Swift Swift Financial Crime Prevention & AML 2 — Questions and Answers
Question 1: What is the purpose of sanctions screening in SWIFT payment processing?
- To check payment parties against government-issued lists of prohibited individuals, entities, and countries (Correct answer)
- To verify that SWIFT BIC codes are registered and active
- To confirm that foreign exchange rates are within acceptable ranges
- To validate that message formatting meets SWIFT standards
Correct answer: To check payment parties against government-issued lists of prohibited individuals, entities, and countries
Sanctions screening compares payment originators, beneficiaries, and intermediaries against OFAC, UN, EU, and other sanctions lists to prevent prohibited transactions.
Question 2: Which US government body administers the most widely referenced sanctions list in SWIFT payment screening?
- OFAC (Office of Foreign Assets Control) (Correct answer)
- FinCEN (Financial Crimes Enforcement Network)
- FDIC (Federal Deposit Insurance Corporation)
- SEC (Securities and Exchange Commission)
Correct answer: OFAC (Office of Foreign Assets Control)
OFAC, part of the US Treasury, administers sanctions lists including the SDN (Specially Designated Nationals) list used globally for payment screening.
Question 3: What is a 'false positive' in the context of SWIFT sanctions screening?
- A legitimate payment flagged as a potential sanctions match requiring manual review (Correct answer)
- A sanctioned transaction that passed screening undetected
- A SWIFT message with incorrect formatting that is rejected
- A payment where the beneficiary information is missing
Correct answer: A legitimate payment flagged as a potential sanctions match requiring manual review
A false positive occurs when a payment is incorrectly flagged as a sanctions match, requiring compliance staff to investigate and clear the transaction.
Question 4: Why is screening Field 59 (Beneficiary) in SWIFT MT103 messages critical for sanctions compliance?
- The beneficiary is the ultimate recipient of funds and must not be a sanctioned party (Correct answer)
- Field 59 contains the sending bank's routing code
- Regulators require this field to be encrypted
- Field 59 determines which sanctions list applies
Correct answer: The beneficiary is the ultimate recipient of funds and must not be a sanctioned party
Field 59 identifies who receives the funds, and if the beneficiary is a sanctioned entity, the bank must block the payment.
Question 5: What does 'name matching' in sanctions screening aim to identify?
- Payment parties whose names are similar to or identical to sanctioned individuals or entities (Correct answer)
- Duplicate SWIFT messages from the same sender
- Beneficiary banks that are not registered SWIFT members
- Payments routed through high-risk jurisdictions
Correct answer: Payment parties whose names are similar to or identical to sanctioned individuals or entities
Name matching algorithms compare payment party names against sanctions lists, accounting for spelling variations, transliterations, and aliases.
Question 6: What is the consequence for a US bank of processing a SWIFT payment involving an OFAC-sanctioned party?
- Civil and criminal penalties, including fines up to millions of dollars per violation (Correct answer)
- Temporary suspension of SWIFT messaging rights
- Mandatory upgrade to ISO 20022 messaging
- Required third-party audit of all SWIFT transactions
Correct answer: Civil and criminal penalties, including fines up to millions of dollars per violation
OFAC violations can result in massive civil penalties (up to $1M+ per violation) and criminal prosecution under US law.
Swift Swift Financial Crime Prevention & AML 2
What is the purpose of sanctions screening in SWIFT payment processing?