VerifySanctionsAll guides

OFAC compliance for car dealers: every party, every deal

Published . Sources checked on that date.

A car dealership must not sell to, buy from or take money from anyone OFAC has blocked, because OFAC sanctions apply to every U.S. person and business, not only banks (OFAC FAQ 11). In practice that means you run an OFAC on every party to every deal: buyer, co-buyer, guarantor, anyone paying part of the price, and the company behind a fleet purchase. Clear any hit with a written reason and put the dated result in the deal jacket. OFAC's rules require records of each transaction for at least 10 years (31 CFR 501.601).

Who to run, on every deal

OFAC does not publish a dealer checklist, so this list is our recommendation, built from who can have an interest in the deal:

  • the buyer and every co-buyer
  • any guarantor or co-signer
  • anyone paying a down payment or part of the price who is not the buyer
  • the owner of a trade-in, if it is not the buyer
  • for a business purchase, the company and the people who own it

The last point matters because a company can be blocked without being named anywhere. Any entity owned 50 percent or more, in the aggregate, by blocked persons is blocked whether or not it appears on the SDN list (OFAC FAQ 91). See the 50 percent rule with worked examples.

Cash deals count too

The duty does not depend on financing. OFAC's reporting rule for rejected transactions defines a transaction to include "sales or purchases of goods or services" (31 CFR 501.604), and U.S. persons are prohibited from transactions involving blocked persons wherever those persons are located (OFAC FAQ 10). If your DMS screens financed deals automatically, check how it handles cash buyers, third-party payers and trade owners it never sees.

The OFAC alert on a credit report

Credit bureaus screen applicants and may put an OFAC alert on the report when the name is a potential match. OFAC says this is a prompt for the person pulling the report to verify whether the applicant is the listed individual. If the applicant is not, disregard the alert; there is no need to contact OFAC. If you believe the applicant is the listed person, OFAC says to call the OFAC Hotline (OFAC FAQ 70).

To decide, compare the full list entry with the customer's date of birth, ID and address, as OFAC describes in FAQ 5. Our post on clearing an OFAC false positive has a rationale template you can copy into the jacket.

When the hit is real

Stop the deal. Property of a person on the SDN list must be blocked; a prohibited deal with nothing to block must be rejected (OFAC FAQ 5). Either one is reported to OFAC within 10 business days (31 CFR 501.603, 31 CFR 501.604).

What goes in the deal jacket

For each party:

  • full name and the identifiers you compared (date of birth, address, ID)
  • date and time of the check
  • the lists searched and their publication date
  • the result, and for any hit, who reviewed it, the decision and the reason

Employees and vendors

Staff and vendors are counterparties too. OFAC leaves the re-screening frequency to your own written policy (OFAC FAQ 28) and notes that it updates its lists at an increasing pace (OFAC FAQ 88). The dates of each update are on OFAC's Recent Actions page. Write the frequency you choose into your policy; our compliance program template has a place for it.

OFAC generally enforces on a strict liability basis, so a dealer can be liable without knowing the customer was listed (OFAC guidance, October 2021, p. 6). The dated record is your evidence that the check ran.

Run the next one

Run a free OFAC check on the next buyer, co-buyer or payer against the current SDN and Consolidated lists. This is screening data, not legal advice.