I85PREP
⌘ K
CGSS study materials
CGSS study resources

CGSS practice questions

One question at a time. Build your CGSS understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Sanctions Fundamentals and Legal Framework

Which statement best describes the purpose of economic sanctions in contemporary practice?

  1. To replace diplomatic negotiations with binding judicial settlement
  2. To permanently annex the target state's territory under international administration
  3. To suspend all trade globally until a unanimous vote is achieved
  4. To change the target's behaviour or constrain its capacity Correct answer.

Explanation

Economic sanctions are coercive but non-military measures adopted to influence a target's behaviour, deny it resources, or signal disapproval. They are not a mechanism for territorial annexation, judicial settlement of disputes, or a universal trade suspension.

Question 2Sanctions Fundamentals and Legal Framework

Under the UN Charter, which body has primary responsibility for maintaining international peace and security and may impose binding sanctions?

  1. The General Assembly
  2. The Security Council Correct answer.
  3. The Secretariat
  4. The International Court of Justice

Explanation

The UN Charter confers primary responsibility for international peace and security on the Security Council, which may adopt binding measures under Chapter VII, including sanctions under Article 41. Article 25 obliges member states to accept and carry out these decisions.

Question 3Sanctions Fundamentals and Legal Framework

Targeted sanctions differ from comprehensive sanctions mainly because targeted sanctions...

  1. apply to an entire country's economy without exceptions
  2. are always imposed by regional organizations rather than states
  3. focus on specific individuals, entities, sectors, or activities Correct answer.
  4. require military enforcement to be legally valid

Explanation

Targeted, or 'smart', sanctions aim at particular persons, entities, sectors, or transactions rather than a whole economy. Comprehensive sanctions restrict broad trade and financial flows with a country and are associated with greater humanitarian harm.

Question 4Sanctions Fundamentals and Legal Framework

An asset freeze imposed as a sanctions measure typically means that...

  1. the listed person is deprived of nationality
  2. the person is barred from entering the designating state
  3. the person's funds and economic resources must be frozen Correct answer.
  4. all financial transfers to the country are prohibited

Explanation

An asset freeze requires that funds and economic resources owned, held, or controlled by the designated person be frozen and not made available to them. It is distinct from a travel ban, which restricts movement, and from a general financial embargo on a country.

Question 5Sanctions Fundamentals and Legal Framework

An arms embargo is best understood as a sanctions measure that...

  1. revokes diplomatic immunity for embassy staff
  2. bans all cultural and sporting exchanges with a country
  3. freezes the target's central bank reserves
  4. prohibits supplying weapons and related materiel to a target Correct answer.

Explanation

An arms embargo restricts the supply, sale, transfer, or brokering of weapons, ammunition, and related military materiel to a designated state or actor. Financial freezes, cultural bans, and diplomatic status are governed by separate measures or legal regimes.

Question 6Sanctions Fundamentals and Legal Framework

Primary sanctions are distinguishable from secondary sanctions in that primary sanctions...

  1. only apply to non-state actors
  2. are imposed exclusively by the United Nations
  3. never require implementing legislation
  4. apply within the sanctioning state's own jurisdictional reach Correct answer.

Explanation

Primary sanctions regulate persons, entities, and transactions subject to the imposing state's jurisdiction, such as its nationals, residents, companies, and transactions in its territory or currency. Secondary sanctions reach outward to deter non-residents from certain dealings with sanctioned targets.

Question 7Sanctions Fundamentals and Legal Framework

In sanctions practice, 'designation' refers to...

  1. the issuance of an export licence for dual-use goods
  2. the removal of a country from a customs union
  3. the diplomatic recognition of a new government
  4. the formal listing of a person or entity for sanctions Correct answer.

Explanation

Designation is the formal act of listing a person, entity, or body as subject to sanctions, which triggers measures such as asset freezes or travel bans. Recognition, customs arrangements, and export licensing are distinct legal processes.

Question 8Sanctions Fundamentals and Legal Framework

A humanitarian exemption in a sanctions regime is intended to...

  1. permit arms transfers for internal security
  2. allow the target to receive unlimited oil revenues
  3. allow specified humanitarian activities such as medical supplies Correct answer.
  4. suspend all sanctions for the duration of negotiations

Explanation

Humanitarian carve-outs permit defined activities, such as the provision of food, medicine, or humanitarian assistance, to continue despite sanctions. They are limited exceptions, not a general suspension or a licence for prohibited revenue or arms transfers.

Question 9Sanctions Fundamentals and Legal Framework

Under Article 25 of the UN Charter, UN Security Council resolutions imposing sanctions are...

  1. advisory recommendations that states may adopt voluntarily
  2. binding only on the states that voted in favour
  3. enforceable only through the International Criminal Court
  4. binding on all UN member states, which must implement them Correct answer.

Explanation

Article 25 provides that UN member states agree to accept and carry out Security Council decisions, including sanctions adopted under Chapter VII. Implementation is therefore an obligation for all members, not only those that supported the resolution.

Question 10Sanctions Fundamentals and Legal Framework

Within the European Union, restrictive measures are generally adopted by...

  1. the European Commission acting alone under competition powers
  2. the Court of Justice of the European Union
  3. the European Parliament by simple majority
  4. the Council acting unanimously, with implementing regulation Correct answer.

Explanation

EU restrictive measures are adopted within the Common Foreign and Security Policy, normally by unanimous Council decision, and are implemented through EU regulations where Union competence is required. The Commission and courts implement or review measures but do not adopt them.

Question 11Sanctions Fundamentals and Legal Framework

In the United States, the principal statutory authority for imposing economic sanctions in response to national emergencies is...

  1. the Export Administration Act
  2. the Sherman Antitrust Act
  3. the Foreign Corrupt Practices Act
  4. the International Emergency Economic Powers Act Correct answer.

Explanation

IEEPA authorizes the President to regulate economic transactions with foreign persons or countries during a declared national emergency. It is the core statutory basis for many US sanctions programmes administered by OFAC.

Question 12Sanctions Fundamentals and Legal Framework

Under OFAC's '50 percent rule', an entity is treated as blocked if...

  1. it is named in a non-binding UN press statement
  2. it is located in a sanctioned country
  3. it has any business relationship with a blocked person
  4. blocked persons own, directly or indirectly, 50 percent or more of it Correct answer.

Explanation

The 50 percent rule provides that an entity is itself blocked if one or more blocked persons own, directly or indirectly, a 50 percent or greater interest in it. The entity need not be separately named on the SDN List.

Question 13Sanctions Fundamentals and Legal Framework

Secondary sanctions are controversial primarily because they...

  1. replace primary sanctions entirely
  2. require congressional approval before each designation
  3. deter non-US persons from dealings with targets outside US territory Correct answer.
  4. apply only to US citizens resident in the United States

Explanation

Secondary sanctions seek to influence the conduct of persons who are not otherwise subject to the imposing state's primary jurisdiction. They are controversial because they extend policy reach extraterritorially and may conflict with foreign blocking measures.

Question 14Sanctions Fundamentals and Legal Framework

A blocking statute, such as the EU Blocking Regulation, is designed to...

  1. counter another state's extraterritorial sanctions and protect domestic operators Correct answer.
  2. authorize military enforcement of embargoes
  3. harmonize export controls among WTO members
  4. extend US sanctions to EU companies

Explanation

Blocking statutes prohibit domestic operators from complying with specified foreign sanctions and may provide for recovery of resulting damages. Their purpose is to resist the extraterritorial application of another state's measures, not to extend them.

Question 15Sanctions Fundamentals and Legal Framework

The UK's Sanctions and Anti-Money Laundering Act 2018 primarily provides...

  1. a treaty basis for UN sanctions only
  2. the UK's domestic framework for imposing and implementing sanctions Correct answer.
  3. rules on competition law in the financial sector
  4. for the UK's membership of the euro area

Explanation

The Act established the domestic legal basis for the UK to impose, update, and implement sanctions autonomously after leaving the EU. It covers a wide range of purposes beyond UN sanctions and is not concerned with euro membership or competition law.

Question 16Sanctions Fundamentals and Legal Framework

An individual subject to a UN asset freeze may seek delisting through...

  1. the relevant sanctions committee and any available review mechanism Correct answer.
  2. direct appeal to the International Court of Justice
  3. the Security Council's Military Staff Committee
  4. a vote in the General Assembly

Explanation

Delisting requests are normally addressed to the sanctions committee that maintains the list, and some regimes provide an independent ombudsperson or focal point for review. The ICJ, General Assembly, and Military Staff Committee are not delisting bodies.

Question 17Sanctions Fundamentals and Legal Framework

Under the ILC Articles on State Responsibility, countermeasures are...

  1. commercial arbitration awards against sanctioned entities
  2. otherwise unlawful measures allowed in response to a prior wrongful act Correct answer.
  3. unilateral military actions permitted against any state
  4. judicial decisions of the ICJ enforcing sanctions

Explanation

Countermeasures are measures that would otherwise be unlawful but are permitted in response to another state's internationally wrongful act, subject to conditions such as proportionality and reversibility. They are distinct from military action, judicial decisions, and arbitral awards.

Question 18Sanctions Fundamentals and Legal Framework

GATT Article XXI, the security exception, is relevant to sanctions because it...

  1. allows members to take measures they consider necessary for essential security interests Correct answer.
  2. requires WTO authorization before sanctions can be imposed
  3. limits sanctions to cultural goods
  4. prohibits all trade restrictions adopted for security reasons

Explanation

Article XXI recognizes that WTO members may take measures they consider necessary for the protection of essential security interests. It is invoked to defend trade restrictions that might otherwise breach WTO obligations.

Question 19Sanctions Fundamentals and Legal Framework

Export controls and sanctions overlap but differ in that export controls typically...

  1. regulate transfers of specified items, including dual-use goods Correct answer.
  2. target individuals rather than goods
  3. are always imposed by the UN Security Council
  4. only apply to financial transactions

Explanation

Export controls regulate the transfer of listed goods, software, and technology, including items with both civilian and military uses. Sanctions more broadly target persons, entities, sectors, or countries through financial and trade restrictions.

Question 20Sanctions Fundamentals and Legal Framework

In many sanctions regimes, liability for breaches is strict, meaning that...

  1. liability can arise without knowledge or intent, subject to defences Correct answer.
  2. no penalties apply if a bank self-reports
  3. only senior officers can be liable
  4. intent to violate must always be proven

Explanation

Strict liability means a person can breach sanctions without intending or knowing of the violation, although defences such as reasonable suspicion checks or licences may apply. Self-reporting may mitigate penalties but does not eliminate liability.

Question 21Sanctions Fundamentals and Legal Framework

For sanctions ownership and control tests, 'control' of an entity typically includes...

  1. membership of the same trade association
  2. a commercial supply contract lasting more than one year
  3. only direct registered shareholding above 50 percent
  4. the ability to direct an entity's actions without majority ownership Correct answer.

Explanation

Control tests look beyond formal majority ownership to whether a person can direct, influence, or control an entity through voting rights, board appointment, contractual arrangements, or other means. A supply contract or trade-association membership does not normally amount to control.

Question 22Sanctions Fundamentals and Legal Framework

Article 41 of the UN Charter expressly lists which types of measures the Security Council may adopt?

  1. Occupying territory and administering it
  2. Economic relations, railways, communications, and diplomatic relations Correct answer.
  3. Judicial proceedings before the ICJ
  4. Military operations by air, sea, or land

Explanation

Article 41 lists measures not involving the use of armed force, including interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations. Military operations are addressed by Article 42.

Question 23Sanctions Fundamentals and Legal Framework

EU restrictive measures that include asset freezes on private individuals are typically implemented through...

  1. a European Parliament resolution
  2. a Commission infringement decision
  3. a Council regulation under Article 215 TFEU after a CFSP decision Correct answer.
  4. an ECB supervisory decision

Explanation

A CFSP Council decision establishes the policy, and an Article 215 TFEU regulation provides the Union-law instrument for measures such as asset freezes and travel bans. Infringement decisions, parliamentary resolutions, and ECB supervision serve different functions.

Question 24Sanctions Fundamentals and Legal Framework

US secondary sanctions risk for non-US banks often arises because...

  1. US authorities can cut off correspondent or dollar-clearing access for facilitating evasion Correct answer.
  2. all banks must join the Federal Reserve
  3. sanctions are enforced by the Bank for International Settlements
  4. WTO rules require dollar clearing

Explanation

US authorities can impose correspondent-account or dollar-clearing restrictions on non-US financial institutions that facilitate significant sanctions evasion. This leverage over access to the US financial system is a key mechanism of secondary sanctions.

Question 25Sanctions Fundamentals and Legal Framework

Research on 'smart' or targeted sanctions suggests that their effectiveness is most likely to be enhanced when...

  1. they are kept secret from the target
  2. they are imposed unilaterally without any demands
  3. they are multilateral and paired with a credible diplomatic strategy Correct answer.
  4. they target the entire population of a state

Explanation

Targeted sanctions tend to work better when they are coordinated among multiple states, clearly linked to specific demands, and combined with diplomacy and other tools. Unilateral, unexplained, population-wide, or secret measures tend to weaken both pressure and legitimacy.

Question 26Sanctions Fundamentals and Legal Framework

Before the UN Security Council can impose binding sanctions under Chapter VII, what must it first do under Article 39 of the UN Charter?

  1. Obtain the prior consent of the state whose nationals or entities would be designated
  2. Secure a two-thirds majority in the General Assembly endorsing the proposed measures
  3. Refer the question to the International Court of Justice for a binding advisory opinion
  4. Make a determination of a threat to the peace, breach of the peace, or act of aggression Correct answer.

Explanation

Article 39 requires the Security Council to determine the existence of a threat to the peace, breach of the peace, or act of aggression before it may decide on measures under Articles 41 and 42. That determination is the legal trigger for binding Chapter VII measures, which members are then obliged to carry out.

Question 27Sanctions Fundamentals and Legal Framework

In a typical asset-freeze regime, what does 'freezing' of funds mean?

  1. The funds stay usable but the total balance an institution may hold is capped
  2. The funds may be used freely provided the holder files a monthly report with the authorities
  3. The funds are confiscated and transferred permanently to the sanctioning state's treasury
  4. The funds may not be moved or used but remain the property of the owner Correct answer.

Explanation

Freezing is a preventive, not punitive, measure: it prevents any movement, transfer, alteration or use of the funds while leaving title with the owner. The assets typically remain with the holder institution, which must report and hold them pending any licence or delisting.

Question 28Sanctions Fundamentals and Legal Framework

At the EU level, which instrument gives legal effect to a CFSP decision by imposing asset freezes and economic measures on private parties?

  1. A Council decision under Article 29 TEU, which applies directly in all member states
  2. A Commission delegated directive adopted after consulting the European Parliament
  3. A Council regulation adopted under Article 215 TFEU Correct answer.
  4. A resolution of the European Parliament adopted by simple majority

Explanation

The EU acts in two steps: a CFSP decision under Article 29 TEU states the political position, and a Council regulation under Article 215 TFEU provides the directly applicable legal instrument for measures affecting private parties. Regulations are what create the enforceable obligations, such as asset freezes.

Question 29Sanctions Fundamentals and Legal Framework

In the United Kingdom, which body is responsible for implementing and enforcing financial sanctions, including imposing monetary penalties for breaches?

  1. The Financial Conduct Authority
  2. The Prudential Regulation Authority of the Bank of England
  3. The Office of Financial Sanctions Implementation Correct answer.
  4. The National Crime Agency

Explanation

OFSI, part of HM Treasury, maintains the consolidated list, issues guidance and general licences, and can impose monetary penalties for financial sanctions breaches. Prudential and conduct regulators supervise other obligations but do not administer the sanctions regime itself.

Question 30Sanctions Fundamentals and Legal Framework

A bank holds frozen funds belonging to a designated person who now needs to pay legal fees. Under most regimes, what is the lawful route?

  1. Release the funds because legal fees are always outside the scope of an asset freeze
  2. Release the funds on the basis of the designated person's written consent
  3. Apply to the competent authority for a specific licence before releasing any funds Correct answer.
  4. Release the funds and notify the competent authority afterwards in writing

Explanation

Frozen funds may only be dealt with under an authorisation granted by the competent authority, which assesses the request against the regime's permitted grounds and any conditions it attaches. Releasing first and notifying later would itself be a breach.

Question 31Sanctions Fundamentals and Legal Framework

A state's bilateral investment treaty obligation conflicts with a binding UN Security Council asset freeze. Which obligation prevails?

  1. The state may elect which of the two obligations to perform
  2. Neither prevails; the ICJ weighs them case by case before they take effect
  3. The Charter obligation, by operation of Article 103 of the UN Charter Correct answer.
  4. The treaty obligation, because it is the more specific commitment

Explanation

Article 103 provides that obligations under the Charter prevail over obligations under any other international agreement in the event of a conflict. A state therefore cannot rely on a treaty to justify non-compliance with a binding Security Council resolution.

Question 32Sanctions Fundamentals and Legal Framework

How do entries on OFAC's Sectoral Sanctions Identifications List differ from entries on the SDN List?

  1. SSI entries carry targeted, transaction-specific prohibitions rather than a full asset freeze Correct answer.
  2. SSI entries are advisory signals that create no legal obligation for US persons
  3. SSI entries are automatically blocked whenever the listed entity is majority state-owned
  4. SSI entries bind only US persons travelling or residing outside the United States

Explanation

SSI listings impose narrow restrictions defined by directives, such as limits on new debt or equity or on supplying certain goods and services. SDN listings, by contrast, generally freeze the person's property and prohibit US persons from dealing with them at all.

Question 33Sanctions Fundamentals and Legal Framework

A designated person owns a stock of non-financial goods. A counterparty proposes to buy the goods and pay the designated person directly. Under an asset freeze covering 'funds and economic resources', how should the sale be treated?

  1. Permitted, because the goods are not money and fall outside any asset freeze
  2. Permitted, provided the buyer pays in cash rather than by bank transfer
  3. Permitted, because ownership of the goods passes outside the sanctioning state
  4. Prohibited unless authorised, because the goods are economic resources Correct answer.

Explanation

Asset freezes cover economic resources as well as funds, and making them available directly or indirectly to a designated person is prohibited without authorisation. Tangible goods of value fall within 'economic resources', so the sale requires a licence or exemption.

Question 34Sanctions Fundamentals and Legal Framework

A trading firm routes shipments through an intermediary in a third country with knowledge that the true end user is a designated entity, so as to hide that link. How is this conduct best characterised?

  1. Outside the regime's scope, because the intermediary is in a third country
  2. A documentation irregularity that has no sanctions consequences
  3. Lawful structuring, because no designated party appears on the documents
  4. Circumvention, which is itself a prohibited activity Correct answer.

Explanation

Sanctions regimes prohibit knowingly or deliberately participating in activities whose object or effect is to circumvent the measures. Concealing the designated end user through an intermediary is the classic form of circumvention and can attract liability even where paperwork appears clean.

Question 35Sanctions Fundamentals and Legal Framework

How do UN Security Council sanctions committees generally reach decisions on listing proposals and on states' exemption or notification requests?

  1. By delegating the decisions to the UN Secretariat's sanctions unit
  2. By consensus among committee members Correct answer.
  3. By simple majority vote of the Council's fifteen members
  4. By automatic approval unless a member objects within thirty days in every case

Explanation

Sanctions committees operate by consensus, so a single member can hold up a listing or an exemption request. This practice reflects the political character of the committees, which are composed of the current Security Council members.

Question 36Sanctions Fundamentals and Legal Framework

A person is designated on 1 March. A contract with a European counterparty was signed and partly performed in January. Which statement best reflects the usual treatment of the contract?

  1. Pre-existing contracts are suspended indefinitely until the person is delisted
  2. All pre-existing contracts are void from the date of designation
  3. The freeze applies immediately, and performance may continue only under a licence or wind-down exemption Correct answer.
  4. Existing contracts are automatically grandfathered and may be performed in full

Explanation

Asset freezes take effect on designation, so any post-designation payment or delivery to the listed person is prohibited. Many regimes nonetheless provide limited wind-down possibilities, but only through a licence or a defined exemption, never automatically.

Question 37Sanctions Fundamentals and Legal Framework

A person listed by the UN Security Council and implemented through an EU regulation challenges that regulation before the EU courts. What is the courts' position?

  1. They may annul the Security Council resolution itself and order the person relisted
  2. They have no jurisdiction, because the measure merely implements a Security Council resolution
  3. They will decline to hear the case until the UN delisting procedure has been exhausted
  4. They may review the EU implementing measure for respect for fundamental rights and annul it Correct answer.

Explanation

The EU courts cannot review the legality of a Security Council resolution, but they can review the EU measure that implements it for conformity with fundamental rights and, if necessary, annul that measure. The reviewing court is not required to wait for a UN delisting outcome.

Question 38Sanctions Fundamentals and Legal Framework

Beyond the physical transfer of weapons, what does an arms embargo in most regimes typically also cover?

  1. Lethal items only, leaving dual-use goods and related services entirely unaffected
  2. Technical assistance, brokering, financing, and maintenance or repair services Correct answer.
  3. Transfers departing the sanctioning state's territory only, with no restrictions on services
  4. Complete weapons systems only, never components or spare parts

Explanation

Modern arms embargoes are drafted broadly to capture the services that make transfers possible, including brokering, technical assistance, financing and maintenance. The aim is to prevent circumvention through the provision of support rather than goods alone.

Question 39Sanctions Fundamentals and Legal Framework

Which statement best reflects the personal and territorial scope of EU restrictive measures?

  1. They bind EU nationals anywhere and cover business done in whole or in part within the Union Correct answer.
  2. They apply only to transactions cleared through EU financial infrastructure
  3. They bind only persons physically present in EU territory at the time of the transaction
  4. They bind only companies incorporated in a member state, and never individuals

Explanation

EU regulations generally apply to EU territory, to nationals of member states wherever located, to entities incorporated under member state law, and to vessels and aircraft under member state jurisdiction. They also reach business done in whole or in part within the Union, which gives the regime significant extraterritorial reach.

Question 40Sanctions Fundamentals and Legal Framework

What evidentiary threshold is normally applied when a person is designated under targeted sanctions criteria?

  1. A formal request from any single state, without any further assessment
  2. Proof beyond reasonable doubt, as in a criminal trial
  3. Reasonable grounds to suspect, assessed case by case on the available information Correct answer.
  4. A prior criminal conviction in the designating state

Explanation

Listing criteria are typically satisfied by reasonable grounds to suspect or believe, based on a case-by-case assessment of the evidence. This is deliberately lower than the criminal standard, though it must still rest on a sufficiently solid factual basis to withstand judicial review.

Question 41Sanctions Programs and Regulatory Regimes

Most U.S. sanctions programs administered by OFAC derive their legal authority from which statute?

  1. The International Emergency Economic Powers Act Correct answer.
  2. The Trading with the Enemy Act, which today is used mainly for the Cuba program
  3. The Bank Secrecy Act, which governs suspicious activity reporting by financial institutions
  4. The Foreign Corrupt Practices Act, which prohibits bribery of foreign officials

Explanation

IEEPA (50 U.S.C. 1701 et seq.) lets the President declare a national emergency and, through OFAC, block property and regulate transactions involving designated persons. Most current programs, including those on Russia and Iran, rest on IEEPA, while TWEA authority is now essentially confined to Cuba.

Question 42Sanctions Programs and Regulatory Regimes

Which OFAC list identifies individuals and entities whose property is blocked and with whom U.S. persons are generally prohibited from transacting?

  1. The Sectoral Sanctions Identifications List, which applies case-by-case directives
  2. The Specially Designated Nationals and Blocked Persons List Correct answer.
  3. The Consolidated Sanctions List, which groups OFAC's non-SDN program lists
  4. The Entity List maintained by the Bureau of Industry and Security

Explanation

The SDN List identifies blocked persons and is the core list underpinning the asset-freeze and dealing prohibition for U.S. persons. OFAC's other lists impose narrower restrictions and are published separately on the Consolidated Sanctions List.

Question 43Sanctions Programs and Regulatory Regimes

Under OFAC regulations, how long must U.S. persons retain records of transactions subject to sanctions regulations?

  1. Three years
  2. Five years Correct answer.
  3. Two years
  4. Ten years

Explanation

The Reporting, Procedures and Penalties Regulations (31 CFR Part 501) require records relating to transactions subject to sanctions to be retained for five years and to be available for inspection on request.

Question 44Sanctions Programs and Regulatory Regimes

UN Security Council sanctions resolutions adopted under Chapter VII of the UN Charter are:

  1. Binding on all member states, which must implement them domestically Correct answer.
  2. Applicable only to the five permanent members of the Security Council
  3. Advisory recommendations that each state may adopt at its own discretion
  4. Enforceable only after a separate ratification vote by the UN General Assembly

Explanation

Article 25 of the UN Charter makes Security Council decisions adopted under Chapter VII binding on all member states. States implement them through national or regional legal instruments, which is why UN listings flow into domestic regimes.

Question 45Sanctions Programs and Regulatory Regimes

A general license issued by OFAC:

  1. Is available only to financial institutions and never to individuals
  2. Authorizes a defined category of transactions without further approval Correct answer.
  3. Must be applied for in writing and approved case by case
  4. Remains valid only until the next update of the SDN List

Explanation

A general license is a self-executing authorization published in the regulations; no application is required, but the transaction must fall squarely within its stated scope and conditions.

Question 46Sanctions Programs and Regulatory Regimes

A U.S. bank declines to process an international funds transfer that would violate sanctions and returns the funds to the originator. The bank must:

  1. Report the rejected transaction to OFAC within 10 business days Correct answer.
  2. Obtain a specific license before returning the funds
  3. Take no action, because no funds were blocked
  4. Report the rejected transaction to OFAC within 30 calendar days

Explanation

Returning funds rather than holding them is a rejection, and 31 CFR 501.604 requires a report of the rejected transaction to OFAC within 10 business days. Reports of property that is actually blocked follow a separate rule.

Question 47Sanctions Programs and Regulatory Regimes

An automated screening system alerts on a customer whose name closely matches an SDN entry, but the date of birth and nationality do not match. This outcome is best described as:

  1. A true match, so the customer's assets must be blocked immediately
  2. A secondary sanctions hit
  3. A false positive that should be documented and cleared Correct answer.
  4. A false negative

Explanation

A name hit that is contradicted by key identifiers is a false positive and should be cleared through documented review. Firms are expected to record the disposal of alerts rather than dismissing them without analysis.

Question 48Sanctions Programs and Regulatory Regimes

Controls on the export of dual-use items from the United States are administered by which body?

  1. FinCEN, acting through the Bank Secrecy Act
  2. The Department of State, acting through the AECA
  3. OFAC, acting through the SDN List and general licenses
  4. The Bureau of Industry and Security (BIS) Correct answer.

Explanation

BIS administers the Export Administration Regulations, which govern dual-use items, while OFAC administers economic sanctions programs. The two regimes are separate but frequently apply to the same transaction.

Question 49Sanctions Programs and Regulatory Regimes

Under OFAC's 50 Percent Rule, an unlisted company is treated as blocked when:

  1. It has entered into a commercial contract with a person on the SDN List
  2. A single blocked person owns at least 25 percent of its equity
  3. It is registered in a country subject to comprehensive sanctions
  4. Blocked persons own 50 percent or more of it, directly or indirectly Correct answer.

Explanation

The 50 Percent Rule provides that an entity owned 50 percent or more in the aggregate by one or more blocked persons is itself treated as blocked even though it does not appear on the SDN List.

Question 50Sanctions Programs and Regulatory Regimes

Secondary sanctions are best described as measures that:

  1. Require U.S. persons to obtain a license before exporting goods
  2. Threaten consequences for non-U.S. persons for activity with no U.S. nexus Correct answer.
  3. Apply only to U.S. citizens regardless of where they reside
  4. Block the property of designated persons located in the United States and its territories

Explanation

Secondary sanctions attach consequences, such as designation or loss of access to the U.S. financial system, to non-U.S. persons for conduct outside U.S. jurisdiction that is viewed as materially harmful to a sanctions program.