CGSS Chapter 5. Sanctions Investigations Questions and Answers Updated 2025/2026!!!!

CGSS Chapter 5. Sanctions Investigations Questions and Answers Generally, what is involved in a sanctions investigation? A sanctions investigation is the process of obtaining, evaluating, recording, and storing information about an individual or legal entity with whom one is conducting business, in response to an alert indicating a possible sanctions violation. Investigations often begin with simple checks before progressing to further investigation such as 1) account review 2) customer outreach 3) possible escalation to the compliance function. As one of the first steps in an investigation, what is a simple check? Simple checks are one of the first steps in an investigation. Essentially, they are the initial actions taken to discount or confirm a sanctions link. An example of a simple check includes comparing data about a sanctions target with a firm's Know Your Customer (KYC) data. What are the five steps comprising a typical sanctions investigation? Although the details of every investigation are unique, most investigations share a common process. Case investigation teams and alert management teams often use a five-step decision tree to determine which alerts can reasonably be discounted and which alerts warrant an investigation: 1) Determine whether a sanctions restriction applies to the case under investigation. 2) Determine what types of restrictions the applicable sanctions impose. 3) Determine whether the sanctions that might apply have actually been violated. 4) Determine how the sanctions violation occurred. 5) Record and document the findings. Define mirror trade. A mirror trade is a type of trade that involves buying securities in one currency and then selling identical ones in another currency. What is the difference between primary and secondary sources of information in a sanctions compliance context? Primary sources of information provide direct evidence about sanctions and sanctions targets. Sanctions instruments and official sanctions lists published by government bodies and their regulators represent a critical type of primary source. These key primary sources encompass various types of documents, including key legal documents, key sanctions lists, key trade activity lists, and transaction activity. Secondary sources contain information that has generally already appeared in primary documents. Commonly used secondary sources include corporate registers, third-party databases, and media publications. Inquiries for gathering primary and secondary sources are conducted separately. If there is a discrepancy between primary sources and secondary sources, it is a red flag that deserves further investigation. What are the most important considerations and potential red flags to address during a transactional review? When conducting a transactional review, consider the following: 1) Transaction activities can be a good source of primary information. 2) Limit the review to transactions that occurred within a defined, optimal timeframe. 3) Determine the extent of payment message review. 4) Define the nature of payments that the review will encompass. Transactions that are highly correlated with red flags include: 1) online purchases, 2) cross-border payments to countries with proximity to sanctioned territories, and 3) transactions involving a money service business. What is a corporate register, and how can you obtain that information? A corporate register is a listing of key information about a company, such as when a corporation was formed and who its owners and directors are. Corporate (or company) registers are often publicly available on the company's website or websites maintained by professional associations or entities, such as chambers of commerce or legal databases. In the United States, the secretary of state for each state and the District of Columbia maintains an online register for corporations doing business in that state. What is required in the initial and periodic schedules for reporting frozen assets? Initial reporting occurs immediately when funds are identified and a freeze or reject is activated. This report usually includes providing the regulatory body with a detailed breakdown of the financial institution's exposure to the sanctions target. In addition, many jurisdictions require periodic reporting (annual or quarterly) from financial institutions. OFAC requires annual reports. These reports provide a summary of the assets the firm is holding in compliance with specific sanctions restrictions and how the assets have been segregated.