Screening Processes & Compliance Systems Flashcards
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What is the primary function of a 'sanctions compliance management system' (SCMS) beyond name matching?
Answer: It integrates workflow management, alert disposition, documentation, and reporting for end-to-end compliance operations
A comprehensive SCMS manages the full compliance lifecycle: screening, alert triage, analyst workflow, case documentation, escalation, and regulatory reporting.
A payment message contains the phrase 'IR' in the originator address field. What risk does this pose from a sanctions screening perspective?
Answer: It could indicate Iran and may trigger a geographic sanctions alert requiring review
Country codes like 'IR' (Iran) in payment fields can trigger geographic sanctions screening alerts, though analysts must confirm whether the connection to a sanctioned jurisdiction is substantive.
What is the purpose of 'negative news screening' in a sanctions compliance program?
Answer: To detect adverse media coverage that may indicate undisclosed sanctions risks or illicit activity beyond official lists
Negative news screening helps identify individuals or entities with sanctions-related risks that may not yet be reflected on official watchlists, serving as an early warning tool.
Under the EU's sanctions framework, which body is primarily responsible for designating individuals and entities on EU sanctions lists?
Answer: The European Council, acting on proposals from the European Commission or member states
EU sanctions designations are made by the Council of the European Union, typically acting by unanimous agreement of member states, often on Commission proposals.
What is a 'consolidated sanctions list' and why is it operationally valuable?
Answer: A proprietary list sold by compliance vendors that combines multiple jurisdictions' designations into one file
Compliance vendors offer consolidated lists that merge OFAC, UN, EU, UK, and other jurisdictions' watchlists into a single file, reducing the operational burden of maintaining separate feeds.
When a financial institution identifies a match between a customer and the SDN list after account opening, what action is REQUIRED under OFAC regulations?
Answer: Block all property and report to OFAC; do not close the account or return funds without OFAC authorization
Upon identifying an SDN match post-onboarding, the institution must block all property in the account and report to OFAC; returning funds or closing the account requires OFAC authorization.
What does 'derisking' mean in the context of sanctions compliance, and why has it drawn regulatory criticism?
Answer: Wholesale termination of business relationships with entire categories of customers to avoid compliance complexity, which can harm legitimate customers and reduce financial inclusion
Derisking involves exiting entire market segments rather than managing individual risks, which regulators criticize because it excludes legitimate customers without commensurate compliance benefit.