Screening Processes & Compliance Systems Flashcards

What is the '50 Percent Rule' as applied by OFAC, and what is its compliance implication?

Answer: Entities owned 50% or more in aggregate by one or more SDNs are themselves treated as blocked, even if not listed

Under OFAC's 50 Percent Rule, entities directly or indirectly owned 50% or more by SDNs are considered blocked property even without explicit listing, requiring institutions to screen for ownership.

A sanctions screening alert is cleared by an analyst who documents 'no match—different date of birth.' Which additional data point would MOST strengthen this disposition?

Answer: The customer's passport number, nationality, or other government-issued ID confirming a distinct identity

Government-issued identification providing verifiable identity attributes (passport number, national ID, citizenship) most definitively distinguishes a customer from a similarly named SDN.

What is 'transaction filtering' as distinct from 'customer screening' in sanctions compliance?

Answer: Transaction filtering screens individual payments in real time; customer screening checks the client database at onboarding and periodic review

Transaction filtering screens payment data (counterparty names, addresses, references) as each transaction occurs, while customer screening checks the institution's customer database against watchlists.

Which situation would most likely require an institution to apply for a specific OFAC license before proceeding?

Answer: Completing a trade finance transaction that involves a designated entity as a counterparty, where a general license does not apply

When a transaction directly involves a designated entity and no general license covers the activity, the institution must apply to OFAC for a specific license authorizing the transaction.

What does 'correspondent account' mean under 31 CFR Part 561 and the Iran sanctions regulations?

Answer: Any account maintained by a U.S. financial institution for a foreign bank to receive, store, and transmit funds

Under the Iran sanctions, a correspondent account is an account established by a U.S. bank for a foreign bank to process dollar-denominated transactions, which can be a sanctions risk vector.

What is a 'risk-based approach' to sanctions screening threshold calibration?

Answer: Applying stricter (lower) match thresholds for higher-risk relationships and more permissive thresholds for lower-risk ones

A risk-based approach tailors sensitivity levels so that high-risk channels and customers face tighter screening criteria, while lower-risk transactions use higher thresholds to manage alert volumes.

What is the role of an 'annual sanctions program review' in a comprehensive compliance framework?

Answer: To assess whether the compliance program's controls, policies, training, and technology remain adequate given evolving sanctions risks and regulatory changes

An annual review evaluates whether the sanctions compliance program is keeping pace with new designations, regulatory guidance, business changes, and emerging typologies to maintain effectiveness.