Risk Analysis & Due Diligence Flashcards

Which of the following is an indicator of potential sanctions evasion through trade finance?

Answer: Vague or generic descriptions of goods on shipping documents

Generic or vague goods descriptions on trade documents are a red flag for potential misrepresentation aimed at concealing sanctioned goods or parties.

When assessing the sanctions risk of a private equity fund client, what is the MOST critical due diligence consideration?

Answer: The identity and sanctions status of the fund's underlying limited partners

In private equity funds, sanctioned parties can use limited partner positions to move funds, making LP identity and status the most critical sanctions concern.

A bank receives a wire transfer where the originator field contains only initials and no address. Under sanctions compliance, this should trigger:

Answer: A request for complete originator information before processing

Incomplete originator information prevents proper sanctions screening and must be resolved before processing to avoid potential violations.

Which of the following best describes 'secondary sanctions'?

Answer: Sanctions that target non-US persons for conducting business with sanctioned countries or parties

Secondary sanctions extend US sanctions reach to non-US persons by threatening them with US market exclusion if they conduct significant business with sanctioned targets.

In a sanctions risk assessment matrix, 'likelihood' of a sanctions violation is BEST measured by:

Answer: The frequency and nature of customer interactions with high-risk jurisdictions or parties

Likelihood in a risk matrix relates to how often and deeply a business channel or customer interacts with sanctioned or high-risk environments.

A company wants to export dual-use technology to a customer in a non-sanctioned country. What sanctions due diligence step is MOST important?

Answer: Screening the end-user and end-use to ensure the technology won't be re-exported to a sanctioned destination

End-user and end-use screening is critical for dual-use goods to prevent re-export or diversion to sanctioned parties or destinations.

What does 'derisking' mean in the context of sanctions compliance at financial institutions?

Answer: Terminating or avoiding relationships with entire categories of customers to reduce sanctions exposure

Derisking refers to wholesale termination of customer categories or jurisdictions to avoid compliance risk, often criticized for excluding legitimate customers.