CSS CSS Correspondent Banking & Trade Finance

Question 1

What is the primary sanctions risk associated with U-turn transactions processed through U.S. correspondent banks?

Accepted Answer

The potential that funds passing through U.S. dollar clearing may involve sanctioned parties or jurisdictions without proper authorization

Answer

Currency conversion risk for non-dollar transactions

Answer

Interest rate risk on delayed settlements

Answer

Counterparty credit risk from foreign banks

Question 2

In a letter of credit (LC) transaction, which party bears the primary sanctions compliance obligation when the beneficiary is in a potentially sanctioned jurisdiction?

Accepted Answer

All parties in the LC chain — issuing bank, confirming bank, negotiating bank, and freight forwarders — have obligations proportionate to their role

Answer

Only the issuing bank in the buyer's country

Answer

Only the advising bank in the seller's country

Answer

Only the importer who initiates the LC

Question 3

What is a 'ghost shipper' red flag in trade finance sanctions compliance?

Accepted Answer

A named shipper or seller whose identity cannot be verified or does not appear to exist as a legitimate business

Answer

A shipper whose name does not appear on any vessel manifest

Answer

A vessel that changes its flag of registry mid-voyage

Answer

A freight forwarder that operates without an IMO number

Question 4

Which document in a trade finance transaction is most useful for identifying the ultimate origin of goods in a sanctions context?

Accepted Answer

Certificate of Origin

Answer

Bill of Lading

Answer

Insurance Certificate

Answer

Packing List

Question 5

Under OFAC's sanctions, which type of activity in correspondent banking is known as 'payment stripping'?

Accepted Answer

Removing SWIFT message fields that identify a sanctioned party to allow the payment to clear undetected

Answer

Splitting large payments into smaller amounts to avoid screening thresholds

Answer

Netting payments between correspondent accounts to reduce individual transaction scrutiny

Answer

Processing payments during off-hours to reduce compliance monitoring

Question 6

The Financial Action Task Force (FATF) Recommendation 16 on wire transfers ('the travel rule') is relevant to sanctions compliance because it requires:

Accepted Answer

Originator and beneficiary information to accompany wire transfers, facilitating sanctions screening throughout the payment chain

Answer

Wire transfers to be conducted only between FATF member country institutions

Answer

All wire transfers above $10,000 to be reported to FinCEN

Answer

Cross-border wire transfers to be denominated in U.S. dollars