OFAC (Office of Foreign Assets Control): Everything You Need to Know

The Office of Foreign Assets Control (“OFAC”) is an agency of the United States Department of the Treasury. This agency was established in April 1940 by President Franklin D. Roosevelt’s Executive Order and was originally established as a department within the Office of Foreign Funds Control for the purpose of enforcing and managing the freezing of foreign assets during wartime.

Since that time, OFAC has expanded its role to include the regulation and enforcement of U.S. economic and trade sanctions involving foreign countries and targeted persons in accordance with U.S. foreign policy and national security objectives.

Taking action to achieve the United States’ national security goals and foreign policy objectives, OFAC’s legal authority is presently derived from a variety of sources, including executive orders, U.S. legislation, and international agreements.

OFAC, United States intelligence agencies, and other federal agencies work together to develop programs to help ensure U.S. foreign policy and national security objectives. OFAC imposes various types of sanctions, including asset freezes, trade restrictions, prohibitions on financial transactions, and travel bans. Such sanctions can have devastating and far-reaching implications for individuals, businesses, financial institutions, and even entire industries. Some of the most notable OFAC sanctions programs are those against Iran, China, North Korea, Venezuela, and entities associated with terrorism.

If you conduct international business or international personal transactions, contact our experienced OFAC attorneys today for a consultation. It is vital that you understand how OFAC regulations may impact you or your business.

The Role of OFAC in National Security

Business owners and managers engaged in commerce, international business, or trade with businesses that are blacklisted by OFAC, or with individuals deemed a “targeted person” could be subject to criminal penalties and administrative actions. Even if you have personal transactions with friends, family members, or charities, you could be subject to OFAC sanctions.

If a person intentionally violations OFAC sanctions, they could be criminally prosecuted by the Department of Justice (“DOJ”). It is important to know that OFAC sanctions can lead to civil liability and result in a finding of strict liability, which can be costly. The OFAC sanctions programs target many types of illegal activities, including terrorism, trafficking weapons of mass destruction and narcotics transactions.

Additionally, OFAC levies financial penalties against those who violate its rules and negotiates possible settlements. OFAC’s enforcement functions are handled by the Compliance Division and the OFAC Office of Enforcement. The Compliance Division deals with financial institutions and banks, and the Office of Enforcement focuses on all other parties. There is also an OFAC Licensing Division that considers the applications that businesses and individuals submit and decides whether a person or business transaction might receive a license even though its proposed transactions might otherwise be considered prohibited transactions.

The enforcement of OFAC sanctions can significantly impact global transactions and international business operations. Financial institutions play a particularly critical role in ensuring compliance with OFAC regulations by screening banking transactions, blocking suspicious and prohibited transactions, and reporting suspicious activities to OFAC.

Additionally, the extraterritorial reach of OFAC sanctions means that non-U.S. companies and individuals must also comply with OFAC regulations when they engage in transactions involving U.S. persons, the U.S. dollars, or a U.S. financial system.

Complying with OFAC Regulations

Compliance with OFAC regulations is essential for businesses and individuals engaged in international transactions. Failure to comply with OFAC sanctions can result in severe penalties, including hefty fines, civil penalties, criminal prosecution, and reputational damage. Therefore, businesses must implement robust compliance programs to ensure adherence to OFAC regulations, including implementing effective screening processes, maintaining accurate records, and conducting due diligence on customers, partners, and transactions .

Schedule a consultation with our knowledgeable OFAC lawyers to ensure your compliance with OFAC sanctions.

What an OFAC Attorney Does

Understanding OFAC rules and foreign policy issues can be confusing. The sanctions that may be imposed by OFAC can be complex and depend upon constantly updated regulations. Additionally, the list of targeted persons and countries of interest is ever-changing. Any person, organization, or foreign entity that is or is perceived to be a threat to U.S. national security may be subject to sanctions.

If a person or business deals in international business matters and transactions, they must be vigilant to make certain they are in constant compliance with the changing OFAC regulations.

An experienced OFAC attorney can help you stay on the right side of OFAC. Additionally, a knowledgeable OFAC attorney can provide the legal counsel and advice needed for all your foreign policy, special licensing, and other OFAC legal needs.

All U.S. citizens and any other persons or businesses with interests or property that is subject to the jurisdiction of the United States are also subject to OFAC sanctions. Therefore, it is vital that persons and businesses dealing with international matters be extremely cautious. Seeking legal counsel from an experienced and knowledgeable OFAC attorney can help you comply with all laws and regulations.

An OFAC lawyer can advise you about the latest national security controls imposed by the U.S. Government and help you avoid possible penalties and devastating actions such as the freezing of assets or arrest.

Understanding Prohibited Transactions

It can be confusing to determine whether an action is considered a prohibited transaction under the rules of OFAC. OFAC operates a blacklist of targeted persons and organizations, which is called the Specially Designated Nationals and Blocked Persons List (or the “SDN List”). There are some sanctions that apply to entire nations, even if they do not appear on the SDN List.

Because political and government interests are always changing, the SDN List is, likewise, ever-changing. New targets are frequently added and new regulations are created by Congressional and Executive action that expand sanctions. You should contact an experienced OFAC attorney for information on the SDN list, including the process of having an entity or person removed from that list.

It is important to know that the prohibitions surrounding sanctions are broadly construed. Often, the prohibitions include all dealings and transactions, whether performed directly or indirectly, facilitated on behalf of foreign persons or entities when such transactions are prohibited when performed by a U.S. citizen.

Understanding the SDN List

SDN stands for Specially Designated National. OFAC places individuals and entities on the SDN List to protect national security, foreign policy, and the U.S. sanctions policy. If a person or entity is placed on the list, they, or their business transactions, are considered a real or potential threat to national security. When OFAC takes this action, it effectively walls off the person or entity from the U.S. financial system and the international marketplace. This action makes it exceptionally difficult to for the person or entity to engage in international transactions.

The SDN list is publicly available. United States citizens, banks, and others can identify and assess whether they are prohibited from transacting with a particular person or business. The SDN List also shows the person’s name, aliases, addresses, and other identification numbers, as well as the country of residence of that person. The SDN List also shows specific sanctions programs assigned to him.

These individuals and entities, as well as those who support them, are subject to asset freezes. They may also be denied entrance into the United States. Additionally, those subject to U.S. law are prohibited from making any financial contribution to or from those on the SDN List.

Placement and Removal from the SDN List

When OFAC places an individual or entity on the SDN List, it provides written reasons explaining its decision. The reason for the placement on the SDN List can be found in reports generated by the Department of Treasury, which is released at the time of the designation. It is important to review the reports, consider OFAC’s reasons, and sufficiently address them in any requests for reconsideration or petition for removal.

To have a person or entity removed from the SDN List, they must lodge a special document called a petition for removal or a request for administrative consideration to OFAC.

This administrative consideration must effectively show that the person or entity ceases to engage in the prohibited activities or that they were wrongfully placed on the SDN List. They also must prove that they have divested from any potentially sanctionable activity. An individual or entity may also be removed from the SDN List if they can prove that the OFAC made a mistake when placing them there.

Once a request is filed, OFAC will review it and usually respond with questions to help understand and obtain a more complete understanding of the person or entity’s transactions. The process of having a person or entity removed from the SDN List may take months or even years.

What is an OFAC Administrative Subpoena?

An OFAC administrative subpoena is a legal request from American authorities to provide answers to questions they may have about activities or transactions that may have violated U.S. regulations. An OFAC Subpoena requires a thorough and complete response.

When an OFAC Subpoena is issued, the agency has not yet decided regarding sanctions, civil penalties, or criminal penalties. If you ever receive an OFAC Subpoena, it is vital that you seek the advice and representation of an experienced OFAC attorney.

Compliance with OFAC regulations is crucial for businesses and individuals engaged in international transactions. Failure to comply with OFAC sanctions can result in severe penalties, including hefty fines, civil penalties, criminal prosecution, and reputational damage. Therefore, businesses must implement robust compliance programs to ensure adherence to OFAC regulations, including conducting thorough due diligence on customers, partners, and transactions, implementing effective screening processes, and maintaining accurate records.

Despite OFAC’s important role in protecting national security, it has faced criticism and legal challenges. Some critics argue that OFAC sanctions can have unintended consequences, including severe humanitarian impacts on civilian populations, unintended economic consequences, and conflicts with the interests of U.S. allies.

Additionally, the complexity of OFAC regulations and the ever-evolving nature of sanctions programs pose challenges for businesses and individuals seeking to navigate OFAC compliance requirements. Schedule a consultation with our OFAC attorneys today.

Countries Currently Blocked by OFAC

The list of countries subject to OFAC sanctions changes over time due to shifts in U.S. foreign policy. It is always best to check for current listings by visiting the U.S. Department of Treasury website.

It is important to note that OFAC sanctions can include various restrictions and prohibitions beyond just blocking financial transactions, including trade restrictions, travel bans, and asset freezes, among others. Additionally, the specific sanctions and restrictions imposed on each country can vary.

You May Be Able to Get a License to Transact with a Prohibited Nation

OFAC has the discretion to issue licenses permitting a United States individual or entity to engage in conduct that is otherwise prohibited by OFAC regulations and the SDN List. While a person can technically apply to conduct any type of transaction, some sanctions programs contain statements of licensing policy identifying specific activities that OFAC would be accepting to authorize.

For instance, in the Iran sanctions program, there is a licensing policy for the sale of civilian aircraft parts to Iran to improve its safety. There can also be favorable licensing policies for the export of food, medication, and medical devices to some other sanctioned countries.

Schedule a Consultation with a Knowledgeable OFAC Lawyer

OFAC administers and enforces economic sanctions programs in the United States to advance U.S. foreign policy and national security objectives. Compliance with OFAC regulations presents significant challenges for businesses and individuals engaged in international transactions, highlighting the importance of robust compliance measures and due diligence.

Knowledgeable OFAC lawyers with expertise in sanctions, import and export licensing, and other complex international trade issues can help you stay compliant with OFAC regulations. Call or click today to schedule a consultation with our experienced OFAC attorneys at Bukh Global.