CSS Screening Processes & Compliance Systems 2 — Questions and Answers
Question 1: What is a 'fuzzy matching' algorithm used for in sanctions screening?
- To identify approximate name matches that account for spelling variations and transliterations (Correct answer)
- To randomly sample transactions for manual review
- To encrypt customer data before comparing against watchlists
- To prioritize alerts by transaction dollar amount
Correct answer: To identify approximate name matches that account for spelling variations and transliterations
Fuzzy matching identifies names that are similar but not identical, accommodating misspellings, transliterations, and aliases common in sanctions lists.
Question 2: A bank receives a wire transfer where the beneficiary name partially matches a Specially Designated National (SDN). What is the FIRST action the bank should take?
- Immediately reject the transaction without any review
- Process the transaction and file a SAR after the fact
- Place the transaction in a pending/hold status while conducting a more thorough review (Correct answer)
- Contact the sending bank for clarification before any holds are placed
Correct answer: Place the transaction in a pending/hold status while conducting a more thorough review
A partial SDN match requires placing the transaction on hold while compliance staff investigate further before processing or rejecting.
Question 3: Which OFAC requirement mandates that blocked funds must be reported within a specific timeframe?
- Blocked funds must be reported to OFAC within 10 business days of the blocking (Correct answer)
- Blocked funds must be reported to OFAC within 30 calendar days of the blocking
- Blocked funds must be reported to FinCEN within 24 hours of the blocking
- Blocked funds must be reported to the FBI within 72 hours of discovery
Correct answer: Blocked funds must be reported to OFAC within 10 business days of the blocking
OFAC regulations require that blocked transactions be reported to OFAC within 10 business days of the date the property was blocked.
Question 4: What does the term 'nested correspondent banking' present as a unique sanctions risk?
- It allows smaller foreign banks to access U.S. dollar clearing through a larger correspondent, obscuring the true originator (Correct answer)
- It requires dual authorization for all international wire transfers
- It eliminates the need for sanctions screening on interbank transfers
- It refers to automated batch processing of multiple currencies simultaneously
Correct answer: It allows smaller foreign banks to access U.S. dollar clearing through a larger correspondent, obscuring the true originator
Nested correspondent relationships layer additional banks into payment chains, making it difficult to identify the true originating customer and their sanctions exposure.
Question 5: An organization uses a sanctions screening system with a 'threshold score' of 85%. What does this mean operationally?
- Only 85% of transactions will be screened each day
- Matches scoring at or above 85% similarity will generate an alert for human review (Correct answer)
- Transactions under $85,000 are automatically cleared without screening
- The system will block 85% of all international transactions
Correct answer: Matches scoring at or above 85% similarity will generate an alert for human review
A threshold score determines the minimum similarity percentage at which the system flags a potential match for analyst review rather than auto-clearing.
Question 6: Which element is LEAST relevant when a sanctions analyst is adjudicating a potential name match alert?
- Date of birth comparison between the customer and the listed individual
- Nationality and country of residence comparison
- The customer's credit score and loan repayment history (Correct answer)
- Review of aliases and alternate spellings on the sanctions list entry
Correct answer: The customer's credit score and loan repayment history
Credit score and repayment history are AML/credit risk factors, not relevant to determining whether a person is a sanctions-listed individual.
Question 7: What is the purpose of maintaining an 'audit trail' in a sanctions screening system?
- To track system uptime and performance metrics for IT purposes only
- To document all screening decisions, analyst actions, and rationale to demonstrate regulatory compliance (Correct answer)
- To store customer transaction data for marketing analytics
- To automate the annual sanctions list update process
Correct answer: To document all screening decisions, analyst actions, and rationale to demonstrate regulatory compliance
An audit trail records every screening decision and the basis for it, providing regulators with evidence that the institution's compliance process functioned properly.
CSS Screening Processes & Compliance Systems 2
What is a 'fuzzy matching' algorithm used for in sanctions screening?