What is OFAC?

The Office of Foreign Assets Control (OFAC) is a government agency that sits within the United States Department of Treasury. Its purpose is to manage, enforce and oversee a variety of sanctions based on United States foreign policy, targeting specially designated nationals and organisations such as:

• Terrorists
• International narcotics traffickers
• Sanctioned foreign countries and regimes

What is the Role of OFAC?

The Office of Foreign Assets Control has one overarching goal: to carry out sanctions – most commonly economic and trade based – against individuals, entities, regimes and entire countries that are engaged in illicit activities. The OFAC meaning of what constitutes ‘illicit activities’ comprises everything from the development of weapons of mass destruction (WMDs), threats to national security or foreign policy, and legitimate threats to the US economy.

As an agency within the US Department of Treasury, the Office of Foreign Assets Control is also responsible for protecting the country from the impact of large transactions carried out by terrorist organisations and drug cartels. This is achieved by constant updating of OFAC sanctions lists and watchlists, which include everything from individuals right up to entire countries, and ensuring the United States’ financial system is well protected against unlawful activities that may occur within it. The Office also make use of sanctions against terrorist organisations and individual threats by cutting off their financing channels.

Based on mandates delivered and/or upheld by the United Nations, these OFAC sanctions are used to pressure nations, entities and individuals into complying with regulations or halt their illegal activities. OFAC has the capacity to impose controls over financial transactions carried out by anyone on a sanctions list and, subsequently, put a freeze on any and all assets that are within the United States’ jurisdiction.

How Do OFAC Sanctions Work?

The Office of Foreign Assets Control (OFAC) has wide-ranging power to apply sanctions – they can target entire countries, specific individuals, as well as any organisation that is owned, controlled by or acting on behalf of a country. They are also able to sanction groups, entities, and terrorist and narcotics-trafficking organisations that may not be recognisably tied to a certain country.

Transparency is key to the OFAC sanctioned country list, which also includes individuals, and it is made publicly available through published lists – for example, the Consolidated Sanctions List and the Specifically Designated Nationals (SDN) and Blocked Persons Lists. While there may be instances where entities and individuals are not publicly named on these lists, they are similarly able to be disciplined by the Office of Foreign Assets Control (OFAC) through secondary sanctions.

What is the OFAC Sanctioned Country List?

There are a number of countries that are currently contained within the OFAC countries list. These are continuously updated and may not be accurate at the time of reading. As of publishing, the current sanctioned list includes countries such as:

• Belarus
• Burma
• Cuba
• Democratic Republic of Congo
• Iran
• Iraq
• Ivory Coast (Côte D’Ivoire)
• Liberia
• North Korea
• Sudan
• Syria
• The Balkans region
• Zimbabwe

Additionally, the SDN and Blocked Persons Lists includes sanctioned individuals and companies who are owned, controlled by or acting on behalf of sanctioned countries. This list also contains terrorists (both individuals and groups) and narcotics traffickers that still pose a global threat but are not specifically tied to any particular country. Not only are their assets within US jurisdiction blocked, but US citizens are prohibited from dealing with them.

Who Does OFAC Apply To?

Because of their widespread reach and their capacity to carry out official sanctions on targeted individuals, organisations, regimes and entire countries, all United States persons and businesses are legally required to comply with OFAC regulations in their sanctions programs. This is particularly true of financial institutions, including US banks, bank-holding companies and non-bank subsidiaries.

Importantly, Office of Foreign Asset Control regulations also apply to all overseas subsidiaries and foreign branches of US financial institutions. The entities are encouraged to take a risk-based approach when developing and implementing their own OFAC sanctions programs, as failure to comply can result in severe consequences. For example, anyone who conducts business with someone who does not pass an OFAC check can face fines of up to US$10 million and up to 30 years in jail.

What is an OFAC Check?

The purpose of performing an OFAC check is, according to their official website, designed to help you find “specially designated nationals, terrorists, narcotics traffickers, blocked persons and vessels and parties subject to various economic sanctioned programs who are forbidden from conducting business in the United States, as well as entities subject to license requirements because of their proliferation of weapons of mass destruction”.

An OFAC check is the heart of all sanctions programs, as it allows you to find out whether or not an individual or company is legally authorised to conduct business in the US. It will also include information on economic and trade sanctions, and national security threats (e.g. foreign regimes, terrorists and drug traffickers).

Complying with the Office of Foreign Assets Control

Nexis Diligence is a screening solution that contains AML, KYC, UBO and OFAC sanctions data on millions of companies around the world. There is also additional data on blacklists, politically exposed people (PEP), sanctions lists, watchlists, and more, which means you can use the platform to perform your due diligence and find any and all ownership information in a single search to identify potential risks.