CSS CSS Financial Institution Obligations & Controls 2 — Questions and Answers
Question 1: Under OFAC regulations, financial institutions must retain records of blocked transactions and rejected transactions for at least:
- 3 years
- 5 years from the date of the transaction
- 5 years from the date of unblocking or for the duration of the blocking plus 5 years (Correct answer)
- 10 years
Correct answer: 5 years from the date of unblocking or for the duration of the blocking plus 5 years
OFAC regulations require records of blocked property to be retained for 5 years after the date the property was unblocked, or for the full period of blocking plus 5 years, whichever is longer.
Question 2: A U.S. bank receives a SWIFT MT103 payment where the beneficiary name generates a potential SDN match. The bank's first step should be:
- Process the payment and file a SAR
- Place the payment in a suspense account and conduct enhanced screening to determine if a true match exists before blocking or processing (Correct answer)
- Immediately return the funds to the originating bank
- Contact the beneficiary directly for additional information
Correct answer: Place the payment in a suspense account and conduct enhanced screening to determine if a true match exists before blocking or processing
When a potential SDN match is identified, the institution should hold the transaction in suspense and perform additional due diligence to determine whether it is a true match before deciding to block, reject, or process.
Question 3: What does OFAC consider a 'no-action' position mean for a financial institution analyzing a complex transaction?
- OFAC will not provide any guidance on the transaction
- OFAC's informal indication that it does not intend to take enforcement action for the specific described conduct (Correct answer)
- The institution may proceed with the transaction without any compliance review
- FinCEN has taken over enforcement responsibility
Correct answer: OFAC's informal indication that it does not intend to take enforcement action for the specific described conduct
OFAC may informally communicate a no-action position to indicate it does not intend to pursue enforcement for a specific described fact pattern, though this is not binding and does not create a safe harbor.
Question 4: Which OFAC requirement applies specifically to U.S. financial institutions processing international wire transfers related to potentially sanctioned transactions?
- Concurrent filing of a CTR and SAR for all international wires
- Screening both the originator and beneficiary of wire transfers against OFAC's sanctions lists (Correct answer)
- Notifying FinCEN within 24 hours of a potential sanctions hit
- Requiring all correspondent banks to obtain OFAC licenses
Correct answer: Screening both the originator and beneficiary of wire transfers against OFAC's sanctions lists
Financial institutions must screen all parties to international wire transfers — including originators, beneficiaries, and intermediaries — against OFAC sanctions lists to identify prohibited transactions.
Question 5: In evaluating a financial institution's sanctions compliance program, OFAC assesses the program's adequacy based on which primary standard?
- Zero-tolerance — any violation is treated as willful
- Whether the program is risk-based, commensurate with the institution's size and complexity, and effectively implemented (Correct answer)
- Whether the institution has dedicated a minimum of 1% of revenue to compliance
- Whether the institution employs a certified sanctions specialist (CSS) as compliance officer
Correct answer: Whether the program is risk-based, commensurate with the institution's size and complexity, and effectively implemented
OFAC expects compliance programs to be risk-based and scaled to the institution's business profile — a community bank and a global money center bank face different expectations based on their transaction volumes and counterparty risk.
Question 6: A financial institution's 'blocking report' submitted to OFAC must include which key information?
- Identity of the account holder, nature and value of blocked property, and date of blocking (Correct answer)
- Only the total dollar amount of all blocked transactions in a calendar quarter
- The institution's risk score for the blocked party and basis for the screening hit
- A full AML investigation report including SAR filing status
Correct answer: Identity of the account holder, nature and value of blocked property, and date of blocking
OFAC's blocking report requirement specifies that institutions must report the identity of the holder, a full description of the blocked property, its value, and the date of blocking within 10 business days.
CSS CSS Financial Institution Obligations & Controls 2
Under OFAC regulations, financial institutions must retain records of blocked transactions and rejected transactions for at least: