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Question 1

In the event of a sanctions violation, the inclusion of a sanctions clause in a trade contract can:

Adefine which sanctioned elements are prohibited in the execution of the contract.

Benforce the contract if sanctions are imposed on any of the parties.

Cidentify the liability for any fines related to sanctioned entities.

Dact as a specific license allowing the contract to be fulfilled.

Answer : A

Sanctions and Compliance Domains state that sanctions clauses in trade contracts are used to:

* clarify prohibited activities,

* define obligations of the parties in case sanctions become applicable, and

* ensure business partners understand compliance expectations.

A sanctions clause cannot enforce a contract when sanctions apply (B), cannot assign liability for regulatory fines (C) beyond legal requirements, and cannot operate as a license (D). Only regulators (e.g., OFAC, EU authorities) can authorize activities by issuing licenses.

Trade contract sanctions clauses and their function.

Legal requirements surrounding sanctions clauses and regulatory authority.

Question 2

Which information should be considered while investigating a potential sanctions violation? (Select Two.)

AThe customer's dual residence in a sanctioned country and a non-sanctioned country

BThe customer's IP addresses

CThe customer's transactions of 10,000 USD or EUR or higher

DThe customer's incoming and outgoing wire transfers involving non-sanctioned countries

EThe customer's salary

Answer : A, B

Sanctions and Compliance Domains emphasize the importance of identity, residency, location indicators, and digital footprints when assessing potential sanctions violations.

Dual residency in a sanctioned country may trigger sanctions exposure because residency can determine jurisdictional reach. Likewise, IP addresses reveal the customer's actual geographic location during transactions and are critical in identifying hidden connections to sanctioned jurisdictions.

Transaction size thresholds, routine salary information, or transfers within non-sanctioned countries do not directly indicate sanctions violations.

Analysis of geographic indicators such as residency and IP information.

Importance of location-based data in determining sanctions exposure.

Question 3

Which has an obligation to accept and carry out UN Security Council Resolutions?

AAll members of the UN

BOnly permanent members of the Security Council

COnly members of the Security Council

DOnly countries that are targets of the resolution

Answer : A

Under the UN Charter, all United Nations member states are obligated to accept and carry out decisions of the UN Security Council. Sanctions and Compliance Domains emphasize that UN Security Council Resolutions issued under Chapter VII are binding on all UN members, not just Security Council members or targeted states.

Only member states have this obligation. Permanent membership or targeted status does not change the scope of obligation.

Reference from Sanctions and Compliance Domains:

UN Charter obligations for all Member States to implement Security Council Resolutions.

Binding nature of Chapter VII resolutions across all UN members.

Question 4

What type of sanctions are imposed against indicated persons operating in targeted field(s) of a country's economy?

AComprehensive sanctions

BIndividual sanctions

CCorporate sanctions

DSectoral sanctions

Answer : D

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.

Definition of sectoral sanctions using economic sector targeting.

Distinction between sectoral and comprehensive sanctions.

Question 5

A compliance analyst at a UK-based company is reviewing a transaction alert for Entity A. A representative provided documentation that a UK Asset Freeze individual reduced their stake in Entity A from 70% to 30% shortly after they became subject to sanctions. Which steps should the analyst recommend first?

AAllow the transaction to proceed and thoroughly document the provided information verifying the reduction in ownership by a sanctioned individual.

BConduct enhanced due diligence on Entity A to verify the provided documentation regarding the reduction of ownership by a sanctioned individual.

CReject the transaction and report it to the competent authority.

DAllow the transaction to proceed and remove Entity A from the screening filters.

Answer : B

Under UK OFSI rules, entities owned or controlled by a designated person remain subject to asset freeze restrictions. A reduction in ownership from above 50% to below 50%, particularly when occurring immediately after designation, requires enhanced due diligence to determine whether the divestment is genuine or merely an attempt to evade sanctions.

Sanctions and Compliance Domains emphasize the need for verification when documentation claims ownership reduction. Institutions must confirm authenticity, timing, beneficiaries of the transfer, and any continuing control influence by the designated person.

Approving the transaction before verification, removing screening, or rejecting without confirming details contradicts UK sanctions compliance expectations. Enhanced due diligence is the required first step.

Reference from Sanctions and Compliance Domains:

OFSI ownership and control criteria, including obligations when ownership reductions occur post-designation.

Requirements for enhanced due diligence to confirm legitimacy of divestment or restructuring.

Risk indicators of sanctions evasion through rapid ownership structure changes.

Question 6

If a financial institution's filtering system generates an alert matching a client to an individual on the Specially Designated National List, which investigation process should the financial institution follow?

AIf the customer is an individual whose last name matches the alert, but whose first name does not match, the investigation should continue by contacting the customer for more information.

BIf the customer is an individual with a match on the first and last name, and the country of birth, but not on the country of residence, then there is no need to proceed further with the investigation.

CIf the customer is an unrelated company with the same name, there is no need to proceed further with an investigation.

DIf the customer is a vessel with the same name, the investigation should continue to establish who is the owner of the vessel.

Answer : D

Sanctions screening standards require that when a hit is produced by the filtering system, the institution must determine whether the alert is a true match or a false positive through a structured escalation and investigation process. The Sanctions and Compliance Domains emphasize that financial institutions must evaluate all relevant identifiers, including entity type, name, ownership, vessel IMO numbers, and additional attributes.

In the case of vessels, sanctions regulations often target vessels by name and ownership, meaning that a vessel with an identical name requires deeper investigation. Authorities such as OFAC, the EU, and the UK regularly designate vessels because of their involvement in sanctioned activities, and vessel names frequently overlap with commercial entities. Therefore, the correct investigative approach is to continue the investigation to determine the true ownership, IMO number, and whether the vessel is the sanctioned party.

Options A, B, and C describe scenarios typically associated with clear mismatches or cases where additional investigation is unnecessary because essential identifiers do not match. However, vessels require continued review due to the regulatory emphasis on vessel ownership, registration, and operational control as determining factors in sanctions risk.

Reference from Sanctions and Compliance Domains:

Requirements for detailed matching processes in sanctions screening.

Guidance on evaluating entity type, ownership, and identifiers when reviewing alerts.

Rules relating to vessel sanctions, ownership determination, and verification steps.

Procedures for identifying true matches versus false positives in sanctions screening.

Question 7

Which action is an acceptable strategy for a financial institution's payment sanctions screening process?

AThe institution excludes incoming SWIFT transfers from sanction screening, instead relying on the controls of the sending/correspondent bank.

BThe institution uses software that does not account for alternative spellings of prohibited countries or parties.

CThe institution incorporates updates to sanction listings into its automated screening tool on a monthly basis.

DThe institution uses internally managed whitelists and calibrates the threshold to reduce false positives.

Answer : D

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.

Reference 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.

Acams Certified Global Sanctions Specialist CGSS Exam Questions