OFAC (OFAC)
The Office of Foreign Assets Control is the US Treasury office that administers and enforces US economic sanctions. It writes the programs, designates the people and companies caught by them, publishes the lists that firms screen against, and grants the licenses that permit otherwise prohibited dealings.
Also called: Office of Foreign Assets Control · OFAC sanctions
OFAC sits inside the US Treasury and runs the country’s economic sanctions programs. Some are country or regime based; others target a defined activity, such as narcotics trafficking or cyber intrusion. For each one OFAC writes the regulations, designates the people and entities caught by them, publishes the lists — the Specially Designated Nationals list is the best known — issues the general and specific licenses that permit otherwise prohibited activity, and investigates and penalizes breaches.
Screening, designation and blocking are three separate things
A firm’s own control is sanctions screening: comparing customer records and payment details against the lists that apply to it. A screening alert is a possible match that someone has to investigate. It is not a finding, and OFAC has said nothing to the firm by generating it. Designation — putting a person or company on a list — is OFAC’s act alone, and no amount of internal suspicion substitutes for it.
Where a real match involves property in which a blocked person or government holds an interest, the firm blocks: the funds are frozen and retained in an interest-bearing blocked account, not returned. Where the transaction is prohibited but there is no blockable interest, the firm rejects it — the payment is not processed and goes back to the originator. Both have to be reported to OFAC within ten business days, and treating one as the other is a recurring cause of enforcement action.
Who OFAC reaches
US persons, US-organized companies and their employees anywhere in the world are bound directly. Non-US firms are reached through the transaction rather than through their address: US dollar payments generally clear through a correspondent bank in the United States, and touching the US financial system is usually enough. Individual programs reach further still, extending in some cases to foreign subsidiaries or to dealings between non-US parties.
In practice
Civil liability under OFAC sanctions is strict: a firm can be penalized for a transaction it did not know was prohibited, and there is no materiality threshold and no exemption for small firms. Not knowing is no defense, but it is not irrelevant either — it is weighed when OFAC decides the response, which can be a cautionary letter or a formal finding of violation rather than a money penalty. Criminal liability is a separate matter and requires wilfulness.
Example
A remittance firm outside the United States sends dollars for a customer. The payment leaves its own bank, clears through a correspondent in New York, and stops there because a beneficiary name matches a designated person. The firm is not a US person, holds no US license and has never dealt with OFAC — but the dollars went through the US financial system, and the money is now blocked in New York.
Commonly confused with
| Term | How it differs |
|---|---|
| SDN List | The SDN list is one of the lists OFAC publishes; OFAC is the agency that designates people onto it and administers the sanctions program behind it. |
| FinCEN | FinCEN administers anti-money-laundering reporting under the Bank Secrecy Act; OFAC administers sanctions, a separate regime with separate obligations and separate penalties. |
See also
- Sanctions ScreeningSanctions screening is the checking of customers, counterparties and payment messages against sanctions lists and watchlists — at onboarding, repeatedly afterwards, and on payments while they are still in flight — and the holding or rejecting of anything that genuinely matches.
- FinCENThe bureau of the US Treasury that administers the Bank Secrecy Act. FinCEN writes the anti-money-laundering rules applying to financial institutions, receives suspicious activity and currency transaction reports, and maintains the federal register of money services businesses.
- De-riskingDe-risking is a bank exiting a whole category of customer, such as money services businesses, crypto firms or particular corridors, rather than assessing and pricing each relationship on its own facts. Accounts close because of what the customer is, not what the customer did.
- Correspondent BankingCorrespondent banking is an arrangement in which one bank holds deposits for another bank and makes and receives payments on its behalf, normally so the second bank can reach a currency or a market where it has no branch or license of its own.