RCMS Sanctions & Trade Compliance 4 — Questions and Answers
Question 1: Which OFAC enforcement action involves a monetary penalty issued without a formal administrative hearing when the party does not contest the findings?
- Pre-penalty notice
- Finding of violation
- Cautionary letter
- Agreed settlement (settlement agreement) (Correct answer)
Correct answer: Agreed settlement (settlement agreement)
A settlement agreement allows OFAC and the violating party to resolve a potential civil monetary penalty without admitting or denying the findings, avoiding a formal hearing.
Question 2: Under the Export Administration Regulations, what is the 'de minimis' rule used to determine?
- Whether a foreign-produced item incorporating U.S.-origin content is subject to the EAR (Correct answer)
- The minimum value of exports requiring an export license
- The threshold for mandatory end-user certificates
- Whether a deemed export license is required for foreign nationals
Correct answer: Whether a foreign-produced item incorporating U.S.-origin content is subject to the EAR
The de minimis rule determines whether a foreign-produced item containing U.S.-controlled content (by value or function) triggers EAR jurisdiction for re-export.
Question 3: A financial institution receives a wire transfer with the payment message 'Ref: services rendered / [blank originator field].' What sanctions red flag does this present?
- Structuring to avoid currency transaction reports
- Stripping or omission of originator information to obscure identity (Correct answer)
- Use of shell company intermediaries
- Layering through multiple correspondent banks
Correct answer: Stripping or omission of originator information to obscure identity
Omitting or stripping originator information from wire transfers is a classic method used to evade sanctions screening systems.
Question 4: Iran sanctions under IFCA (Iran Freedom and Counter-Proliferation Act) target which sector that is distinct from traditional oil and finance sanctions?
- Automotive manufacturing
- Agricultural commodities
- Shipping, shipbuilding, and port operations (Correct answer)
- Pharmaceutical distribution
Correct answer: Shipping, shipbuilding, and port operations
IFCA expanded Iran sanctions to cover the shipping, shipbuilding, and port operations sectors, targeting Iran's ability to transport and export sanctioned goods.
Question 5: What is the primary purpose of a 'Specially Designated Global Terrorist' (SDGT) designation under Executive Order 13224?
- To impose travel bans on suspected terrorists entering the U.S.
- To block the property and prohibit transactions with persons who support terrorism (Correct answer)
- To authorize military action against state sponsors of terrorism
- To share intelligence about terrorist financing with allied nations
Correct answer: To block the property and prohibit transactions with persons who support terrorism
E.O. 13224 authorizes OFAC to block the property of and prohibit transactions with SDGTs — persons determined to commit, threaten, or support acts of terrorism.
Question 6: A U.S. company's foreign subsidiary (not a U.S. person) enters into a contract with a Cuban state-owned entity. Under current OFAC rules, is this generally permitted?
- Yes, because foreign subsidiaries are not subject to U.S. jurisdiction
- No, because OFAC's Cuban Assets Control Regulations apply to entities owned or controlled by U.S. persons (Correct answer)
- Yes, if the contract involves agricultural goods only
- No, unless the subsidiary is incorporated in a non-U.S. jurisdiction for more than 5 years
Correct answer: No, because OFAC's Cuban Assets Control Regulations apply to entities owned or controlled by U.S. persons
OFAC's Cuban Assets Control Regulations (CACR) extend to entities owned or controlled by U.S. persons, making foreign subsidiary transactions with Cuba generally prohibited without a license.
Question 7: In trade compliance, what does 'transshipment risk' refer to?
- Loss or damage to goods during multimodal transport
- The risk that goods are re-routed through a third country to reach a prohibited end destination (Correct answer)
- Customs duties applied to goods shipped through free trade zones
- Insurance gaps when goods transfer between carriers
Correct answer: The risk that goods are re-routed through a third country to reach a prohibited end destination
Transshipment risk refers to the diversion of controlled goods through intermediary countries to circumvent sanctions or export controls on the ultimate destination.
RCMS Sanctions & Trade Compliance 4
Which OFAC enforcement action involves a monetary penalty issued without a formal administrative hearing when the party does not contest the findings?