIS transponder data allows compliance teams to track vessel movements and identify sanctioned port calls or ship-to-ship transfers

Answer

AIS transponder data provides real-time and historical vessel location information, enabling compliance teams to detect when vessels have called at sanctioned ports, conducted ship-to-ship transfers, or engaged in other suspicious behaviors.

Question 4

In the context of trade-based sanctions evasion, 'transshipment' refers to:

Accepted Answer

Shipping goods through a non-sanctioned third country to disguise their origin or ultimate destination

Answer

Transshipment as a sanctions evasion technique involves routing goods through a third, non-sanctioned country (a 'transit hub') to obscure that they originated from or are destined for a sanctioned country.

Question 5

Which financial institution action is required when it receives a SWIFT MT202 COV (cover payment) where underlying payment information reveals a sanctions concern?

Accepted Answer

Hold the MT202 COV and investigate the underlying transaction details to determine if blocking or rejection is required

Answer

MT202 COV messages contain underlying payment information that must be screened — financial institutions cannot ignore sanctions red flags in underlying payment data even if the direct counterparty appears clean.

(CSS) Certified Sanctions Specialist Practice Test

(CSS) Certified Sanctions Specialist Practice Test

CSS CSS Correspondent Banking & Trade Finance 2