Chief Compliance Officers Qualifying Examination (CCO) Practice Questions And Answers

Both EU regulations and the UK domestic regimes make clear that the reporting requirements do not apply to information to which legal professional privilege is attached.
However, OFSI expects legal professionals to carefully ascertain whether legal privilege applies, and which information it applies to.
OFSI may challenge a blanket assertion of legal professional privilege where it is not satisfied that such careful consideration has been made.

Asset freezing legislation generally permits a person to make the following payments into a frozen account without the need for a licence from OFSI, so long as those funds are frozen after being paid in:
• any interest or earnings on the account
• any payments due to a designated person under contracts, agreement or obligations that were concluded or arose before the date the person became sanctioned

Applicants will generally be required to provide:
• the licensing ground(s) being relied upon in the application including supporting arguments
• full information on the parties involved in the proposed transaction, e.g. the:
• designated person(s)
• any financial institution(s) involved (e.g. remitter, correspondent, beneficiary)
• ultimate beneficiary of the transaction
• the complete payment route including account details
• the amount (or estimated amount) of the proposed transaction

The most common types of financial sanctions used in recent years are:
• Targeted asset freezes
• Restrictions on a wide variety of financial markets and services
• Directions to cease all business

The following outlines where financial sanctions apply and who needs to comply with them.
• EU financial sanctions apply within the territory of the EU and to all EU persons, wherever they are in the world.
• UK financial sanctions apply within the territory of the UK and to all UK persons, wherever they are in the world.
• All individuals and legal entities who are within or undertake activities within the UK’s territory must comply with the EU and UK financial sanctions that are in force.
• All UK nationals and UK legal entities established under UK law, including their branches, must also comply with UK financial sanctions that are in force, irrespective of where their activities take place.
• All EU nationals and legal entities established under EU law must comply with the EU financial sanctions that are in force, irrespective of where their activities take place.

Financial sanctions are generally imposed to:
• coerce a regime, or individuals within a regime, into changing their behaviour (or aspects of it) by increasing the cost on them to such an extent that they decide to cease the offending behaviour

• constrain a target by denying them access to key resources needed to continue their offending behaviour, including the financing of terrorism or nuclear proliferation;

• signal disapproval, stigmatising and potentially isolating a regime or individual, or as a way of sending broader political messages nationally or internationally; and/or

• protect the value of assets that have been misappropriated from a country until these assets can be repatriated

In certain circumstances, the UK can impose its own financial sanctions and restrictions under the following legislation (collectively the ‘domestic regimes’):
• Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010)
• Counter Terrorism Act 2008 (CTA 2008)
• Anti-Terrorism, Crime and Security Act 2001 (ATCSA 2001)

Applicants will generally be required to provide:
• the licensing ground(s) being relied upon in the application including supporting arguments
• full information on the parties involved in the proposed transaction, e.g. the:
• designated person(s)
• any financial institution(s) involved (e.g. remitter, correspondent, beneficiary)
• ultimate beneficiary of the transaction
• the complete payment route including account details
• the amount (or estimated amount) of the proposed transaction

OFSI’s approach to compliance is summarised by its compliance and enforcement model: promote, enable, respond, and change.

UNICEF defines the three levels of causes as follows:
Immediate causes: such as disease and inadequate nutrition, which directly relate to life, survival and development rights;

Underlying causes: such as the status of household food and nutrition, as well as social services like water and sanitation, health and education, which promote or prevent wellbeing and development;

Basic causes: which relate to issues such as control and distribution of national resources, institutional arrangements and social organization (including the status of women).

Humanitarian outcomes may be influenced by many causes other than sanctions.

Infant mortality, for example, is influenced by the education level of the mother, access to health information, the distribution of resources within the family, and access to medical care, in addition to the variables that may be directly influenced by sanctions.

The different types of indicators that can be used for measurement of baseline conditions and changes in conditions include:
• Infant mortality rates
• Access to or lack of access to piped (indoor) water and sanitary waste disposal
• Household assets
• Educational levels

In Serbia, the health system provided a stable number of emergency consultations, but reduced well-child visits and increased the number of immunizations provided during sanctions.

This was because demand for immunizations rose when families knew fewer medicines and routine visits would be available to them.

Investigations may be initiated from proactive monitoring for potentially suspicious activity as well as reactive measures taken to address regulatory findings, referrals or other recommendations.
Common investigation initiators include:
• Regulatory recommendations or official findings.
• Transaction monitoring rules designed to detect potentially suspicious activity.
• Referrals from customer-facing employees regarding potentially suspicious activity.
• Information obtained from internal hotlines.
• Negative media information.
• Receipt of a governmental subpoena or search warrant.

Financial institutions should establish a program to regularly monitor transactions to proactively identify potentially suspicious activity. Common approaches to transaction monitoring include the creation of in-house, customizable transaction monitoring rules or engaging a third-party vendor to assist with the development and implementation of automated rules.

The Wolfsberg Group noted in its 2009 Statement on Monitoring, Screening and Searching that an institution’s transaction monitoring framework should be aligned to the risk of its business model, the products and services offered, and its customer base, and should be embedded in an institution’s AML program. The document additionally discusses types of monitoring, typology reviews, and staff training.

Internal hotlines are also known as ethics, compliance, or whistleblower hotlines.

The hotlines may ask the employee to provide their identity but most allow for anonymous reporting.

The financial institution is prohibited from retaliating against the person making a report via the hotline in most jurisdictions.

The financial institution must maintain policies, procedures, and processes to confidentially investigate the information provided through the hotline.

Financial institutions may proactively monitor media stories and initiate investigations to determine if a suspicious activity or transaction report (SAR or STR) should be filed or if further actions may be necessary.

Financial institutions may initiate investigations upon receipt of a governmental subpoena or search warrant. In either situation, the financial institution maintains two independent obligations: (1) legally fulfill the requirements of the subpoena or warrant, and (2) determine whether the activity of its customer identified in the subpoena or warrant requires the filing of an STR.

The Wolfsberg Group also issued guidelines in early 2002 on “The Suppression of the Financing of Terrorism,” outlining the roles of financial institutions in the fight against money laundering and terrorism financing.
The Wolfsberg recommendations included:
• Providing official lists of suspected terrorists on a globally coordinated basis by relevant authorities.
• Including adequate information in the lists to help institutions search customer databases efficiently.
• Providing prompt feedback to institutions following the circulation of the official lists.
• Providing information on the manner, means and methods used by terrorists.
• Developing government guidelines for business sectors and activities identified as high-risk for terrorism financing.
• Developing uniform global formats for funds transfers that assist in the detection of terrorist financing.
• Protecting financial institutions with safe harbor immunity to encourage them to share information and to report to authorities.