ABC Industries is a legal entity owned by Entity X (30%), Entity Y (25%), and Entity Z (45%). Entity X is a Specially Designated National (SDN) under OFAC sanctions, and Entity Y is owned (80%) by an OFAC SDN. Is ABC Industries a blocked entity under OFAC sanctions?
Correct Answer: D
OFAC’s 50 Percent Rule requires aggregation of ownership by SDNs and entities owned 50% or more by SDNs.
Ownership breakdown:
* Entity X (SDN) 30%
* Entity Y (owned 80% by an SDN) treated as an SDN contributes 25%
* Total SDN-derived ownership = 30% + 25% = 55%
Since aggregate SDN ownership exceeds 50%, ABC Industries is automatically considered a blocked entity, even though Entity Z is not sanctioned.
Options B and C are incorrect because explicit listing is not required—ownership triggers blocking. Option A is incorrect because one SDN at 30% alone is insufficient, but combined ownership is.
OFAC 50 Percent Rule (aggregation principle).
Treatment of entities majority-owned by SDNs as SDNs for ownership calculations.
Which variables are most important for sanctions compliance when screening customers with an automated tool? (Select Three.)
Correct Answer: A, C, F
Sanctions screening systems rely on key personal identifiers to distinguish between true matches and false positives. The Sanctions and Compliance Domains highlight that the most essential variables for screening individuals include name, date of birth, and identification numbers. These identifiers significantly enhance matching accuracy and reduce false positives, especially when screening against common or high-frequency names.
Location, account numbers, and employers are not primary screening variables for matching against sanctions lists. Although these fields may support enhanced due diligence, they are not core identity attributes used for automated sanctions screening.
Reference from Sanctions and Compliance Domains:
Essential identity attributes required for automated sanctions screening.
Use of names, birth dates, and identification numbers to improve match accuracy.
Guidance on minimizing false positives using reliable personal identifiers.
Which directs the Office of Foreign Assets Control to list non-US persons as Specially Designated Nationals?
Correct Answer: A
OFAC designations—including designating non-US persons—are authorized through Executive Orders (EOs) issued by the President under statutory authority such as IEEPA or the Trading With the Enemy Act. Executive Orders define which categories of persons or entities may be designated and direct OFAC to act.
Sectoral Sanctions Identifications relate to sectoral sanctions, not full SDN designation. FATF recommendations are global AML standards, not OFAC authorities. UN resolutions may influence US sanctions but are not the legal authority directing SDN listings.
Executive Orders as legal authority for OFAC SDN designations.
Relationship between US statutory authority and OFAC implementation.
In accordance with the Office of Foreign Assets Control 50% Rule, which entities would be considered sanctioned even if not listed on the Specially Designated National (SDN) List? (Select Three.)
Correct Answer: A, B, D
Under the OFAC 50% Rule, an entity must be treated as a Specially Designated National (SDN) — even if not named on the SDN List — when:
One SDN owns 50% or more of the entity, OR
Multiple SDNs collectively own 50% or more of the entity (ownership must be aggregated).
Applying this rule:
A: 98% ownership by a single SDN Blocked (exceeds 50%).
B: 35% + 15% = 50% aggregate ownership by two SDNs Blocked (meets 50%).
C: 20% + 25% = 45%, which does not meet the threshold Not blocked.
D: 12% + 18% + 28% = 58% aggregate ownership by SDNs Blocked (exceeds 50%).
E: 45% + 3% = 48%, which is below 50% Not blocked.
F: 10 SDNs 4% = 40%, which is below 50% Not blocked.
Thus, only A, B, and D meet or exceed the 50% aggregate ownership requirement defined by OFAC.
OFAC ”50 Percent Rule” Guidance: Entities owned 50% or more, directly or indirectly, singly or in the aggregate by one or more SDNs, are considered blocked.
OFAC Ownership and Control Interpretive Guidance detailing aggregation of SDN ownership percentages.
Transliteration is defined as the:
Correct Answer: D
Transliteration is defined as converting writing from one script into another while preserving pronunciation as closely as possible. In sanctions screening, transliteration is important because sanctioned parties may appear in multiple scripts (e.g., Cyrillic, Arabic, Mandarin) and the automated screening system must recognize these variations.
While option B focuses specifically on converting non-Latin scripts into Latin, sanctions screening requires a broader definition that applies to any script-to-script conversion relevant to matching names globally. Thus, the correct definition is the general conversion of text from one script into another.
Reference from Sanctions and Compliance Domains:
Definition of transliteration in sanctions screening and name-matching methodologies.
Need for script conversion to support accurate detection of sanctioned parties across language systems.
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