Risk Analysis & Due Diligence Flashcards
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Read the first 7 Risk Analysis & Due Diligence flashcards as text
A compliance officer discovers that a new corporate client's beneficial owner holds a 15% stake in a company on the SDN list. What is the most appropriate immediate action?
Answer: Escalate to senior management and place the account on hold pending review
When a beneficial owner has connections to an SDN-listed entity, the account should be held and escalated for senior review before any decision is made.
Which of the following best defines 'ownership and control' under OFAC's 50 Percent Rule?
Answer: Any entity owned 50% or more, directly or indirectly, by one or more SDN-listed persons
OFAC's 50 Percent Rule blocks any entity owned 50% or more in aggregate by one or more SDN-listed persons, even if the entity itself is not listed.
During enhanced due diligence on a correspondent bank, you identify that the bank operates in a jurisdiction with weak AML controls. Which risk factor is MOST relevant to sanctions exposure?
Answer: The volume of nested correspondent relationships the bank maintains
Nested correspondent relationships can obscure the true originator of transactions, creating significant sanctions evasion risk.
A sanctions risk assessment for a money services business (MSB) should prioritize which of the following customer risk factors?
Answer: Customer's geographic reach into high-risk jurisdictions
Geographic reach into high-risk or sanctioned jurisdictions is a primary customer risk factor for MSBs given the nature of cross-border money transfers.
What is the purpose of a 'risk-based approach' in sanctions compliance?
Answer: To allocate compliance resources proportionally to the level of identified sanctions risk
A risk-based approach directs enhanced scrutiny and resources toward higher-risk customers, products, and geographies rather than applying uniform controls.
Which document would be MOST useful when conducting due diligence on a foreign financial institution's sanctions exposure?
Answer: A Wolfsberg Questionnaire completed by the institution
The Wolfsberg Questionnaire is an industry-standard tool for assessing a financial institution's AML and sanctions compliance program.
A client states that its business partner is a government-owned entity in a partially sanctioned country. Which due diligence step is MOST critical?
Answer: Determine if the government-owned entity is on any sanctions lists or subject to sectoral sanctions
Government-owned entities in partially sanctioned countries may themselves be designated or subject to sectoral sanctions, making list-screening and sanctions program analysis essential.