The OFAC check on a credit report: what it covers and what it misses

An OFAC result that comes back with a credit report screens the person whose credit was pulled, on the day it was pulled. It does not screen anyone you never pulled credit on, it does not watch people you keep doing business with, and it may not leave the kind of record an auditor asks for. If your store relies on it, close the gaps for cash buyers, third-party payers, trade owners, business buyers, staff and vendors, and keep the dated result in the jacket.

How the credit-pull check fits in

OFAC applies to every U.S. person and business, not only lenders (OFAC FAQ 11). For date-of-transaction checks at dealerships, Hudson Cook, a law firm that advises dealers, writes that "dealers typically check the SDN List at the same time, and in conjunction with, the credit pull on a potential buyer/lessee" (Hudson Cook). It is a sensible place for the check: the applicant's name, address and date of birth are already in hand.

The product details vary by provider and are outside this post. What follows is about the structure: what any check tied to a credit pull can and cannot see.

What it covers

• the applicant, and a co-applicant if one is on the application
• on the date of the pull
• against whatever list version the provider used that day

That is a real control for a financed retail deal. It is not the whole program.

What it misses

People with no credit pulled

A buyer who pays in full may never fill in a credit application. A relative who brings the down payment, a company paying for an employee's car, and the owner of a trade-in who is not on the contract usually never do. OFAC's prohibitions are about who you deal with, and U.S. persons are prohibited from transactions involving blocked persons wherever those persons are (OFAC FAQ 10). See cash deals and OFAC.

Companies and their owners

A credit pull on a person tells you nothing about the business they are buying for. A company owned 50 percent or more, in the aggregate, by blocked persons is blocked even if it is not on the SDN list (OFAC FAQ 91). Screen the company name, and for business buyers that matter, ask who owns it. The 50 percent rule examples show how indirect stakes count.

Changes after the day of the pull

A check on the day of the pull says nothing about next month. Hudson Cook's view is that dealers with a continuing business relationship, such as an employee or a vendor, "must check that person against the SDN List every time the SDN List changes," and that buy-here, pay-here dealers collecting on contracts should at a minimum check the list when collecting payments (Hudson Cook). OFAC itself leaves the frequency to your own policies, while warning of the consequences of missing a target (OFAC FAQ 28). Our post on how often to re-screen sets out a defensible schedule.

Staff and vendors

Your payroll and vendor files never go through a credit pull at all. They are continuing relationships, so they need a scheduled scrub. The monthly vendor scrub has a CSV layout you can reuse for employees.

The record

Ask what you would hand an examiner. OFAC's guidance asks organizations to keep "complete, accurate records" of the steps taken to investigate a potential match and the information relied on to decide it (OFAC FAQ 5). OFAC's rules require a full record of each transaction subject to them for at least 10 years (31 CFR 501.601). A flag on a printed credit report shows that a check ran. It may not show which list version was used, who reviewed a hit, or why it was cleared.

Closing the gaps

None of these replaces the credit-pull check. They sit around it.

This is screening data and general information, not legal advice.

Run a free OFAC check on anyone the credit pull did not cover, against the current SDN and Consolidated lists.