OFAC (Office of Foreign Assets Control)

The Office of Foreign Assets Control (OFAC) is an office of the United States Department of the Treasury that administers and enforces US economic and trade sanctions. It implements sanctions programs against foreign countries, regimes, terrorists, narcotics traffickers, cyber actors and others whose activities threaten US national security, foreign policy or the economy. OFAC designates the individuals, companies, vessels and other entities subject to sanctions, publishes the lists that businesses screen against, issues licenses authorizing otherwise prohibited activity, and imposes penalties for violations.

Because the US dollar is central to international trade and finance, OFAC's rules reach far beyond the United States. For the agency's full profile, see the Office of Foreign Assets Control regulator profile.

OFAC traces its roots to the Office of Foreign Funds Control, set up in 1940 to block assets of countries occupied by Nazi Germany. OFAC itself was formally created in December 1950, after China entered the Korean War, when the United States blocked Chinese and North Korean assets under its jurisdiction. Since then its programs have expanded from country-wide embargoes to targeted sanctions on specific persons and sectors. OFAC sits within the Treasury's Office of Terrorism and Financial Intelligence, alongside FinCEN.

Most OFAC programs rest on presidential executive orders issued under the International Emergency Economic Powers Act of 1977 (IEEPA). Other authorities include the Trading with the Enemy Act of 1917, which still underpins the Cuba embargo, the Foreign Narcotics Kingpin Designation Act, and program-specific statutes passed by Congress. OFAC's regulations are published in Title 31 of the Code of Federal Regulations, Chapter V.

Designations and lists

OFAC adds and removes names from the Specially Designated Nationals and Blocked Persons List (SDN List). US persons must block, or freeze, any property or interests in property of a specially designated national that come into their possession and are generally prohibited from dealing with them. Under OFAC's 50 percent rule, an entity owned 50 percent or more, directly or indirectly, in the aggregate by blocked persons is itself blocked even if it does not appear on the list, which makes beneficial ownership information important to compliance. OFAC also maintains non-SDN lists, such as the Sectoral Sanctions Identifications List, which impose narrower restrictions.

Licenses

General licenses authorize categories of transactions for everyone, for example certain humanitarian or wind-down activities. Specific licenses are granted on application to a named party for a particular transaction.

Enforcement

Civil liability for OFAC violations is strict: a firm can be penalized even if it did not know a transaction involved a sanctioned party. OFAC's Economic Sanctions Enforcement Guidelines weigh factors such as willfulness, harm to program objectives and the quality of the compliance program. In 2024 Congress extended the statute of limitations for IEEPA and Trading with the Enemy Act violations from five to ten years. Willful violations can be prosecuted criminally by the Department of Justice.

OFAC regulations apply to US persons: US citizens and permanent residents wherever located, entities organized under US law and their foreign branches, and anyone in the United States. Some programs extend to foreign subsidiaries of US companies. Non-US firms are exposed when they cause a US person to violate sanctions, often by sending dollar payments through US banks, and through secondary sanctions that target foreign parties dealing with sanctioned targets.

Banks, money services businesses, card issuers, crypto firms and fintech platforms carry out sanctions screening of customers, counterparties and payment messages against OFAC lists. Blocked funds must be reported to OFAC within 10 business days and held in an interest-bearing blocked account; rejected transactions must also be reported. OFAC's 2019 framework for compliance commitments sets out five components of a sanctions program: management commitment, risk assessment, internal controls, testing and auditing, and training. These are usually integrated with a firm's wider AML program under a risk-based approach.

Sanctions risk is a frequent reason for de-risking of correspondent relationships, and indirect access through nested accounts is a recognized channel for evasion. State regulators such as the NYDFS have brought parallel actions against banks for sanctions failures. A broader treatment of program types is in OFAC sanctions.

• Office of Foreign Assets Control (US Department of the Treasury)