Office of Foreign Assets Control (OFAC)

🔹 Definition

The Office of Foreign Assets Control (OFAC) is an agency of the U.S. Department of the Treasury responsible for administering and enforcing economic and trade sanctions based on U.S. foreign policy and national security goals. OFAC targets foreign governments, terrorists, drug traffickers, proliferators of weapons of mass destruction, and other threats by restricting their access to the U.S. financial system and economy.

OFAC’s enforcement includes maintaining the Specially Designated Nationals (SDN) List, blocking assets, and prohibiting U.S. persons and entities from engaging in transactions with designated individuals or entities.

🔹 Frequently Asked Questions (FAQs)

Q1: What is the SDN List?

• The Specially Designated Nationals and Blocked Persons List (SDN List) is a list of individuals, companies, vessels, and entities sanctioned by OFAC
• U.S. persons are prohibited from dealing with any parties on the list, and their assets are frozen if under U.S. jurisdiction
• The SDN List is used globally for sanctions screening and compliance checks

Q2: Who must comply with OFAC regulations?

• All U.S. citizens, permanent residents, and entities (including branches and subsidiaries abroad)
• Non-U.S. entities if their transactions pass through the U.S. financial system or involve U.S. persons, technology, or currency
• Financial institutions and fintech firms worldwide often screen against OFAC lists to avoid secondary sanctions

Q3: What types of sanctions does OFAC enforce?

• Comprehensive sanctions: Broad restrictions on countries like Iran, North Korea
• Targeted sanctions: Focused on specific individuals, companies, or sectors (e.g., Russian oligarchs, terrorist groups)
• Sectoral sanctions: Target economic sectors such as energy, defense, or finance in specific jurisdictions
• OFAC can also impose civil and criminal penalties for violations

Q4: What are the compliance requirements for businesses?

• Implement a sanctions screening program, including SDN and other OFAC lists
• Conduct customer due diligence (CDD) and beneficial ownership checks
• Report blocked or rejected transactions to OFAC within required timeframes
• Maintain internal controls, audit trails, and employee training on sanctions compliance
• Use automated tools to continuously monitor counterparties and transactions

Q5: What are the consequences of non-compliance with OFAC rules?

• Civil penalties up to millions of dollars per violation
• Criminal charges for willful violations, including fines and imprisonment
• Loss of business access to the U.S. financial system
• Reputational damage, regulatory scrutiny, and de-risking by financial institutions