Enforcement Actions & Reporting Obligations Flashcards

Which of the following best describes 'disgorgement' as used in OFAC civil settlements?

Answer: Recovery of profits gained through sanctionable conduct

Disgorgement requires a violator to give up profits earned through the sanctions violation, preventing unjust enrichment and serving as a deterrent beyond the base civil penalty.

A foreign bank with no U.S. branch processes a USD transaction through a U.S. correspondent bank on behalf of a sanctioned entity. Which party bears primary OFAC liability?

Answer: The U.S. correspondent bank, as it processed the transaction on U.S. soil

The U.S. correspondent bank bears primary OFAC liability because it is a U.S. person that processed a transaction involving a sanctioned party, regardless of the foreign originator's intent.

Under OFAC's Economic Sanctions Enforcement Guidelines, which factor is considered an aggravating circumstance that can increase the base penalty?

Answer: The violation involved a significant commercial benefit to the violator

Commercial benefit — meaning the violator profited from the sanctions violation — is an aggravating factor under OFAC's enforcement guidelines that can increase the penalty above the base amount.

What is the primary purpose of OFAC's 'cautionary letter' in the enforcement process?

Answer: To notify a party that OFAC is aware of potential violations but is taking no further action at this time

A cautionary letter informs the recipient that OFAC reviewed the matter and found no violation or chose not to pursue action, but puts the entity on notice that similar conduct may be scrutinized more closely.

When a U.S. financial institution rejects (rather than blocks) a transaction involving a sanctions concern, what filing is required and to whom?

Answer: A rejected transaction report to OFAC within 10 business days

Rejected transactions — those not processed because they involve a sanctions concern but do not involve blockable property — must be reported to OFAC within 10 business days of rejection.

A compliance program discovers that a customer's payment was sent to a bank whose name closely resembles an SDN but is not on the list. After investigation, no match is confirmed. What is the appropriate next step?

Answer: Document the investigation findings and retain records for at least 5 years

When a potential match is investigated and cleared, the institution should document its false-positive analysis and retain those records to demonstrate due diligence in any future examination.

Under which legal theory can a U.S. parent company be held liable for sanctions violations committed by its foreign subsidiary that operated independently?

Answer: Alter ego or piercing the corporate veil theory

OFAC can hold a U.S. parent liable for a foreign subsidiary's violations under alter ego or veil-piercing theories if the parent exerted sufficient control over the subsidiary's operations.