CGSS Exam Questions and Answers
100% Pass
Are autonomous sanctions only implemented by single governments? If yes, give an
example of a single government that has autonomous sanctions. If not, give an example
of a different entity that has autonomous sanctions. - ✔✔No. Autonomous sanctions can
be employed by a single entity or government, such as Australia, or a coalition of
governments, such as the EU, acting to enforce a sanctions regime. Most countries have
their own version of autonomous, unilateral sanctions. However, the EU also has
autonomous sanctions. These occur when its Council decides to impose sanctions on its
own initiative. Although most countries in the EU do not rely on autonomous sanctions,
choosing instead to rely on the EU framework, EU member countries, in turn, can have
their own autonomous sanctions, such as when Latvia passed a version of the US's
Magnitsky Act in 2018, imposing travel restrictions on 49 Russian citizens.
Define counterparty and explain how an institution establishes a counterparty
relationship. - ✔✔The customer relationship should be the primary defense against
sanctions evasion. It is important to fully understand the nature of the customer, the
businesses the customer is engaged in, the structure of the company and the individuals
behind it, and where and with whom the company does business. With this knowledge,
an institution is better armed to detect any activity that does not have a valid business
purpose and does not make sense for the customer. A key risk area related to customers
is jurisdiction or geography. It's important to understand a customer's geographic
footprint, e.g., information about individuals such as:
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,• Nationality (current and former)
• Place of birth
• Place of residence (current and former)
• Place of employment
• Tax residency
• Occupation/travel for work
Define stripping, and identify ways in which jurisdictions can prevent it. - ✔✔Stripping
involves omitting or removing key information, such as the sender's name or the
business name, from a payment message to avoid detection. It may occur with or
without the knowledge of other participants in the transaction. When a wire transfer
travels through multiple parties before reaching the intended destination, there are
multiple opportunities for information to be abbreviated, omitted, or altered. Therefore,
most jurisdictions have enacted laws that require payments to contain certain "basic"
information, including the sender's and recipient's names and addresses. When a wire
originates from a sanctioned entity or location, and the intent is to deliver it within the
US or EU, where restrictions would ordinarily flag the payment and block it, sanctions
evaders have an incentive to remove the information that would trip the system.
List and explain the usage of the three common SWIFT message types. - ✔✔Common
SWIFT (Society for Worldwide Interbank Financial Telecommunications) message types
include:
• MT103 (Serial Method): Payment message sent from an originating bank (on behalf of
a customer) via intermediary banks to a beneficiary bank (on the behalf of a beneficiary
customer)
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, • MT202: Bank-to-bank instructions that are used solely by, for, and on behalf of
financial institutions
• MT202COV (Cover Method): When a payment is sent via an intermediary bank to a
receiving correspondent involving an underlying MT103 customer credit transfer With
the MT202COV, the payment message contains a sequence B field. Sequence B
information must be identical to the same fields of 50a and 59b of the underlying
MT103.
Define U-turn payment - ✔✔A U-turn payment is a payment in which a bank or other
institution from country A sends a transaction through a bank in country B using an
offshore bank. In the financial world, U-turn payments are most commonly known in
relation to US sanctions—particularly to those imposed on Iran.
What is the function of Real Time Gross Settlement Systems (RTGS)? - ✔✔International
wire transfers use Real Time Gross Settlement Systems (RTGS) within a given
jurisdiction. In RTGS, money or securities are transferred between banks on a "real
time" and "gross" basis, i.e., payment transactions are not subject to a waiting period,
and each transaction is settled on a one-on-one basis.
How do SWIFT messages get separated as a sanctions evasion method? - ✔✔Separating
messages involves incorrectly using the MT202 payment with an underlying MT103
payment instead of the required MT202 Cover Payment. To avoid this, SWIFT
introduced the Cover Method in 2007, but banks can still wrongly choose to not use it
and separate the message.
Describe nesting and downstreaming as sanctions evasion methods. - ✔✔Nesting
occurs when a foreign financial institution accesses the US financial system through an
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100% Pass
Are autonomous sanctions only implemented by single governments? If yes, give an
example of a single government that has autonomous sanctions. If not, give an example
of a different entity that has autonomous sanctions. - ✔✔No. Autonomous sanctions can
be employed by a single entity or government, such as Australia, or a coalition of
governments, such as the EU, acting to enforce a sanctions regime. Most countries have
their own version of autonomous, unilateral sanctions. However, the EU also has
autonomous sanctions. These occur when its Council decides to impose sanctions on its
own initiative. Although most countries in the EU do not rely on autonomous sanctions,
choosing instead to rely on the EU framework, EU member countries, in turn, can have
their own autonomous sanctions, such as when Latvia passed a version of the US's
Magnitsky Act in 2018, imposing travel restrictions on 49 Russian citizens.
Define counterparty and explain how an institution establishes a counterparty
relationship. - ✔✔The customer relationship should be the primary defense against
sanctions evasion. It is important to fully understand the nature of the customer, the
businesses the customer is engaged in, the structure of the company and the individuals
behind it, and where and with whom the company does business. With this knowledge,
an institution is better armed to detect any activity that does not have a valid business
purpose and does not make sense for the customer. A key risk area related to customers
is jurisdiction or geography. It's important to understand a customer's geographic
footprint, e.g., information about individuals such as:
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,• Nationality (current and former)
• Place of birth
• Place of residence (current and former)
• Place of employment
• Tax residency
• Occupation/travel for work
Define stripping, and identify ways in which jurisdictions can prevent it. - ✔✔Stripping
involves omitting or removing key information, such as the sender's name or the
business name, from a payment message to avoid detection. It may occur with or
without the knowledge of other participants in the transaction. When a wire transfer
travels through multiple parties before reaching the intended destination, there are
multiple opportunities for information to be abbreviated, omitted, or altered. Therefore,
most jurisdictions have enacted laws that require payments to contain certain "basic"
information, including the sender's and recipient's names and addresses. When a wire
originates from a sanctioned entity or location, and the intent is to deliver it within the
US or EU, where restrictions would ordinarily flag the payment and block it, sanctions
evaders have an incentive to remove the information that would trip the system.
List and explain the usage of the three common SWIFT message types. - ✔✔Common
SWIFT (Society for Worldwide Interbank Financial Telecommunications) message types
include:
• MT103 (Serial Method): Payment message sent from an originating bank (on behalf of
a customer) via intermediary banks to a beneficiary bank (on the behalf of a beneficiary
customer)
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, • MT202: Bank-to-bank instructions that are used solely by, for, and on behalf of
financial institutions
• MT202COV (Cover Method): When a payment is sent via an intermediary bank to a
receiving correspondent involving an underlying MT103 customer credit transfer With
the MT202COV, the payment message contains a sequence B field. Sequence B
information must be identical to the same fields of 50a and 59b of the underlying
MT103.
Define U-turn payment - ✔✔A U-turn payment is a payment in which a bank or other
institution from country A sends a transaction through a bank in country B using an
offshore bank. In the financial world, U-turn payments are most commonly known in
relation to US sanctions—particularly to those imposed on Iran.
What is the function of Real Time Gross Settlement Systems (RTGS)? - ✔✔International
wire transfers use Real Time Gross Settlement Systems (RTGS) within a given
jurisdiction. In RTGS, money or securities are transferred between banks on a "real
time" and "gross" basis, i.e., payment transactions are not subject to a waiting period,
and each transaction is settled on a one-on-one basis.
How do SWIFT messages get separated as a sanctions evasion method? - ✔✔Separating
messages involves incorrectly using the MT202 payment with an underlying MT103
payment instead of the required MT202 Cover Payment. To avoid this, SWIFT
introduced the Cover Method in 2007, but banks can still wrongly choose to not use it
and separate the message.
Describe nesting and downstreaming as sanctions evasion methods. - ✔✔Nesting
occurs when a foreign financial institution accesses the US financial system through an
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