The Office of Foreign Assets Control (OFAC) is an agency in the Department of the Treasury responsible for the administration and enforcement of economic and trades sanctions. These sanctions are based on United States foreign policy and national security goals in regard to targeted foreign countries and regimes, terrorists, international narcotics traffickers, and any nation or group engaged in the proliferation of weapons of mass destruction or other activities considered threats to the national security, foreign policy, or economy of the United States. The office acts under authority granted by the specific legislation passed to impose controls on transactions or freeze assets under US jurisdiction, as well as powers granted to the office by presidential national emergency powers. Violations of the legislation, national emergency powers, or the office generally can result in civil and criminal penalties.
The sanctions imposed and administered by OFAC are intended to restrict persons from the United States from engaging in trade of financial transactions, whether direct or indirect, with the governments or persons of countries or areas designated by OFAC as sanctioned countries or areas, or individuals and entities engaged in the above-sanctioned activities. Many sanctions under OFAC are based on United Nations and related international mandates, which involve cooperation with allied governments and can be multilateral in scope. Examples of countries or entities identified under OFAC sanctions include, but are not limited to, Cuba, Iran, North Korea, Syria, and the Crimean region of Ukraine.
OFAC has several different sanction programs, which are sanctions against a region, entities within a region, or specific individuals or groups. These sanction programs can be either comprehensive or selective and include the blocking of assets and trade restrictions to accomplish foreign policy and national security goals. The different US sanctions programs vary in scope, as noted above, with some being broad-based and oriented geographically and others targeting and focused on individuals or entities. These programs can include broad prohibitions, indirect or direct bans on provisions, or targeted financial sanctions.
To notify the public about the sanctions programs and the sanctioned regions or entities, OFAC publishes lists, including the Specially Designated Nationals (SDNs) List or the Consolidated Sanctions List. Other groups and individuals not named in these lists could fall under OFAC's discipline through secondary sanctions. OFAC offers a sanctions components program to help US companies, organizations, and individuals comply with the sanctions laws and regulations and prevent sanctions violations from occurring.
OFAC's sanctions component program map
In which OFAC describes the need to develop internal policy procedures in order to effectively assess risk for an organization, and help that organization understand the types of financial crimes risk they will encounter.
In which OFAC suggests that management commitment is the beginning of everything in a company, meaning focuses upper management and creating a governance structure that makes sense for an organization to evaluate financial crime risk.
In which OFAC describes the more difficult issues in compliance dealing with the assessment of consequences which fall in a particular zone of risk and what an organization can do to mitigate or avoid those risks.
Which OFAC suggests for every person in an organization so that those individuals can understand the role they play in fighting financial crime.
All economic sanctions imposed by a country are primary sanctions. Whereas secondary sanctions are those penalties imposed on persons and organizations not subject to the primary sanctions and are applied against entities engaged in prohibited dealings. For example, if a non-US person deals in assets linked by a sanctioned entity or related group, such as making a charitable donation to a sanctioned terrorist group's charitable donation, that person can be penalized under secondary sanctions. This can be true even when the dealings do not involve the US in any way.
The OFAC does not maintain a specific list of countries that US persons cannot do business with because the sanctions vary in scope and can encompass broad prohibitions at the country level or targeted sanctions. They offer information on specific sanction programs or country information. Further, OFAC offers the Specially Designation Nationals and Blocked Persons List, along with other sanctions lists, which have different associated prohibitions. These lists help deal with the individuals and entities that may move and end up in otherwise unexpected locations but with remaining sanctions; therefore, US citizens remain prohibited from dealing with them.
The Specially Designated Nationals and Blocked Persons List (SDN List) is an OFAC published and managed list detailing the designated terrorists, officials, beneficiaries of authoritarian regimes, international criminals, and companies owned or controlled on behalf of targeted countries under the OFAC sanctions programs. The members of the list are have been identified as posing a threat to US national security and foreign policy. And the lists are published to help US companies, organizations, and individuals to know they are generally prohibited from dealing with them and allow them to know their assets are blocked.
Companies in Mexico listed in the Specially Designated Nationals And Blocked Persons List (SDN)
To make it easier for individuals trying to understand the sanctions enforced under OFAC, the office offers non-SDN Lists in a consolidated sanctions list. These lists include sanctions not covered under the SDN list and tend to include data from the following:
- Foreign Sanctions Evaders List
- Sectoral Sanctions Identifications List
- Palestinian Legislative Council List
- List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions
- Non-SDN Menu-Based Sanctions List
- Non-SDN Chinese Military-Industrial Complex Companies List
In addition to the above lists, OFAC maintains other sanctions lists, which include but are not limited to the following, due to the changing nature of the OFAC's sanctions and related legislation:
- Non-SDN Palestinian Legislative Council List
- Non-SDN Iranian Sanctions List
- The List of Foreign Financial Institutions Subject to Part 561 (the "Part 561 List")
- Non-SDN Menu-Based Sanctions List
The penalties for violations, which OFAC treats as serious threats to national security and foreign relations, include monetary fines (which can range from a few thousand to several million dollars) and prison time of up to thirty years. Parties that break the Trading with the Enemy Act, for instance, can face fines of around $90,000 per violation. While a violation of the International Emergency Economic Powers Act includes penalties of about $308,000 per violation. And a violation of the Foreign Narcotics Kingpin Designation Act includes a penalty of about $1.5 million per violation. Overall, the punishment depends on the violated sanction, the nature of the violation, and previous violations or convictions. Examples of firms that have paid large penalties, in some cases more than $1 billion in penalties, include UniCredit Bank, ZTE Corporation, Standard Chartered, Crédit Agricole, Société Générale, and BNP Paribas.