For economic and trade sanctions to work—and have the impact they should—they need to be managed by a source of truth. Not only that, but organizations need to be able to cross-reference sanctions lists to make sure they aren’t conducting business with blocked individuals or entities.
Fortunately, OFAC is in place to protect U.S. citizens and support national defense objectives by implementing and maintaining sanctions lists—as well as enforcing them. To help organizations stay compliant, we explore what OFAC is, what it’s responsible for, and how to search sanctions lists.
What Does OFAC Stand For?
OFAC stands for the “Office of Foreign Assets Control.”
What is the Office of Foreign Assets Control (OFAC)?
The Office of Foreign Assets Control (OFAC) regulates the financial services industry by administering and enforcing sanctions that support U.S. national security and foreign policy objectives. OFAC is a U.S. government agency belonging to the U.S. Department of the Treasury.
What’s the Purpose of OFAC?
The Office of Foreign Assets Control (OFAC) is designed to support foreign policy and national security directives of the US government by ensuring sanctions in the financial services industry are adhered to.
To achieve this, it works tirelessly to establish programs and policies that prevent money laundering, terrorism financing, and other financial crimes.
What is the Office of Foreign Assets Control Responsible For?
OFAC implements, supervises, and enforces U.S. sanctions in support of US national security directives. Under this umbrella, OFAC is responsible for the following:
- Creating, implementing, and managing sanctions lists for U.S. individuals and entities
- Enforcing sanctions lists for U.S. citizens and businesses by supervising and investigating suspicious activity
- Providing guidance on how to follow sanctions lists
- Approving OFAC licenses where relevant exceptions to sanctions lists apply
- Safeguarding U.S. foreign policy and national security
The OFAC Sanctions List
The OFAC sanctions list refers to the various lists of sanctions managed and enforced by the Office of Foreign Assets Control.
These lists outline which countries, individuals, entities, vessels, and aircraft are sanctioned by the United States. Individuals and organizations are forbidden from conducting business with those listed on these sanctions lists. Because of this, these sanctions lists are vital for ensuring compliance.
The OFAC Sanctions List Search tool makes it easy for individuals and organizations to search all sanctions lists quickly and easily, so organizations can avoid conducting business with sanctioned individuals and entities.
To help organizations stay compliant with OFAC sanctions, we explore the main OFAC sanctions lists below:
Specially Designated Nationals (SDN)
The Specially Designated Nationals and Blocked Persons List (SDN) include all individuals and companies that are owned by, controlled by, or acting on behalf of targeted countries, as well as those that are not country-specific. This includes drug traffickers and terrorist groups that aren’t tied to a specific country.
All American individuals and organizations are restricted from conducting business with any of these individuals, companies, and groups.
Consolidated Sanctions List
The Consolidated Sanctions List (Non-SDN Lists) is a comprehensive list of all of the non-SDN sanctions list that OFAC administers and enforces. The consolidated list is designed to make it easier for individuals and organizations to adhere to OFAC sanctions regulations.
The Consolidated Sanctions list is comprised of the following non-SDN lists:
- Foreign Sanctions Evaders (FSE) List: A list of foreign individuals and entities that have violated (or attempted to violate) U.S. sanctions on Syria or Iran, as well as foreign individuals that have aided deceptive transactions for those subject to U.S. sanctions.
- Sectoral Sanctions Identifications (SSI) List: A list of individuals operating in specific sectors of the Russian economy that have been identified by the Secretary of the Treasury. While this list is separate from the SDN list, some individuals or entities may also appear on the SDN list.
- Non-SDN Palestinian Legislative Council (NS-PLC) list: A list of members of the Palestinian Legislative Council (PLC) that were elected under the party of Hamas or other terrorist designations (Foreign Terrorist Organizations (FTO), Specially Designated Terrorist (SDT), or Specially Designated Global Terrorist (SDGT)).
- List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA List): A list of foreign financial institutions (FFIs) that are restricted (or subject to strict operating conditions) from opening or operating a correspondent account or a payable-through account.
- Non-SDN Menu-Based Sanctions List (NS-MBS List): A list of individuals and entities subject to specific, non-blocking sanctions, such as prohibitions on certain goods or services or statutory exceptions on the importation of goods for blocked entities.
- Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List): A list of individuals subject to sanctions imposed under statutory authority, such as those related to the funding of security and financial companies of the People’s Republic of China.
OFAC Licenses: How OFAC Exemptions Work
There are cases where individuals and entities can receive exemptions from enforced OFAC sanctions. However, to do this, organizations need to get a license from OFAC that allows them to engage in behavior that would otherwise be prohibited.
There are two types of licenses that offer exemptions:
- General License: Those issued a general license are able to conduct a particular type of transaction without the need to apply for a specific license.
- Specific License: Those issued a specific license are allowed—via a written document—to authorize a particular transaction, as per their license application.
Essentially, a specific license authorizes an individual transaction on a case-by-case basis, whereas a general license authorizes an individual or entity to make a specific type of transaction.
These licenses often have strictly defined conditions—which organizations have to follow to the letter.
How to Follow OFAC Regulations for AML and Compliance
Failure to comply with sanctions lists puts businesses in jeopardy and exposes companies to fines and penalties. Online marketplaces, payment platforms, and other financial institutions must incorporate sanctions list checks into their risk management processes to ensure compliance.
OFAC checks are just one element of a team’s AML compliance program though—teams need a comprehensive risk management solution that offers onboarding orchestration, transaction monitoring, and case management to maintain compliance and prevent fraud.
Schedule a demo to learn how Unit21’s AML transaction monitoring can help your team maintain compliance using both monetary and non-monetary signals. Our case management solutions give risk professionals sleek data visualizations that empower them to easily visualize connections between individuals and entities, and draw more meaningful insights from customer behavior.