Sanctions Laws & Regulatory Frameworks Flashcards

Under the North Korea Sanctions and Policy Enhancement Act of 2016, which of the following is a mandatory sanctions trigger?

Answer: Foreign banks that maintain any correspondent accounts with North Korean financial institutions

The Act mandates designation of foreign financial institutions that knowingly maintain correspondent accounts or provide financial services used to conduct significant transactions on behalf of designated North Korean parties.

What is the 'effects test' used by OFAC to determine whether a foreign entity's transaction is subject to US sanctions jurisdiction?

Answer: Whether the transaction has a sufficient nexus to the US — such as using US currency, infrastructure, or involving a US person

OFAC asserts jurisdiction over foreign transactions that have a sufficient US nexus, including use of US dollar correspondent banking, US persons, or US-origin goods/services.

Which OFAC-administered program targets individuals and entities involved in weapons of mass destruction (WMD) proliferation, regardless of country?

Answer: The Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR) under Executive Order 13382

EO 13382 and implementing WMDPSR target proliferators of WMD and their supporters globally, not limited to any single country program.

In the context of EU sanctions, what is the 'asset freeze' obligation and how does it differ from 'confiscation'?

Answer: Asset freeze prohibits dealing with funds/assets while preserving ownership; confiscation permanently transfers title to the state

An asset freeze prevents access to and movement of funds/assets while leaving legal ownership with the sanctioned party; confiscation involves permanent transfer of ownership to the state, which typically requires court proceedings.

Which of the following transactions would most likely qualify for OFAC's general license for 'personal remittances' to Cuba?

Answer: A $1,000 transfer from a US person to a close relative living in Cuba

OFAC's Cuba general licenses permit personal remittances to close relatives in Cuba up to specified dollar limits, while payments to government officials or state entities remain prohibited.

What is the significance of the 'Protecting Europe's Energy Security Act' (PEESA) and its connection to US secondary sanctions?

Answer: It authorizes secondary sanctions on vessels and entities involved in constructing Russian energy pipelines like Nord Stream 2

PEESA authorizes the US to impose secondary sanctions on non-US persons providing vessels, services, or facilities for certain Russian energy pipeline projects, including Nord Stream 2.

Under OFAC's compliance framework, what does a 'risk-based approach' to sanctions compliance primarily require of financial institutions?

Answer: Calibrating the depth of due diligence and screening intensity to the assessed sanctions risk of customers, products, geographies, and transactions

A risk-based approach requires institutions to assess sanctions exposure across customers, geographies, products, and transaction types, then allocate compliance resources proportionately to higher-risk areas.