Sanctions Compliance Flashcards
What is dual control?
Dual control is a principle whereby at least two employees are required in order to complete an internal control task. / Also maker-checker or four eyes principle.
Where can the dual control process apply?
It can vary based on institution size, it can reside solely within the second line defense or involve the first line, including the operations department. The escalation paths and related dual-control functions depend on the size and complexity of both the institution and business profile.
What are the core elements of sanctions due diligence?
- Understanding of the sanctions exposure that emanates from the customer and its business
- geographic risk exposure/ customer’s risk exposure to sanctioned countries
- how the customer’s supply chain can be exposed to sanctions risk, even indirectly
What are the key elements of the concept of beneficial ownership?
The phrases “ultimate effective control” refer to situations in which ownership or control is exercised through a chain of ownership or by means of control other than direct control. This definition should also apply to the beneficial owner of a beneficiary under a life or other investment linked insurance policy.
Who has beneficial ownership of a bank account?
A person in whose name an account is opened with a bank is not necessarily the person who ultimately controls such funds. This distinction is impt because the focus of AML efforts needs to be on the person who has this ultimate level of control.
What are the criteria set by EU to determine when a person or entity is controlled by another person?
- having the right or exercising the power to appoint or remove a majority of the members of the administrative, management, or supervisory body of such legal person or entity
- having appointed solely from one’s voting rights a majority of the members of the admin, mgmt, or supervisory bodies of entity who have held office during the present and previous financial year
- controlling alone, pursuant to an agreement with other shareholders in or members of a legal person or entity, a majority of shareholders’ or members’ voting rights in that legal person or entity
- having the power to exercise a dominant influence pursuant to an agreement.
How does the OFAC 50% rule apply on an aggregate level?
If a company that is an SDN (Company A) owns 50% or more in another company (Company B), which holds 50% or more of another company (Company C), Company C also is subject to the same sanctions restrictions that apply to Company A.
What are the three significant differences between OFAC and the EU’s European Best Practice Guidance concerning SDD and beneficial ownership?
- The EU’s rule applies when a sanctions target owns more than 50% of a legal entity.
- The EU has not yet implemented the aggregate rule.
- The EU requires that assets be frozen when a sanctions target “controls” or exercises influence over an entity.
What % is often applied for an EU AML programme?
25%, because the EU AML Directives have required that FIs collect KYC for companies holding 25% or more ownership of an entity.
When a sanctioned target divests interest, what is the difference btw the application of US and EU sanctions?
Although divestment may circumvent US sanctions, under the EU rule regarding control, it may not be sufficient, as divestment does not necessarily divest control.
What are the considerations about the nature of a customer’s business that are specifically relevant to sanctions risk?
- Activity of subsidiaries or affiliated third parties (relationship, commercial connection to a sanctioned target through payments, linked accounts, or other names)
- parties forming part of the supply chain
- duration of current business activities
What does a bill of lading identify?
Means of transport, info about the goods, points of loading, transshipment points, final unloading destination, and the date on which the goods are to be shipped.
What info needs to be obtained re free trade zones?
If FTZs are part of the planned shipping arrangements, it is critical to understand the reason for stopping at or transferring goods at them. This includes obtaining information about the owners and controllers of any companies formed in an FTZ that are acting as the recipient or sender of goods.
What are the customer risk indicators in the Wolfsberg Correspondent Banking questionnaire?
An org must determine:
- the parent company and its branches and equivalents
- the executive committee, or equivalent, and the supervisory board
- ant other significant controlling interests and their ultimate beneficial owners
- the geographic regions in which their customer base is located
What are the risks specific to insurance companies as customers?
- does the customer use brokers or intermediaries in jurisdictions known to be high risk for SDD purposes?
- are their brokers required to do SDD checks on individuals for whom they underwrite policies?
- who is the target customer base?
- what are their procedures to identify the beneficial owner of their customers?
