CFCS CFCS Terrorist Financing & Sanctions Compliance 1 — Questions and Answers
Question 1: Which US government agency administers and enforces economic and trade sanctions programs?
- FinCEN
- OFAC (Correct answer)
- FBI
- FATF
Correct answer: OFAC
The Office of Foreign Assets Control (OFAC), part of the US Treasury Department, administers and enforces economic and trade sanctions against targeted foreign countries, entities, and individuals.
Question 2: What is a key difference between money laundering and terrorist financing?
- Terrorist financing always involves larger sums
- Terrorist financing may involve clean funds used for criminal purposes, while money laundering conceals funds already derived from crime (Correct answer)
- Money laundering is not a federal crime
- Terrorist financing only occurs internationally
Correct answer: Terrorist financing may involve clean funds used for criminal purposes, while money laundering conceals funds already derived from crime
Unlike money laundering, which involves disguising criminally derived funds, terrorist financing may involve legitimately sourced funds that are directed toward violent or extremist activity.
Question 3: Under the USA PATRIOT Act, financial institutions must file a Suspicious Activity Report (SAR) related to suspected terrorist financing within how many days of detection?
- 15 days
- 30 days (Correct answer)
- 45 days
- 60 days
Correct answer: 30 days
Financial institutions are required to file a SAR within 30 calendar days of detecting facts that may constitute terrorist financing or other suspicious activity.
Question 4: What is 'hawala' in the context of terrorist financing?
- A cryptocurrency exchange used by extremists
- An informal value transfer system that moves money without physical currency crossing borders, often leaving no paper trail (Correct answer)
- A sanctioned entity designation
- A formal wire transfer system in the Middle East
Correct answer: An informal value transfer system that moves money without physical currency crossing borders, often leaving no paper trail
Hawala is an informal value transfer network based on trust between brokers (hawaladars) who settle accounts without physically moving money across borders, creating minimal documentation.
Question 5: Which international body sets global standards for combating terrorist financing and publishes the relevant Recommendations?
- Interpol
- FATF (Financial Action Task Force) (Correct answer)
- UN Security Council
- Basel Committee
Correct answer: FATF (Financial Action Task Force)
The Financial Action Task Force (FATF) is the global standard-setting body whose 40 Recommendations form the international framework for combating money laundering and terrorist financing.
Question 6: What does 'de-risking' mean in the context of sanctions and terrorist financing compliance?
- Hedging currency exposure in international trade
- Financial institutions terminating relationships with entire categories of customers to avoid regulatory risk (Correct answer)
- Removing names from the OFAC SDN list
- Implementing enhanced due diligence measures
Correct answer: Financial institutions terminating relationships with entire categories of customers to avoid regulatory risk
De-risking occurs when financial institutions exit entire customer segments or geographic markets deemed too high-risk for sanctions/AML exposure, rather than managing individual customer risk.
CFCS CFCS Terrorist Financing & Sanctions Compliance 1
Which US government agency administers and enforces economic and trade sanctions programs?