Enhanced due diligence is required when trade transactions involve jurisdictions near sanctioned countries due to the increased risk of transshipment, diversion, and sanctions evasion.

Sanctions and Compliance Domains highlight two core focus areas:

• verifying the identities and ultimate beneficial owners of all involved parties, and

• validating the shipment details, including routing, goods description, and movement patterns.

These elements are critical where geographic proximity raises sanctions exposure. While reviewing commercial terms and pricing may be part of general trade finance due diligence, the primary sanctions-specific EDD requirements focus on beneficial ownership and shipment details.

References from Sanctions and Compliance Domains:

Enhanced due diligence expectations for trade involving high-risk regions.

Requirements to verify UBOs to detect potential sanctioned ownership.

Importance of shipment route verification to detect diversion to sanctioned jurisdictions.

Sanctions and Compliance Domains outline that references to sanctioned ports, locations, or shipping routes in payment instructions require further investigation. Even when the transaction parties are not located in a sanctioned jurisdiction, involvement of a sanctioned port or movement of prohibited goods can trigger sanctions exposure.

The correct approach is to obtain supporting documents such as shipping documents, invoices, bills of lading, and routing information to confirm whether the shipment, goods, transport path, or third parties have any sanctioned involvement. Approving or rejecting a payment without verification contradicts sanctions screening standards.

References from Sanctions and Compliance Domains:

Requirements to investigate references to sanctioned locations in trade or payment messages.

Guidance on obtaining underlying documents to assess sanctions exposure.

Expectations for verifying goods, ports, and shipment paths.

OFAC regulations require that blocked funds must be placed into an interest-bearing account, held separately, and reported to OFAC. This does not require preauthorization from OFAC.

However, no debits or credits may occur without OFAC authorization, including:

• settling standing bills or checks (A),

• charging interest or loan/corporate card fees (C),

• deducting credit-card service charges (B).

Only OFAC can authorize movement or use of blocked property.

UN sanctions are imposed by the UN Security Council as part of its mandate to maintain international peace and security. They are intended to influence behavior, prevent conflict, suppress terrorism, and stabilize global security conditions.

While asset freezes and travel bans are common measures (option D), they are examples, not the fundamental reason for imposing sanctions. Option C describes the overarching purpose.

EU sanctions require financial institutions to immediately freeze the funds or economic resources of designated persons and promptly report the freeze to the competent national authority. Reporting is mandatory to ensure oversight and enforcement.

Banks must not transfer frozen funds, and they must not freeze accounts of family members unless those individuals are also designated or otherwise meet ownership/control criteria. Institutions also do not notify the customer directly, as doing so may undermine regulatory requirements.

Sanctions and Compliance Domains identify "weak aliases" as variations of names that do not robustly identify an individual. These include:

• Nicknames – informal or shortened versions (“Alex” vs. “Aleksandr”), often used for concealment.

• Names with numbers – identifiers that are easily fabricated and not tied to legitimate naming conventions.

Middle names, titles, or long names are normal cultural variations and not considered weak aliases for screening purposes.

Sanctions and Compliance Domains state that screening calibration must be tied directly to a financial institution’s sanctions risk assessment, which evaluates products, customer base, geography, delivery channels, and transaction volume. Sensitivity adjustments must be justified by an institution’s assessed sanctions exposure.

Staff levels or training do not determine screening thresholds; these are operational considerations. Management commitment supports governance but does not form the technical basis for calibration decisions.