What Does OFAC Stand For and Who Has to Comply?

Mar 21, 2019

By: Kathy Linscott, NACM Commercial Services

OFAC stands for Office of Foreign Assets Control of the US Department of Treasury. It administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.

OFAC compliance is critical for U.S. businesses working with overseas partners, such as foreign suppliers or clients. Regulations are in place in part to ensure that companies don’t unwittingly do business with terrorist organizations or other unsanctioned entities.

OFAC publishes lists of individuals and companies owned or controlled by, or acting for or on behalf of, targeted companies. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are non-country specific.

To search all OFAC’s Sanctions List – https://sanctionssearch.ofac.treas.gov/

Does OFAC Maintain a List of Countries that U.S. Persons Cannot do Business With?

Due to U.S. Sanction programs varying in scope they do not. Some are broad-based and geographical (i.e. Cuba, Iran) Others are targeted (i.e. counter-terrorism, counter-narcotics) and focus on specific individuals and entities. There may be broad prohibitions at the country level as well as targeted sanctions. Due to the diversity among sanctions, OFAC advises visiting the “Sanctions Programs and Country Information” page for information on a specific program.

Who Has to Comply With OFAC?

U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches. In the cases of certain programs, foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S.-origin goods to comply.

What If there is an OFAC Alert on a Credit Report?

Credit bureaus and agencies have adopted new measures to ensure compliance with OFAC regulations. Before issuing a credit report, they use screening software to determine if a credit applicant is on OFAC’s Specially Designated Nationals (SDN) list or one of OFAC’s other sanctions lists. This software matches the credit applicant’s name and other information to the names on OFAC’s sanctions lists. If there is a potential match, the credit bureaus may place a “red flag” or alert on the report. This does not necessarily mean that someone is illegally using a social security number, or they have bad credit. It is merely a reminder to the person checking credit that he or she should verify whether you are the individual on one of OFAC’s sanctions lists by comparing your information to the OFAC information. If the person is not the individual on the sanctions list, the person checking credit should disregard the OFAC alert, and there is no need to contact OFAC. However, if the person checking credit believes the person on one of OFAC’s sanctions lists, then he or she should call the OFAC Hotline to verify and report it.

Additional information available on US Department of Treasury Website. They provide a very good question and answer section:
https://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx