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Exam CRCM topic 1 question 224 discussion

Actual exam question from ABA's CRCM
Question #: 224
Topic #: 1
[All CRCM Questions]

ABC Co. signs a contract to export goods to Country G, a boycotting country. Payment will be made by a letter of credit confirmed by First National Bank. The letter of credit requires the goods to be shipped on a ship eligible to enter the port of Country G in conformity with its laws and regulations and that the insurer of the goods has an agent in Country G. Country G's laws prohibit blacklisted ships from calling at its ports and blacklisted insurance companies from qualifying agents in Country G. First National Bank confirms the letter of credit. Did the bank's action constitute an agreement to participate in or cooperate with an international boycott, and is it subject to IRS reporting requirements?

  • A. Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements.
  • B. Yes. The action is an agreement to participate in a boycott but no, it is not subject to the reporting requirements.
  • C. No. Because the bank is not responsible for knowing the laws of Country G, it is not in participation with or in cooperation with a boycott.
  • D. No. The confirmation of a letter of credit is not sufficient to be in participation or cooperation with a boycott.
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Suggested Answer: A 🗳️
by Cam22 at March 17, 2024, 1:11 a.m.

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Cam22
4 months ago
Selected Answer: A
Yes. The action is an agreement to cooperate with or participate in a boycott and, yes, it is subject to the reporting requirements. By confirming a letter of credit that includes conditions aligning with the boycotting country's laws and regulations—which effectively enforce the boycott—First National Bank is participating in the boycott. U.S. regulations require entities, including financial institutions, to report certain actions that could be seen as cooperating with or participating in international boycotts not sanctioned by the U.S. government. The bank's confirmation of such a letter of credit triggers these reporting obligations to the IRS.
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