Office of Foreign Assets Control (OFAC)

An OFAC check is a key measure to the company’s sanctions program. A OFAC sanctions check provides information on economic and trade sanctions, as well as national security threats like foreign regimes, terrorists, and drug traffickers. It determines if an individual or company is permitted to conduct business in the US.

OFAC regulations apply to all individuals and businesses in the US, which have the authority to enforce sanctions against specific individuals, organizations, regimes, and entire countries. Banks and their subsidiaries, along with overseas branches and subsidiaries of US financial institutions, must adhere to OFAC lists and use a risk-based approach for AML compliance.

OFAC imposes sanctions on individuals, countries, and businesses associated with certain countries. It also targets entities like terrorists and drug traffickers, regardless of their country. The organization announces these actions through lists like the following:

• Consolidated Sanctions List
• Blocked Person Lists
• Specially Designated Nationals (SDNs) List

Even if entities and individuals are not explicitly named on these lists, they can still face discipline from OFAC through secondary sanctions.

OFAC sanctions can be categorized into two main types:

• Primary sanctions forbid US residents and entities from conducting business or transactions with individuals, entities, or countries identified by OFAC as targets of sanctions.
• Secondary sanctions restrict economic and financial engagements with individuals who pose threats to US national security, foreign policy, or economy, focusing on foreign entities.

OFAC can regulate the financial transactions of those on the sanctions list and freeze assets within US jurisdiction.

There are a few key elements that help companies understand OFAC sanctions and prevent unwanted consequences. These include:

• Familiarizing yourself with the list of sanctioned countries, individuals, and entities.
• Conducting due diligence and researching entities before approving transactions.
• Implementing policies and procedures to build a proper OFAC compliance program. 
• Conducting Know Your Customer (KYC) and Know Your Business (KYB) checks to understand individual and corporate clients and their business operations.
• Recognizing the extent of sanctions to avoid violations.

Yes, OFAC also oversees virtual asset compliance. With cryptocurrencies becoming mainstream, it’s vital to comply with OFAC regulations and apply the same level of scrutiny as to traditional financial institutions. Staying updated on OFAC’s latest actions ensures a thorough grasp of sanctions’ implications.

Countries or organizations enforcing sanctions may pursue legal action against violators. This can involve seizing assets or filing criminal charges. Non-compliance can also lead to severe penalties, such as fines of up to $10 million and up to 30 years in jail for anyone involved in transactions that don’t pass an OFAC screening.