OFAC Sanctions Overview

OFAC Sanctions Overview

The Office of Foreign Assets Control, or OFAC, administers and enforces economic sanctions programs for the U.S. Department of Treasury. These sanctions support U.S. national security and foreign policy goals against targeted foreign countries, regimes, terrorists, weapons proliferators, and other threats.

OFAC was created in 1950 during the Korean War when President Truman declared a national emergency and froze Chinese and North Korean assets. OFAC restricts trade and blocks assets to accomplish its goals. Let’s take a closer look at what OFAC does.

Types of Sanctions

There are a few main types of sanctions OFAC administers:

• Comprehensive sanctions block assets of entire countries and governments, like Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine.
• List-based sanctions target specific individuals, groups, and entities like terrorists, drug traffickers, and weapons proliferators.
• Sectoral sanctions target specific sectors of a country’s economy like finance, energy, or defense in Russia.

Sanctions can include:

• Asset freezes and blocks
• Trade restrictions
• Transaction prohibitions
• Entry visa bans

The goals are to change behavior of targets, apply pressure, and signal disapproval.

Current Programs

As of September 2022, OFAC administers over 30 active sanctions programs. Some of the major ones include:

• Ukraine/Russia-related sanctions
• Iran sanctions
• Cuba sanctions
• North Korea sanctions
• Counter-terrorism sanctions
• Rough Diamond Trade Controls
• Transnational Criminal Organizations sanctions
• Narcotics Trafficking sanctions

Sanctions are dynamic and frequently updated based on global events, so it’s important to check OFAC’s website regularly for changes.

Who Must Comply

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 within the United States, and all U.S. incorporated entities and their foreign branches. Some programs also require foreign subsidiaries owned or controlled by U.S. companies to comply.

Compliance Programs

Organizations subject to OFAC regulations need to develop and implement a risk-based sanctions compliance program. This involves policies, procedures, internal controls, and training to identify, mitigate, and manage sanctions risk. Some key compliance activities include:

• Screening customers, suppliers, and transactions against OFAC lists
• Blocking or rejecting transactions with sanctioned parties
• Reporting blocked property to OFAC within required timeframes
• Conducting supply chain due diligence
• Reviewing transactions for sanctions red flags
• Updating compliance programs for new sanctions
• Training staff on compliance obligations

Effective compliance helps organizations avoid potential civil penalties from OFAC, which can be substantial. In 2022, OFAC collected over $1.1 billion in civil penalties.

Penalties for Violations

There are significant risks for violating OFAC sanctions programs. Potential civil penalties include:

• Fines up to $307,922 per violation or twice the value of the transaction
• Loss of export privileges
• Reputational harm

Criminal penalties may also apply in cases of willful violations, including:

• Fines up to $1 million for individuals and $20 million for organizations
• Up to 30 years imprisonment

Mitigating factors like voluntary self-disclosure, cooperation, and remediation can reduce penalties. However, OFAC encourages disclosing violations quickly, as delays may aggravate penalties.

Licenses

In some circumstances, OFAC issues licenses to authorize transactions that would otherwise be prohibited by sanctions. Different license types include general, specific, and blanket licenses. Each sanctions program has unique licensing policies and application requirements.

Real-World Impacts

OFAC sanctions have tangible real-world impacts, both positive and negative. On the positive side, sanctions can successfully apply pressure to achieve foreign policy aims without military force. They also express moral opposition to objectionable behavior like human rights abuses.

However, sanctions can negatively impact civilians in target countries by limiting access to goods and finances. They also create compliance burdens for global businesses. Balancing effectiveness against unintended consequences is an ongoing challenge.

Looking Ahead

OFAC will likely continue expanding its sanctions programs in response to evolving global threats. At the same time, OFAC faces pressure to evaluate the effectiveness and humanitarian impacts of sanctions. The future direction may depend on these competing priorities.

Organizations should monitor OFAC developments closely and maintain flexible compliance programs that can adapt to a changing sanctions landscape.

Resources

• OFAC Sanctions Programs and Country Information
• OFAC Frequently Asked Questions
• OFAC Sanctions Compliance Guidelines