CFCS (Other exams): The Chain Above the Client

Do the arithmetic first, then interrogate it.

• Mr. K: 38% direct.
• Meridian: 62% of Halcyon. Within Meridian, the nominee holds 49% for the brother-in-law and the trust holds 51%.
• Brother-in-law's indirect interest: 49% × 62% = 30.38%.
• Trust's indirect interest: 51% × 62% = 31.62%.

So no single route reaches 50%. But the 50% rule aggregates the interests of the same designated person held through multiple chains - it does not add together different people's stakes. Whether the former minister reaches the threshold therefore depends entirely on whether he is a beneficial owner of the trust, and at what level. If he owns or benefits from, say, 90% of the trust, his aggregate interest is 0.90 × 31.62% ≈ 28.5% - still below 50%, and the nomination for the brother-in-law cannot be bolted on unless the brother-in-law is himself owned or controlled by the minister.

The pivot is control, not percentage. The 50% rule is usually expressed as owned or controlled directly or indirectly. A protector with power to appoint or remove trustees, or to veto distributions, may confer control irrespective of economic interest. That question, not the arithmetic, decides the case. Obtain the trust deed and the protector's powers before concluding.

A voluntary closure request from a client under review is not a neutral event - it is often the moment value leaves the jurisdiction. Treat it as a risk signal in its own right.

Do not expedite the transfer. Process the closure on the normal timeline, with the review completed first. Speed here is the risk.

Consider the funds' origin. Receipts from state-owned entities in the minister's country, swept immediately to a personal account in Switzerland, is the shape of public-funds diversion: state money in, private money out, no commercial rationale recorded. That engages corruption as a predicate, and the assets are potentially the proceeds of crime - which puts you in asset-recovery territory, not just sanctions territory.

Actions:

• File a suspicious activity report covering both the sanctions question and the corruption proceeds question.
• Check whether any freezing order, restraint order, or mutual legal assistance request touches the client or the Swiss account, and make the enquiry rather than assuming none exists.
• Ask the reporting unit whether funds should be held pending instruction. Do not release on the client's request once suspicion is formed.
• Preserve records: the beneficial ownership chain, trust deed, source-of-funds file, and all correspondence about closure.
• Do not tell Mr. K why the process has slowed. Prepare a neutral response.

Three separate questions are being conflated: legal obligation, extra-territorial exposure, and risk appetite.

Legal obligation. Whether the listing binds depends on your home regime's implementation of sanctions - some jurisdictions apply their own lists only, some give effect to designated lists by reference, some give effect to UN listings automatically. Sectoral measures also differ from asset freezes: a sectoral programme may prohibit certain dealings with named sectors or entities without freezing anything. Check what the measure actually does before deciding the funds are untouchable.

Extra-territorial exposure. A designation by a major jurisdiction can reach a non-domestic bank through correspondent relationships, dollar clearing, or the risk of secondary designation. The legal answer and the commercial answer diverge here.

Risk appetite. Your own policy may adopt a broader screening set than the legal minimum precisely to avoid this divergence. If so, the question is not whether the listing binds but whether the policy applies - and if you depart from policy, document why.

The independent ground. Even if the listing does not bind, you have a separate and sufficient basis to act: suspected corruption proceeds, a PEP protector with unexplained state revenue, and an attempted rapid exit. Decide the case on that ground, so the answer does not collapse if the sanctions analysis changes.