OFAC
What does OFAC mean?
OFAC stands for the Office of Foreign Assets Control, a division of the U.S. Department of the Treasury. It administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries, regimes, terrorists, international narcotics traffickers, and those involved in weapons proliferation or other threats.
How does OFAC work?
OFAC maintains and updates several sanctions programs, which restrict transactions and business dealings with individuals, entities, and countries that are identified as a threat to U.S. interests. The most well-known tool OFAC uses is the Specially Designated Nationals (SDN) List, which includes names of individuals and companies owned, controlled by, or acting on behalf of targeted countries.
U.S. persons, including businesses, nonprofits, and financial institutions, are legally required to avoid doing business with SDNs or with those under comprehensive country-based sanctions. OFAC has the power to freeze assets and levy civil or criminal penalties for violations.
OFAC compliance is especially important for:
- Banks and fintech companies
- E-commerce and global trade businesses
- Law firms and compliance professionals
- Software platforms with international users
FAQs about OFAC
Any U.S. person, individual or entity, must comply with OFAC. This includes U.S. citizens, permanent residents, companies organized under U.S. law, and even foreign branches of U.S. companies. Foreign subsidiaries may also fall under certain sanctions depending on their dealings.
Penalties can range from asset freezes and blocked transactions to steep civil fines, often hundreds of thousands of dollars per violation. In some cases, criminal prosecution is also possible, leading to imprisonment.
The Specially Designated Nationals and Blocked Persons List is maintained by OFAC and includes individuals and entities banned from U.S. commerce. U.S. persons must block any assets held by SDNs and report such blocks to OFAC.
Best practice is to screen new customers or transactions during onboarding and on a regular, automated basis thereafter, especially in industries like finance, shipping, and global trade.
If a website offers goods, services, or digital content globally, it must consider OFAC restrictions. Selling to or allowing access from embargoed countries could expose the site owner to liability. Region-blocking and sanctions screening are key tools for mitigating risk.