CSS CSS Sanctions Evasion Techniques & Red Flags 2 — Questions and Answers
Question 1: What is 'trade-based money laundering' (TBML) and how does it relate to sanctions evasion?
- TBML involves using physical cash smuggled in trade cargo to move value
- TBML exploits trade transactions (invoices, LCs) to disguise the movement of value, often to circumvent sanctions by making prohibited fund flows appear as legitimate commerce (Correct answer)
- TBML applies only to domestic trade, not international transactions
- TBML is a FinCEN-specific term with no OFAC relevance
Correct answer: TBML exploits trade transactions (invoices, LCs) to disguise the movement of value, often to circumvent sanctions by making prohibited fund flows appear as legitimate commerce
TBML uses trade transaction documentation (over/under-invoicing, phantom shipments, multiple invoicing) to move value across borders while disguising sanctions violations or money laundering as legitimate commercial activity.
Question 2: Which red flag suggests that a company may be acting as a 'conduit' for a sanctioned party's transactions?
- The company has multiple subsidiaries in different countries
- The company consistently receives and immediately transfers payments of similar amounts without apparent commercial purpose (Correct answer)
- The company operates in multiple currencies
- The company uses international freight forwarders
Correct answer: The company consistently receives and immediately transfers payments of similar amounts without apparent commercial purpose
Pass-through or conduit activity — receiving and immediately forwarding funds without apparent commercial purpose or added value — is a strong indicator that an entity is being used to route transactions on behalf of a sanctioned party.
Question 3: The use of a 'straw man' in sanctions evasion schemes refers to:
- A legal theory used to challenge SDN designations in court
- A person or entity that acts as a front for a sanctioned party, conducting transactions on their behalf while appearing to be the legitimate principal (Correct answer)
- A term for shell companies registered in the British Virgin Islands
- A compliance officer who rubber-stamps suspicious transactions
Correct answer: A person or entity that acts as a front for a sanctioned party, conducting transactions on their behalf while appearing to be the legitimate principal
A straw man (or straw party) is an individual or entity that interacts with the financial system on behalf of a sanctioned party, providing a non-sanctioned face to what is actually a sanctioned party's transaction.
Question 4: Which international organization operates the Egmont Group, which facilitates the sharing of financial intelligence about sanctions evasion between Financial Intelligence Units (FIUs)?
- The United Nations Office on Drugs and Crime (UNODC)
- The Egmont Group is an autonomous intergovernmental body of FIUs, not subordinate to another international organization (Correct answer)
- The World Bank
- INTERPOL
Correct answer: The Egmont Group is an autonomous intergovernmental body of FIUs, not subordinate to another international organization
The Egmont Group is an independent intergovernmental organization that provides a forum for FIUs to cooperate in the fight against money laundering, terrorist financing, and sanctions evasion through secure information sharing.
Question 5: A wire transfer that includes an unusual number of vague payment references such as 'consulting services' or 'management fees' to entities in high-risk jurisdictions is a red flag because:
- Management fees are always prohibited under U.S. sanctions law
- Vague payment purposes can disguise prohibited transactions with sanctioned parties as apparently legitimate business expenses (Correct answer)
- Such payments always exceed OFAC reporting thresholds
- Consulting transactions are specifically excluded from OFAC general licenses
Correct answer: Vague payment purposes can disguise prohibited transactions with sanctioned parties as apparently legitimate business expenses
Generic payment descriptions like 'consulting' or 'management fees' are commonly used to obscure the true nature and beneficiaries of transactions, potentially concealing payments to sanctioned parties within seemingly legitimate business activity.
Question 6: Which technology tool is increasingly used by financial institutions to detect vessel-based sanctions evasion through analysis of maritime data?
- SWIFT gpi tracking
- Satellite-based AIS monitoring and vessel behavior analytics platforms (Correct answer)
- UN Comtrade trade data APIs
- OFAC's SDN List screening API
Correct answer: Satellite-based AIS monitoring and vessel behavior analytics platforms
Commercial satellite AIS providers can track vessels even when terrestrial AIS is disabled, enabling compliance teams to monitor vessel movements, detect sanctioned port calls, and identify AIS manipulation through behavior analytics.
CSS CSS Sanctions Evasion Techniques & Red Flags 2
What is 'trade-based money laundering' (TBML) and how does it relate to sanctions evasion?