RCMS Sanctions & Trade Compliance 2 — Questions and Answers
Question 1: Under OFAC regulations, which term describes a transaction that a U.S. person must reject and report to OFAC within 10 business days?
- Blocked transaction
- Rejected transaction (Correct answer)
- Suspended transaction
- Flagged transaction
Correct answer: Rejected transaction
Rejected transactions involve parties or destinations not on the SDN list but still prohibited (e.g., embargoed countries); these must be reported to OFAC within 10 business days.
Question 2: Which U.S. government agency administers export controls under the Export Administration Regulations (EAR)?
- Department of State (DDTC)
- Department of Commerce (BIS) (Correct answer)
- Department of Treasury (OFAC)
- Department of Defense (DSCA)
Correct answer: Department of Commerce (BIS)
The Bureau of Industry and Security (BIS), part of the Department of Commerce, administers the EAR, which controls dual-use items.
Question 3: A company discovers its software falls under ECCN 5D002. Under EAR, which license exception most commonly allows mass-market encryption exports?
- License Exception STA
- License Exception ENC (Correct answer)
- License Exception TMP
- License Exception GOV
Correct answer: License Exception ENC
License Exception ENC (Encryption) allows export of certain encryption items, including mass-market products, subject to reporting requirements.
Question 4: When performing a sanctions screening, a match triggers on a name that is phonetically similar but not identical to an SDN entry. What is this scenario called?
- False negative
- Alias match
- False positive (Correct answer)
- Sanctions evasion
Correct answer: False positive
A false positive occurs when a screening system flags a name that is not actually the sanctioned party, requiring manual review to clear.
Question 5: Which of the following best describes a 'debarred' party on the State Department's AECA Debarred List?
- An entity sanctioned for financial crimes under OFAC
- A person prohibited from participating in defense articles exports under ITAR (Correct answer)
- A company denied export privileges under EAR
- A foreign government subject to arms embargo
Correct answer: A person prohibited from participating in defense articles exports under ITAR
The AECA Debarred List identifies parties prohibited from receiving defense articles or defense services controlled under ITAR due to AECA violations.
Question 6: A U.S. exporter ships items to a legitimate buyer in France, knowing the buyer intends to re-export them to Iran. This violates which EAR principle?
- End-user rule
- Knowledge standard (Correct answer)
- Re-export control rule
- De minimis rule
Correct answer: Knowledge standard
The EAR's knowledge standard holds exporters liable when they 'know' (including willful blindness) that items will be diverted to prohibited destinations.
Question 7: Under OFAC's 50 Percent Rule, a company is automatically considered blocked if sanctioned persons own what minimum combined ownership stake?
- 25%
- 33%
- 50% (Correct answer)
- 75%
Correct answer: 50%
OFAC's 50 Percent Rule blocks any entity in which one or more SDN-listed persons own, individually or in aggregate, a 50% or greater interest.
RCMS Sanctions & Trade Compliance 2
Under OFAC regulations, which term describes a transaction that a U.S. person must reject and report to OFAC within 10 business days?