Certified Regulatory Compliance Manager (CRCM) — Question 209

ABC Co. signed a contract to export goods to Country M, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires ABC Co. to certify that none of its directors are nationals of any country boycotted by Country M before ABC can be paid. First National
Bank confirms the letter of credit to ABC after determining that all of the documents are in order. Did First National Bank participate in a boycott, and must the bank report the action to the IRS?

Answer options

• A. No. The bank's action was only ministerial.
• B. Yes. The action was participation in a boycott and the bank must report the action to the IRS.
• C. No. Only ABC Co. is required to report to the IRS.
• D. Yes, but no reporting requirements were triggered.

Correct answer: B

Explanation

The correct answer is B because First National Bank's action of confirming the letter of credit, while ensuring compliance with the boycott regulations, indicates participation in a boycott. Options A and C are incorrect as they fail to recognize the bank's involvement, and option D incorrectly suggests that the bank's participation does not necessitate reporting.