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

U-turn transactions create sanctions exposure because U.S. dollar clearing routes payments through U.S. financial institutions, which must screen all parties to the transaction even when neither the sender nor recipient is a U.S. person.

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

Sanctions compliance in LC transactions is a shared responsibility — each party in the chain must screen counterparties and underlying goods/routes against applicable sanctions programs.

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

Ghost shippers are fictitious or unverifiable entities listed as shippers in trade finance documents, often used to conceal the true origin of goods or involvement of a sanctioned party.

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

A Certificate of Origin identifies the country where goods were manufactured or produced, helping compliance teams determine whether goods originate from a sanctioned country or involve prohibited content.

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

Payment stripping involves deliberately removing, altering, or omitting fields in SWIFT payment messages (such as the originator name or address) that would identify a sanctioned party and trigger screening flags.

(CSS) Certified Sanctions Specialist Practice Test

(CSS) Certified Sanctions Specialist Practice Test

CSS CSS Correspondent Banking & Trade Finance