ACAMS CGSS Dumps

Under OFAC regulations, when a customer’s funds are blocked, the individual or entity may apply to OFAC for a specific license to authorize the release or movement of the funds. Only OFAC has the authority to approve the unblocking of assets.

Attempting new transactions (A) is prohibited. Banks cannot refund blocked funds (B). Notifying local authorities (C) does not resolve the issue, because OFAC authorization is required.

OFAC general licenses commonly authorize the export of agricultural commodities, medicine, and medical devices to sanctioned countries under humanitarian exemptions. These items are recognized as essential goods and are generally permitted even in comprehensive sanctions programs, provided specific conditions are met.

Luxury goods such as gold, raw materials like iron and steel, and petroleum-related products are typically prohibited or require specific licensing.

Sanctions and Compliance Domains explain that fuzzy logic screening includes phonetic algorithms (e.g., Soundex, Metaphone) to identify variations in the spelling or pronunciation of names. This allows a screening tool to detect near matches and transliteration differences that would not match under exact-match logic.

Inequality lists, big data, and whitelists are not fuzzy matching algorithms. Whitelists are used for reducing false positives, not matching logic.

Sanctions and Compliance Domains specify that when a transaction presents multiple risk indicators—such as a high-risk jurisdiction, shell company involvement, and unclear payment purpose—the appropriate response is to seek additional information before releasing or rejecting funds.

Financial institutions are required to conduct deeper review when the transaction indicators suggest possible sanctions exposure, even if the names involved do not appear on sanctions lists. Obtaining supporting documentation helps determine whether the payment involves sanctioned parties, prohibited shipping routes, disguised ownership, or goods subject to restrictions.

Freezing/blocking is only appropriate when the institution has identified a match to a designated party or prohibited conduct. Reporting to authorities must follow a confirmed sanctions nexus, not preliminary suspicion.

References from Sanctions and Compliance Domains:

Requirements to obtain underlying documents when shell companies or high-risk jurisdictions appear in a payment.

Investigation obligations prior to rejecting or blocking a payment.

Risk-based approach to suspicious or unclear maritime/shipping transactions.

A four-eye check is a standard internal control requiring two independent reviewers to validate decisions, ensuring accuracy, transparency, and reducing the risk of error or inappropriate clearance of alerts.

Sanctions and Compliance Domains identify this as a critical component of the alert-handling process, enabling oversight and minimizing compliance failures.

Fuzzy matching is a screening technique, not a control mechanism. Batch screening and threshold calibration relate to system functionality, not independent quality assurance.

OFAC guidance clarifies that blocking virtual currency means preventing any access, transfer, or withdrawal of the asset by the sanctioned party. The entity holding the virtual currency must:

Deny access to the wallet or virtual asset, and

Report the blocked property to OFAC in accordance with reporting rules.

Virtual currencies are not “returned” (A), not necessarily moved to a pooled wallet (B), and are not converted to fiat unless authorized (C).

Sectoral sanctions target specific sectors of a foreign country's economy, such as defense, energy, mining, or financial services. These sanctions apply to persons or entities operating within those sectors and often restrict specific types of transactions (e.g., certain financing or technology transfers).

Comprehensive sanctions cover entire jurisdictions. Individual or corporate sanctions apply to specific persons or companies but are not sector-based.

UN sanctions are imposed by the UN Security Council as part of its mandate to maintain international peace and security. They are intended to influence behavior, prevent conflict, suppress terrorism, and stabilize global security conditions.

While asset freezes and travel bans are common measures (option D), they are examples, not the fundamental reason for imposing sanctions. Option C describes the overarching purpose.

The UK Office of Financial Sanctions Implementation (OFSI) applies the ownership and control test to determine whether an entity is considered owned or controlled by a designated person. Under OFSI rules, a person is deemed to own an entity if they hold, directly or indirectly, more than 50% of the shares or voting rights. This threshold also applies when determining indirect ownership through corporate structures.

Powers such as signing authority or power of attorney do not constitute ownership. The right to appoint or remove the majority of a board may indicate control but not ownership. Any threshold below 50% does not satisfy the OFSI ownership criteria.

References from Sanctions and Compliance Domains:

OFSI ownership threshold requiring more than 50% of shares or voting rights.

Distinction between ownership and other types of influence or authority.

OFAC regulations apply broadly to US persons, which include US citizens, permanent residents, entities organized under US law, and individuals located in the United States. These obligations apply regardless of where the US person is physically located.

Foreign companies, foreign financial institutions, or foreign persons are only obligated under OFAC regulations when a US nexus exists (e.g., US origin goods, US dollars, US-based transactions). US persons, however, must always comply.

Sanctions and Compliance Domains state that independent testing and auditing must be conducted by a group separate from the sanctions operations and screening management teams. Internal audit is typically the independent function with sufficient technology and control expertise to assess system performance, threshold calibration, governance, and rule sets.

Teams involved in day-to-day operations (investigations, list management, risk assessment) cannot test their own work due to conflicts of interest.

Sanctions apply primarily to persons and entities within the jurisdiction of the issuing authority. For example:

• US sanctions apply to US persons, entities organized under US law, and persons physically located in the US.

• EU sanctions apply to EU nationals, persons within EU territory, and EU-incorporated entities.

Sanctions are not automatically global unless other jurisdictions adopt similar measures. International financial institutions must comply only when they operate within relevant jurisdictions.

Transliteration is defined as converting writing from one script into another while preserving pronunciation as closely as possible. In sanctions screening, transliteration is important because sanctioned parties may appear in multiple scripts (e.g., Cyrillic, Arabic, Mandarin) and the automated screening system must recognize these variations.

While option B focuses specifically on converting non-Latin scripts into Latin, sanctions screening requires a broader definition that applies to any script-to-script conversion relevant to matching names globally. Thus, the correct definition is the general conversion of text from one script into another.

References from Sanctions and Compliance Domains:

Definition of transliteration in sanctions screening and name-matching methodologies.

Need for script conversion to support accurate detection of sanctioned parties across language systems.

When a bank has a zero-tolerance stance regarding sanctioned jurisdictions and no applicable license or exemption exists, the appropriate response is to reject and return the remittance, informing the sending bank that the transaction cannot be processed for sanctions compliance reasons.

Escalation for consideration is inconsistent with a zero-tolerance policy. Filing a SAR does not authorize processing a prohibited payment. Processing on the assumption of a license without one presents regulatory violations.

Artificial intelligence (AI) enhances sanctions screening by improving:

• name-matching accuracy,

• pattern recognition,

• reduction of false positives, and

• detection of complex sanctions-evasion typologies.

AI can analyze large volumes of data in real time and identify subtle risk indicators which traditional systems may miss.

Cryptocurrency mining tools and anonymizing tools hinder compliance, while tuning adjusts system thresholds but is not a standalone technology.

The OFAC 50% Rule states:

• Any entity owned 50% or more — directly or indirectly — by an SDN or SDN-owned entity is itself automatically blocked.

• Ownership is cumulative through all tiers.

Apply the rule:

✔ A – Blocked Person X has direct + indirect ownership in Entity C exceeding 50% → Blocked.

✔ C – Ownership cascades: SDN → A → B → C; each at 50%. Result: Entity C is blocked.

✔ D – Blocked Entity A (>50%) → owns B (>50%) → owns C (>50%). All downstream entities are blocked.

Not blocked:

• B = 25% + 25% = 50% but SDN does not directly own A or B — the SDN owns A and B, but A and B each are not blocked themselves because ownership is not aggregated across separate entities unless they hold shares. Therefore, C is not blocked.

• E = Only 25% flows into Entity C.

• F = Neither ownership chain reaches 50%.

Under OFAC’s 50 Percent Rule, any entity owned 50% or more by one or more SDNs is considered automatically blocked, even if it is not explicitly listed. The jurisdiction of incorporation (e.g., tax haven) does not exempt the entity from OFAC sanctions.

Because the SDN owns the company, the entity is also subject to OFAC prohibitions and cannot transact through the US financial system, including any USD-clearing banks, whether located inside or outside the United States.

Options B, C, and D are incorrect because OFAC sanctions apply regardless of where the company is registered and because USD transactions create a US nexus.

Enhanced due diligence is required when trade transactions involve jurisdictions near sanctioned countries due to the increased risk of transshipment, diversion, and sanctions evasion.

Sanctions and Compliance Domains highlight two core focus areas:

• verifying the identities and ultimate beneficial owners of all involved parties, and

• validating the shipment details, including routing, goods description, and movement patterns.

These elements are critical where geographic proximity raises sanctions exposure. While reviewing commercial terms and pricing may be part of general trade finance due diligence, the primary sanctions-specific EDD requirements focus on beneficial ownership and shipment details.

References from Sanctions and Compliance Domains:

Enhanced due diligence expectations for trade involving high-risk regions.

Requirements to verify UBOs to detect potential sanctioned ownership.

Importance of shipment route verification to detect diversion to sanctioned jurisdictions.

A sound governance framework, according to Sanctions and Compliance Domains, includes:

• Senior management ensuring adequate resources to investigate violations, identify weaknesses, and remediate control gaps.

• Updating the sanctions risk assessment to incorporate findings and root causes from prior incidents.

Human resources actions (A) are not a primary governance function. Reporting based on “lack of penalty” (D) is not a risk-based governance indicator. Zero-tolerance statements (E) do not constitute governance processes and may conflict with risk-based management expectations.

The Wolfsberg Guidance on Sanctions Screening emphasizes data quality as the most important factor when developing or maintaining a screening system. High-quality, accurate, complete, and consistently structured data is essential to ensure proper matching, reduce false positives, and avoid missed true matches.

Even with strong IT capabilities or defined risk appetite, a screening system will fail if the underlying data is incomplete or inaccurate.

Sanctions and Compliance Domains state that when entities share similar names, regions, or other characteristics with a sanctioned party — even when executive leadership differs — the institution must perform enhanced due diligence to rule out affiliation, ownership, or control links.

The similarity in names ("Al-Falah" vs. "El-Fallah"), geographic proximity, and the involvement of UN-sanctioned terrorism-related activity require deeper investigation. Compliance teams must confirm corporate records, ownership structure, purpose, and possible indirect connections before making a determination.

Automatic rejection is premature without evidence. Onboarding without further investigation is inappropriate.

Canadian sanctions law requires that Canadian persons ensure all commercial dealings comply with Canadian sanctions regulations, including those concerning Iran. Contracts involving sanctioned countries must incorporate compliance clauses reflecting applicable Canadian law.

The EU Blocking Statute does not apply to Canadian entities. Avoiding references to Iran is ineffective and does not eliminate sanctions exposure. USD payments may introduce US sanctions exposure and are not advisable in this context.

“Stripping” refers to removing, altering, or replacing material information from payment messages, invoices, or trade documents to conceal a sanctioned party, vessel, location, or jurisdiction. It is a recognized sanctions evasion technique used by actors seeking to bypass automated screening.

Examples include removing the sanctioned port name, omitting the ultimate consignee, or deleting identifying references.

This is distinct from structuring (option A), price manipulation (B), or dual messaging (C).

Appropriate tuning must maintain the tool’s ability to capture spelling variations, transliterations, and linguistic differences. This is essential for detecting sanctioned parties that may appear under alternate spellings (e.g., Arabic, Cyrillic transliterations).

Exact-match screening (C) or limiting variations (A, D) leads to missed true positives and violates regulatory expectations for effective sanctions screening.

UN sanctions require agreement among multiple countries, making them more difficult to enact than unilateral national sanctions. The UN Security Council must reach consensus, and all five permanent members must avoid using their veto power. Any negative vote by a permanent member blocks the resolution entirely.

This requirement for global political alignment is the primary barrier to rapid sanctions adoption. UN sanctions are neither autonomous nor inherently ineffective, and they do not exist to intervene in domestic affairs but to protect international peace and security under Chapter VII of the UN Charter.

Sanctions evasion indicators in trade documentation include:

• Multiple amendments designed to obscure the parties involved – a classic red flag indicating concealment of the real counterparty.

• Falsified or tampered shipping documents – used to hide sanctioned routes, ports, or vessels.

• Conflicting end-user documentation – a major warning sign of diversion or concealment of sanctioned recipients.

Cash withdrawals (E) and online payment instructions (F) are AML indicators, but not directly sanctions evasion indicators. Docking at non-sanctioned countries (D) is not suspicious unless used as part of concealment, which is not indicated here.

INSTEX was established by EU member states as an operational mechanism designed to facilitate limited and compliant trade with Iran after the re-imposition of U.S. secondary sanctions in 2018. According to the Sanctions and Compliance Domains, INSTEX is categorized as a special purpose vehicle, created specifically to permit trade transactions without reliance on traditional cross-border payment routes exposed to U.S. sanctions risk.

Special purpose vehicles are defined within sanctions frameworks as structured entities created to conduct or support specific categories of trade or payments where direct financial transfers are restricted or exposed to sanctions risk. INSTEX was designed to match European exporters and importers with Iranian counterparts through a barter-style internal clearing arrangement, avoiding external USD payment flows.

It is not a general license, nor is it a blocking statute. It also does not constitute sanctions evasion because it was formally established, publicly announced, and structured within EU legal parameters. Its purpose was to ensure compliance while maintaining limited humanitarian and permitted trade channels.

References from Sanctions and Compliance Domains:

Definitions and characteristics of special purpose vehicles in sanctions environments.

Description of EU mechanisms facilitating compliant trade with sanctioned jurisdictions.

Distinction between SPVs, blocking statutes, and licensing frameworks.

Regulatory context regarding INSTEX as an EU-created structured trade mechanism.

Sanctions and Compliance Domains state that institutions may notify the customer that their funds have been blocked or frozen, provided the notification does not reveal internal compliance processes or compromise legal obligations.

The customer may also be directed to the competent authority (such as OFAC or a national sanctions regulator) to seek guidance or licensing relief.

There is no blanket prohibition against notifying the customer; however, the institution must provide factual notification without offering legal advice or operational details.

EU Restrictive Measures apply to all persons and entities within the territory of the EU, including airspace and territorial waters, and to any vessel or aircraft under the jurisdiction of an EU Member State. This establishes that sanctions obligations extend to vessels registered under EU jurisdictions regardless of location.

EU sanctions also apply to all legal persons, entities, and bodies incorporated or constituted under the law of an EU Member State, even when those entities operate entirely outside EU territory. Legal incorporation under EU law creates an ongoing obligation to comply with EU sanctions.

EU ownership by itself does not trigger sanctions applicability, so a non-EU company that is 45% owned by an EU national does not fall under EU Restrictive Measures. Additionally, arrangements such as double-taxation conventions or participation in customs union agreements do not extend the territorial or legal applicability of EU sanctions to non-EU jurisdictions.

References from Sanctions and Compliance Domains:

Territorial applicability of EU sanctions, including vessels and aircraft under Member State jurisdiction.

Applicability to companies incorporated under EU Member State law regardless of geographic operations.

Legal and territorial definitions outlining the scope of EU Restrictive Measures.

Sanctions and Compliance Domains outline that institutions must maintain effective and reliable sanctions screening systems. This includes screening all incoming and outgoing payment messages, and institutions may not rely solely on correspondent banks for sanctions controls. Screening tools must also be capable of detecting alternative spellings, transliterations, and name variations of sanctioned parties.

Sanctions list updates must be incorporated immediately or as soon as practicable after publication. Monthly updates would be considered insufficient.

The use of controlled internal whitelists, combined with proper governance, periodic review, and controlled threshold calibration, is an accepted method used to reduce false positives while maintaining compliance integrity. Threshold adjustments must always follow documented validation, testing, and oversight procedures.

References from Sanctions and Compliance Domains:

Requirements for screening all payment messages, including incoming SWIFT transfers.

System expectations for matching name variations and alternative spellings.

Regulatory expectations for timely list updates.

Recognition of whitelist use and threshold calibration as acceptable screening optimization methods.