OFAC Sanctions Compliance: A Practical Guide

Sanctions compliance is non-negotiable. The Treasury Department's Office of Foreign Assets Control administers sanctions programs covering countries like Russia, Iran, North Korea, and Syria, as well as drug cartels, terrorists, and other bad actors. Violations can result in civil penalties up to $1 million per violation or twice the transaction value, criminal penalties up to $10 million and 30 years imprisonment, and reputational damage that can destroy a company's ability to do business.

The Specially Designated Nationals List

The SDN List is the primary screening tool. It names individuals and entities with whom US persons are prohibited from doing business. But screening shouldn't stop at SDN — OFAC administers multiple lists including the Consolidated Sanctions List, and many companies screen against additional lists including those maintained by the EU, UN, and UK. Automated screening software is essential for any company with significant transaction volume.

What Constitutes a Violation

Transactions with SDN-listed parties are prohibited regardless of dollar amount. Processing a wire transfer that passes through a sanctioned country, even if neither party is sanctioned, can violate the prohibitions on facilitating sanctions evasion. Providing services to a sanctioned entity, even if those services are legal, is a violation. Causing a violation by another party, or conspiring to violate sanctions, are also prohibited. The definition of "US person" is broad — it includes foreign subsidiaries of US companies in some circumstances.

Building a Sanctions Compliance Program

A risk-based sanctions compliance program starts with knowing your customers and counterparties. Enhanced due diligence for higher-risk relationships, automated screening against all applicable lists, training for relevant employees, and regular audits are all essential. OFAC has published guidance emphasizing that a compliance program can be a mitigating factor in enforcement actions — and that the absence of a program, even for small companies, will be viewed negatively.