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FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud

A bank discovers that a payment it processed involved an entity owned 60% by a person newly added to a sanctions list. Under common sanctions guidance such as the OFAC 50 percent rule, how should the bank treat the entity?

The entity should be treated as blocked because it is 60% owned by a sanctioned person, exceeding the 50 percent threshold in the OFAC rule. Not being listed by name does not matter, so sanctions screening must incorporate beneficial ownership analysis.

  1. AAs blocked or restricted, because it is owned 50% or more by a sanctioned personCorrect
  2. BAs unrestricted, because the entity itself is not listed
  3. CAs unrestricted unless the sanctioned person holds a board seat
  4. DAs restricted only if the entity operates in the sanctioned person's country

Explanation

Under the OFAC 50 percent rule, entities owned 50% or more, individually or in aggregate, by blocked persons are themselves treated as blocked even if not listed. The 60% ownership meets this threshold. Board seats or location are not required, so screening must include ownership analysis, not just name matching.

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