OFAC in the closing file: what title underwriters expect
Each title underwriter sets its own OFAC instructions for agents, so start with your underwriter's bulletin. Fidelity National Financial, for example, runs a public OFAC search at ofac.fnf.com and tells independent agents that a possible match must go through OFAC's due-diligence steps. Whatever the wording, the closing file should show each party screened against OFAC's SDN and Consolidated lists, the date, the list version, and how any hit was cleared. The law underneath applies to every U.S. person, settlement agents included (OFAC FAQ 11).
Who to screen at a closing
This list is our recommendation; your underwriter's instructions control where they differ:
- every buyer and every seller
- any borrower who is not a buyer
- anyone receiving proceeds from the closing
- for an entity buyer or seller, the entity and the people who own it
Entity parties need the extra step because OFAC blocks any entity owned 50 percent or more, in the aggregate, by blocked persons, whether or not the entity is on the SDN list (OFAC FAQ 91). OFAC's rule looks at ownership, not control (OFAC FAQ 398), and adds together stakes held by different blocked persons (OFAC FAQ 399). The 50 percent rule with worked examples walks through layered ownership.
Clearing a possible match
OFAC's method is to compare the full list entry with what you know about the party: date of birth, nationality, ID numbers and address. Very few similarities may mean no valid match; several, such as name and date of birth, mean a likely match. OFAC does not confirm matches for you (OFAC FAQ 5). The FNF page linked above sends its own employees to escrow administration on a possible match. Check what your underwriter requires before you contact anyone else.
Our false positive guide has a rationale template for the file.
If a party is blocked
The closing does not proceed. Property of a blocked person must be blocked, and OFAC's guidance says blocked funds go into a segregated, interest-bearing account at a federally insured U.S. financial institution, from which only OFAC-authorized debits may be made (OFAC FAQ 5).
A blocking report is due within 10 business days (31 CFR 501.603). For real property, the regulation puts primary responsibility for reporting on any U.S. co-owner, legal representative, agent, or property manager in the United States. Another person's report does not excuse yours unless you actually know it was filed (same section).
What the closing file should hold
- each party's name and the identifiers compared
- the date and time of each check
- the lists searched and their publication dates
- for any hit: who reviewed it, the decision, and the reason
OFAC requires records of each transaction subject to its rules to be kept for at least 10 years (31 CFR 501.601), and can demand them, with the underlying documents, at any time (31 CFR 501.602).
Check the next party
Run a free OFAC check on the next buyer, seller or payee against the current SDN and Consolidated lists. This is screening data, not legal advice, and it does not replace your underwriter's instructions.