Fintech

  .  

5 min read

  .  

September 15, 2022

OFAC Countries List: Meaning & Compliance

OFAC is a US department of treasury agency that implements commercial & economic sanctions to support US policy objectives. Click here to know about OFAC countries!

The Office of Foreign Assets Control, better known as OFAC, under the US Department of the Treasury oversees and enforces trade and economic sanctions. As a manager of the United States government's sanctions and embargo programs, OFAC imposes the sanctions based on US foreign policy and national security goals. The OFAC sanctions list provides a publicly accessible list of companies, organizations, or individuals, facing economic or trade, or legal sanctions. 

The OFAC sanctions list is a critical list for protecting the interests of the US. Organizations need to comply with the OFAC sanctions and honor the sanctions imposed by not engaging with any entity or individual listed by OFAC without authorization. In this way, the OFAC sanctions list helps to safeguard the US foreign policy objectives. At the same time, it is useful in protecting international trade interests for the US from within and abroad.

WHAT ARE THE OFAC SANCTIONS?

As stated above, OFAC sanctions are trade and economic sanctions that list persons, organizations, or companies based on the current national policy and security objectives. The sanctioned persons, organizations, or companies are called by OFAC as the Specially Designated Nationals (SDNs). 

A sanctions list check is important to carry out business in a legal manner by complying with the regulations. The failure to carry out these checks also bears legal consequences ranging from hefty fines or even imprisonment.

Non- compliance with OFAC sanctions can also impact risk management in an organization. Sometimes, the managers overseeing these functions become the primary subjects of fines or imprisonment caused by transgression. 

For instance, Deutsche Forfait, a German company operating in the US, was placed on the OFAC list due to alleged violations of sanctions against Iran. The sanction led the company to extensively restructure and even placed for liquidation proceedings.

WHAT ARE OFAC SANCTIONED COUNTRIES AND HOW CAN YOU WORK WITH THEM?

The OFAC may freeze assets of embargoed countries, or prohibit payment of funds or provision of services, depending on the country subjected to US sanctions. Before engaging with any sanctioned country obtaining OFAC approval is mandatory. The nature of sanctions may differ. Some apply to the entire country or certain individuals and entities. 

A company is required to check sanctions lists before entering into a new business. Though, the review of business relationships periodically to verify that your financial or economic resources are not in hands of sanctioned persons, is important. The sanctions can be: 

  • Trade barriers
  • Trade tariffs
  • Restriction on financial transactions
  • Ban on investment
  • Emergo on arms
  • Export and import ban 
  • Travel and trade bans
  • Freezing assets

The current list of sanctioned countries includes the Balkans, Belarus, Burma, Cuba, Ethiopia, Libya, Iran, Iraq, Lebanon, North Korea, Mali, Nicaragua, Somalia, Sudan and Darfur, South Sudan, Syria, Yemen, and Russia, among others. The complete list of OFAC sanctioned countries can be accessed here

The following types of financial transactions are subject to OFAC and should be reviewed on an ongoing basis for compliance:

  • Deposit (checking & savings) accounts
  • Loans
  • Loan payment
  • Letter of credit
  • Depositing or cashing checks
  • Line of credit
  • Credit Cards
  • Trust account
  • Wire transfer
  • ACH transfer
  • Currency exchange
  • Safety deposit box
  • Guarantors and collateral owners
  • Money orders or cashier’s checks

The regulations mandate screening of customer databases as per the latest OFAC list to check for terrorists, drug traffickers, and other sanctioned entity matches.

Conclusion

With heightened compliance measures in place by every country in the era of geopolitical uncertainty, it is necessary to keep an eye on changing measures and the swiftly evolving business and trade landscape. Balancing compliance and due diligence obligations are increasingly becoming challenging without an automated tool. Not only it is time taking, costly and inefficient, but is susceptible to human error. And the cost of remedy is enormous in terms of both reputation and money lost. Automated OFAC screening solutions can help firms to quickly and efficiently achieve the compliance standards that regulators like OFAC require.

FAQs


1. How do I do an OFAC check?

You can check an individual or company name in the OFAC search on the website of the US Department of Treasury. There is a check on the individual or company name against the Specially Designated National list.

2. What is OFAC and what does it do? 

The Office of Foreign Assets Control oversees and enforces economic sanctions mostly against countries and groups of individuals like terrorists and narcotics traffickers.

3. Who must comply with OFAC regulations? 

All US-based persons have to comply with OFAC regulations. Individual in the US and US citizens and US PRs located around the world. The definition also includes entities formed in the country or incorporated there. The branches of any foreign entity located in the US are also included and the foreign subsidiaries of a US parent company.

4. What is the OFAC list? 

The OFAC sanctions list is released by the Office of Foreign Assets Control under the US Department of Treasury. 

5. Who does not need to comply with OFAC sanctions?

The non US-based  exporters, NGOs, international organizations, and foreign financial institutions, and few non-US individuals carrying out activities related to  COVID-19 pandemic response.

FAQs

No items found.
Related Articles
Curve lines for BG