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Question

Difficulty: EasyAnti-Money Laundering (AML), KYC, and Sanctions Compliance

When opening a new brokerage account for an individual, a member broker-dealer is required by federal regulations to screen the customer's name against which of the following targeted sanctions lists?

  1. The Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) listAnswer
  2. B
    The Financial Crimes Enforcement Network (FinCEN) Currency Transaction Report (CTR) registry
  3. C
    The Securities and Exchange Commission (SEC) Suspicious Activity Report (SAR) database
  4. D
    The FINRA Regulation S-P Privacy Opt-Out registry

Answer

Broker-dealers must screen customer names against the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list to comply with federal sanctions regulations.
Under regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), broker-dealers must check all new and existing account holders against the Specially Designated Nationals (SDN) list. If a match occurs, customer assets must be blocked/frozen and reported to OFAC within mandatory deadlines.

Step-by-Step Solution

1
Identify the regulatory requirement being tested.
The requirement involves screening new customer account names against federal sanctions lists.
U.S. financial institutions are prohibited from doing business with individuals and entities targeted by U.S. foreign policy and national security sanctions.
2
Determine which agency and list enforce U.S. sanctions policy.
The Office of Foreign Assets Control (OFAC), an agency of the U.S. Department of the Treasury, publishes and maintains the Specially Designated Nationals (SDN) list.
Broker-dealers must block or freeze assets of persons on the SDN list and report matches to OFAC.

Key Concept

OFAC Sanctions Compliance and SDN List Screening
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Topics

Anti-Money Laundering (AML), KYC, and Sanctions Compliance