What is OFAC? The Office of Foreign Assets Control, in plain terms

OFAC stands for the Office of Foreign Assets Control, part of the U.S. Department of the Treasury. In OFAC's own words, it "administers and enforces economic and trade sanctions against targeted foreign jurisdictions and regimes, as well as individuals and entities engaging in harmful activity" (OFAC FAQ 1). For a business, OFAC matters because every U.S. person and company must comply with its sanctions, and the best-known tool is its list of blocked people and companies, the SDN list.

What OFAC does

OFAC's sanctions take two broad forms. Some block the property of specific individuals and entities. Others broadly prohibit transactions involving a whole country or region, for example through a trade embargo, or restrict particular sectors of a country's economy (OFAC FAQ 1). OFAC lists the programs it runs, country by country and theme by theme, on its Sanctions Programs and Country Information page.

The targets OFAC names include terrorists, international narcotics traffickers and proliferators of weapons of mass destruction (OFAC FAQ 1). OFAC was formally created in December 1950, according to its About OFAC page.

Who must comply

Not only banks. OFAC says all U.S. persons must comply, "including all U.S. citizens and permanent residents regardless of where they are located, all individuals and entities within the United States, and all U.S. incorporated entities and their foreign branches" (OFAC FAQ 11). In some programs, foreign subsidiaries owned or controlled by U.S. persons must comply too, and non-U.S. persons are prohibited from causing U.S. persons to violate sanctions (same FAQ).

In practice that reaches car dealers, title and escrow agents, landlords, exporters, marketplaces and anyone paying vendors. See our guides for dealers, title and escrow and accounts payable.

Why liability is strict

OFAC's guidance says it may impose civil penalties "based on a strict liability legal standard," which means a U.S. person "may be held civilly liable for sanctions violations even without having knowledge or reason to know it was engaging in such a violation" (OFAC guidance). The same guidance says OFAC looks at the totality of the facts and may treat a risk-based compliance program as a mitigating factor. That is why businesses screen names before they deal, and keep a record that they did.

OFAC's Framework for Compliance Commitments describes what it expects a sanctions compliance program to contain. Our compliance program template turns it into a document a small business can adopt.

What the SDN list is

The List of Specially Designated Nationals and Blocked Persons, the SDN list, names individuals and entities whose property is blocked. U.S. persons are generally prohibited from dealing with them, and property and interests in property of listed persons in the United States or in the possession or control of U.S. persons are blocked (OFAC FAQ 91).

Two things catch people out:

• Not everyone blocked is named. Some sanctions block categories of persons who do not appear on the SDN list, including entities owned 50 percent or more by blocked persons (OFAC FAQ 91).
• The SDN list is not the only list. OFAC also maintains lists of persons subject to sanctions other than blocking (same FAQ). See OFAC's non-SDN lists.

More in the SDN list explained.

Where the lists live

• Search by name: OFAC's free Sanctions List Search covers the SDN list and its other sanctions lists. OFAC says it is intended for individual users and should not be driven by automated systems running searches continually (OFAC FAQ 287).
• Download the data: the Sanctions List Service publishes the SDN and Consolidated lists as files, including a CSV that opens in a spreadsheet (OFAC FAQ 80). See how to download the SDN list.
• What changed: OFAC posts each action on its Recent Actions page.

What OFAC is not

OFAC does not confirm whether a particular hit is a real match. Its guidance says it encourages organizations to make risk-based determinations instead (OFAC FAQ 5). It also does not set one screening frequency for every business; that is left to your own policies (OFAC FAQ 28). And an OFAC license, which authorizes a transaction that would otherwise be prohibited, is a different thing from a screening record. See OFAC license vs clearance.

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

Run a free OFAC check on a person or company against the current SDN and Consolidated lists.