Examkin

Question

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

While conducting Customer Due Diligence (CDD) for a newly opened corporate account, a registered representative identifies that a 30% beneficial owner of the entity is designated on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List. The account currently holds $75,000 in transferred securities. Under federal anti-money laundering (AML) regulations and sanctions compliance rules, which of the following actions is the broker-dealer required to take?

  1. Immediately block the account assets, report the blocking to OFAC within 10 business days, and file a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days.Answer
  2. B
    Reject the account opening, return the deposited securities to the originating institution, and file a Currency Transaction Report (CTR) with FinCEN within 15 calendar days.
  3. C
    Freeze the account assets and file a Currency Transaction Report (CTR) with the Securities and Exchange Commission (SEC) within 30 calendar days.
  4. D
    Allow account transactions under enhanced surveillance, provided no individual cash deposit exceeds the $10,000 reporting threshold.

Answer

The broker-dealer must immediately block the account assets, report the blocked property to OFAC within 10 business days, and file a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days.
Under federal sanctions and AML laws, matching a 30% beneficial owner to the OFAC SDN List triggers an immediate requirement to block (freeze) the account assets. The firm must notify OFAC of the blocked property within 10 business days. Additionally, because the activity is suspicious and involves potential federal sanctions violations well exceeding $5,000, a Suspicious Activity Report (SAR) must be filed with FinCEN within 30 calendar days.

Step-by-Step Solution

1
Identify the sanctions obligation under OFAC rules
Assets belonging to or associated with a listed Specially Designated National (SDN) must be blocked (frozen) immediately upon identification.
U.S. persons and financial institutions are strictly prohibited from conducting business or processing transactions involving SDN-listed individuals.
2
Determine OFAC reporting timeline requirements
The broker-dealer must report blocked assets to OFAC within 10 business days of the block.
Federal sanctions compliance regulations mandate prompt notification of blocked property to the U.S. Department of the Treasury's OFAC division.
3
Evaluate FinCEN AML reporting requirements
File a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days.
Attempting to open an account or conduct transactions involving an SDN constitutes suspicious activity exceeding the $5,000 SAR threshold for broker-dealers.

Key Concept

OFAC Sanctions & FinCEN Suspicious Activity Reporting
Estimated Time:1m 45s
Rate this question

Topics

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