OFAC

Question 1

An account in which payments, transfers, withdrawals, or other dealings may not be made without authorization from OFAC. Debits are prohibited; however, credits are not.

Answer 1

Blocked account

Question 2

What does SDN stand for?

Answer 2

Specially designated nationals

Question 3

Persons who are considered to be nationals of the target country because they are known to be acting on behalf of the target country or are associated with international narcotics trafficking or terrorism.

Answer 3

Specially designated nationals

Question 4

Anything of value, including but not limited to money, deposits, notes, stocks, bonds, securities, bills of lading, bankers’ acceptances, evidences of ownership, mortgages/deeds, real estate, goods, AP, negotiable instruments, SDB contents, personal property, annuities, POAs, contracts and so forth. This is any interest whatsoever, direct or indirect.

Answer 4

Property/property interests

Question 5

All reports on blocked accounts or rejected transactions must be sent to OFAC within __________ days of the occurrence.

Answer 5

10 business

Question 6

What information is required to be sent to OFAC on blocked assets?

Answer 6

• ID of the property
• Owner of the account
• Property address and location
• Account number
• Value of the account (actual or estimated)
• Blocking date
• Photocopy of the transfer or payment instructions
• Confirmation that the funds have been deposited into a blocked account.
• The ID of the individual or entity subject to blocking should be clearly ID’d.
• Name and phone number of compliance personnel at the bank who have knowledge of the transaction

Question 7

What information is required to be sent to OFAC on rejected transactions?

Answer 7

• Name and address of the FI requesting the transfer
• Date and amount of the transfer
• Photocopy of the transfer or payment order
• Reason for rejection
• Name and phone number of the compliance personnel at the bank who has knowledge of the transaction

Question 8

If a transaction should have been blocked or rejected, OFAC may send a letter requesting information on how the transaction was processed. The bank has __ days to reply and request no penalty or a reduction in penalty.

Answer 8

30

Question 9

An annual report on blocked accounts as of June 30 of each year must be filed by ______ __ of that same year.

Answer 9

Sept 30

Question 10

All blocked accounts must be placed in an ______________________________________.

Answer 10

Interest-bearing account earning interest at a commercially reasonable rate, that is a rate currently offered to other depositors on deposits or instruments of comparable size and maturity.

Question 11

Is right of offset permitted on blocked accounts that are placed in interest-bearing accounts?

Answer 11

No

Question 12

How long must banks retain records for rejected transactions?

Answer 12

5 years

Question 13

How long must banks retain records for blocked property?

Answer 13

For the amount of time the period is blocked and for an additional 5 years after the property has been released

Question 14

In case of a violation, what two actions does OFAC consider favorably?

Answer 14

• The use of interdiction software
• The use of good-faith manual and electronic efforts

Question 15

How often should in-depth audits be conducted for OFAC compliance?

Answer 15

Annually

Question 16

Voluntary self-disclosure of a violation reduces the base civil money penalty amount by up to __.

Answer 16

50%

Question 17

What constitutes an egregious OFAC violation?
A. Willful or reckless violation of law, unfamiliarity with requirements, harm to sanctions program objectives, and individual characteristics.
B. Accidental violation of law, awareness of conduct at issue, harm to sanctions program objectives, and individual characteristics.
C. Involuntary violation of law, inexperience, harm to sanctions program objectives, and individual characteristics.
D. Willful or reckless violation of law, awareness of conduct at issue, harm to sanctions program objectives, and individual characteristics.

Answer 17

D. Willful or reckless violation of law, awareness of conduct at issue, harm to sanctions program objectives, and individual characteristics.

A suspected violation is “egregious” if OFAC’s director or deputy director analyzes a set of general factors and finds that the fact pattern meets a threshold that calls for a “strong enforcement response.” The general factors evaluated by OFAC are willful or reckless violation of law, awareness of conduct at issue, harm to sanctions program objectives, and individual characteristics.

Question 18

OFAC will issue a _______ notice if it has reason to believe a violation has occurred and a civil monetary penalty is warranted.

Answer 18

pre-penalty

OFAC will issue a Pre-Penalty Notice informing the alleged violator of the agency’s intent to impose a monetary penalty. A Pre-Penalty Notice shall be in writing and include the following:
(1) Right to respond
(2) Deadline for response within 30 days
(3) Computation of time for response: response must be postmarked on or before the 30th day after the pre-penalty notice postmark.
(4) Extensions of time for response if a due date falls on a federal holiday or weekend
(5) Form and method of response: typewritten, signed by the violator or a representative, indicate it is a pre-penalty notice response, and include the OFAC ID number. The response can be electronically submitted, but the original must be sent in accordance with #3.
(6) Settlement
(7) Guidelines for the imposition or settlement of civil penalties
(8) Representation

Question 19

The BSA officer has just been notified by the chief operations officer that, due to a glitch in the bank’s OFAC interdiction software, wires have been regularly transmitted to a bank on the SDN list. Based on the OFAC Enforcement Guidance, what should the BSA Officer do FIRST to attempt to mitigate any penalties?

A. Review the OFAC wire policies and procedures to determine how the errors occurred
B. Stop and hold all wires to the bank on the SDN list
C. Investigate the customer who sends these wires
D. Self-report the activity to OFAC

Answer 19

B. Stop and hold all wires to the bank on the SDN list

While all of these actions are important and should be undertaken, stopping the conduct should be done immediately.

Question 20

Your institution has identified a deposit made by an existing depositor to an entity on the OFAC SDN list that should be blocked under OFAC requirements. The branch manager contacts you for specific instructions. Before reporting the transaction to OFAC, what should the bank do?

A. Reject the transaction
B. Process the transaction
C. Close the customer’s account
D. Place the funds in an interest-bearing account

Answer 20

D. Place the funds in an interest-bearing account

Question 21

Your bank’s president comes back from an industry conference and tells the compliance officer that she attended a presentation about OFAC. She heard the bank could be fined for not adhering to OFAC requirements. Thus, she has directed that every bank transaction be reviewed for OFAC compliance. What is the most appropriate statement the compliance officer could make to the bank president?

A. The bank is already in compliance because OFAC checks are performed on all new depositors
B. The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures
C. OFAC does not apply because the bank does not conduct business in foreign countries or with foreign nationals
D. Banks are usually not fined for OFAC violations unless they conduct transactions with SDNs or blocked countries

Answer 21

B. The bank has assessed its OFAC risk and has implemented risk-based OFAC procedures

A risk-based program is required by the BSA/AML interagency manual.

Question 22

What should a bank do when it receives a request from a customer to transfer funds to an individual in Iraq?

A. Conduct the transfer as requested
B. Conduct the transfer if the individual and the financial institution are not on the SDN list
C. Block the transfer
D. Conduct the transfer and then notify OFAC immediately

Answer 22

B. Conduct the transfer if the individual and the financial institution are not on the SDN list

The bank must check the person and the financial institution receiving the funds. If neither is an SDN, the transfer can be made.

Question 23

Which of the following countries are currently subject to the Office of Foreign Assets Control Regulations?

A. North Korea
B. Jordan
C. Bahrain
D. Russia

Answer 23

A. North Korea

North Korea is covered under OFAC regulations, pursuant to the Trading with the Enemy Act, the Anti-Terrorism Act, and the Effective Death Penalty Act.

Question 24

Frank presents cash to the bank and seeks to wire it to his spouse, Rita, in Iran. The OFAC list identifies Rita as a specially designated national. Under OFAC Regulations, what should the bank do?

A. Block the transfer
B. Conduct the transfer as requested and take no further action
C. Conduct the transfer as requested and notify OFAC immediately
D. Conduct the transfer only if the bank determines that Iran is not a blocked country

Answer 24

A. Block the transfer

Question 25

State National Bank is a $250 million community bank. It makes a variety of consumer and commercial loans, regularly transmits funds via wire transfers for its customers, and issues commercial and stand-by letters of credit. Which of the following transactions can State National make without checking the OFAC SDN list and without incurring liability?

A. Send a wire transfer via its correspondent bank in New York for a commercial customer.
B. Sell a cashier’s check payable to a third party.
C. Cash an on-us check over-the-counter for a noncustomer.
D. None. The bank can be liable for all.

Answer 25

D. None. The bank can be liable for all.

Question 26

ACME Bank is a $600 million institution with 15 branches within three counties. Because of its proximity to Mexico, the bank has many foreign national customers and makes many foreign wire transfers for its customers. Currently the bank’s branch managers print the OFAC list of SDNs and place them in strategic places in each branch. The wire transfer department keeps its own copy of the list. The compliance officer has implemented an annual auditing program to check the bank’s compliance with OFAC regulations. The findings of this audit are provided to the bank’s board of directors annually. The bank’s regulatory agency has indicated to management that the bank has a high risk for BSA/AML/OFAC compliance. Of the following actions, which would be the most effective to strengthen the bank’s OFAC compliance?

A. Conduct compliance audits twice a year
B. Purchase and implement interdiction software for the wire transfer area
C. As an internal control procedure, require the BSA officer to check the OFAC Web site daily for any changes to the SDN list
D. Routinely provide account transaction information to federal security agencies so suspicious patterns can be detected

Answer 26

B. Purchase and implement interdiction software for the wire transfer area

The bank should conduct regular OFAC training for all employees and maintain internal control procedures. It is not necessary to audit compliance with OFAC regulations more often than once a year, but in a bank of this size with the level of risk involved, the bank should invest in interdiction software for at least the wire transfer area and preferably for all operational areas.

Question 27

OFAC is an office with which U.S. government agency?

A. State Department
B. Central Intelligence Agency
C. Office of the President
D. U.S. Treasury Department

Answer 27

D. U.S. Treasury Department

Question 28

Which of the following best describes who is subject to OFAC regulations?

A. All U.S. persons and federally-chartered U.S. banks, bank-holding companies, and credit unions
B. All individuals and entities subject to U.S. jurisdiction, including U.S. citizens, residents, companies, banks, and foreign entities operating within or conducting business with the United States
C. All financial institutions operating in the U.S.
D. Federally and state chartered banks and credit unions including foreign branches

Answer 28

B. All individuals and entities subject to U.S. jurisdiction, including U.S. citizens, residents, companies, banks, and foreign entities operating within or conducting business with the United States

Question 29

Your bank has identified an account that is subject to OFAC sanctions and has blocked the account. What additional responsibilities does the bank have with respect to the blocked account?

A. Transfer the funds to the U.S. Treasury Department within 10 business days
B. Report the blocked account to OFAC within 10 business days
C. Notify the accountholder of the procedures for obtaining an OFAC license
D. Notify your primary regulator

Answer 29

B. Report the blocked account to OFAC within 10 business days

Must also place the funds into an interest-bearing account from which only credits and OFAC-authorized debits may be made.

Question 30

Can a bank debit a service charge against the account?

Answer 30

Yes