The Office of Foreign Assets Control (OFAC) creates the Specially Designated Nationals and Blocked Persons list – also known as the OFAC SDN list – in order to carry out its responsibilities.
The OFAC SDN list is a critical tool in the fight against money laundering and terrorist financing in the US and around the world. It is part of the US Treasury's Selective Sanctions policy, which penalises specific individuals and organisations involved in criminal activities rather than the more comprehensive approach of sanctioning entire nations.
The names of individuals, entities, and organisations suspected of involvement in a variety of criminal activities are added to the Specially Designated Nationals and Blocked Persons List on a regular basis.
US Persons (including US citizens and permanent resident aliens regardless of location, US incorporated entities and their foreign branches, and in some cases their subsidiaries) are prohibited from doing business with anyone on the OFAC SDN list – and should check the list to ensure they are not in violation of the law if there is any doubt.
Businesses should conduct background checks before establishing a relationship with a person or entity or conducting transactions with them, as well as on a regular basis throughout the relationship.
To use the Specially Designated Nationals and Blocked Persons List, you must first understand how it works and how to apply it when dealing with foreign business interests.
OFAC sanctions must be followed by all US individuals, with the term "US individuals" defined as follows:
Along with US persons, there may be certain instances where the OFAC regulations may also apply to foreign subsidiaries that are owned/controlled by US entities or to foreign persons in possession of US-originated goods.
For these purposes, an entity is considered owned or controlled by a US person if they:
The SDN List contains the names of individuals, corporations, and vessels with whom US citizens are prohibited from doing business or transacting. SDNs are appointed for a variety of purposes, including:
The OFAC SDN list is updated on a regular basis, notwithstanding the lack of a timeline. The list is updated to reflect the status of ongoing and upcoming OFAC investigations, and users may search through changes dating back to 1994.
Because of the unpredictability and frequent changes to the SDN list, organisations should seek for a screening provider that keeps up to date, relevant, and reliable data.
OFAC may remove people from the SDN list based on the findings of investigations or continuous compliance with the law. Individuals and organisations on the list may also petition OFAC for removal. In these cases, OFAC will undertake a thorough examination and post any modifications to its recent actions' website. On archived versions of the list, you may see all previous revisions.
OFAC provides an SDN list search engine. Users can narrow their results by entering specific parameters, such as searching by country or specific sanction.
Names returned by a search are accompanied by codes that indicate why a person or organisation has been added to the list: "BPI-PA" indicates that entry has been "blocked pending investigation" under the Patriot Act, for example.
It’s strongly recommended that the individuals pay attention to the programme codes associated with each returned record. These programme codes detect how a true hit on a returned value needs to be treated.
The Sanctions List Search tool makes use of an appropriate string matching to find possible matches between word or character strings as entered into Sanctions List OFAC SDN Search, alongside any name or name component as it appears on the SDN List and/or the various other sanctions lists. The Sanctions List Search has a slider-bar that can be used to set a threshold (a confidence rating) in order to bring more accuracy in a potential match, which is a result of a user’s search.
It can detect certain misspellings or other incorrectly entered text, and will return near or proximate matches, based on the confidence rating set by the user via the slider-bar. The Office of Foreign Assets Control does not provide recommendations with regard to the appropriateness of any specific confidence rating. The Search List tool is a tool offered to assist users in utilising the SDN List and/or the various other sanctions lists; however, use of the Sanctions List Search is not a substitute for undertaking appropriate due diligence.
While all US citizens are expected to comply with the sanctions' responsibilities, OFAC does not force financial institutions to create any specific compliance programme. Institutes are expected to approach sanctions compliance in a risk-based manner. This implies that an acceptable compliance programme will be determined by the size, kind, and frequency of a company's overseas transactions.
The compliance policy may be seen by institutes and individuals on the official website of OFAC.
A good compliance programme will have:
If you find a name match on the SDN list that causes concern, you should first investigate the outcome. Check to see if the score suggests an exact or merely probable match — you may need to utilise other information, such as location, to rule out a false positive. A screening provider that adds context to your search results can help you resolve possible matches faster, increasing workflow efficiency.