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The OFAC SDN List Explained
The Specially Designated Nationals (SDN) list published by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) is one of the most powerful tools for enforcing economic sanctions. But what exactly is the SDN list, and how does it work?
Contents
What is the SDN List?
The SDN list is a directory of individuals and companies specifically targeted by OFAC sanctions programs. SDNs can include:
- Government officials and ruling elites in sanctioned regimes.
- Terrorists, drug traffickers, and other major criminals.
- Weapons proliferators and sanctions evaders.
- Entities engaged in malicious cyber activities.
As of September 2022, there were over 1,000 SDN entries, spanning thousands of individuals and organizations located around the world.
Two Types of SDN Entries
The SDN list contains two main types of entries:
- Specially Designated Nationals (SDNs) – Individuals and companies specifically designated under sanctions programs.
- Blocked Persons – Entries for vessels, aircraft, and other property interests that are blocked rather than designated.
Both SDNs and Blocked Persons are subject to asset blocking and transaction prohibitions.
Goals of the SDN List
Adding parties to the SDN list is intended to:
- Freeze assets and block transactions for specific bad actors.
- Publicly identify and shame those engaged in illicit conduct.
- Warn the global financial community about prohibited dealings.
- Deter sanctions evasion and related crimes.
The SDN list operationalizes targeted sanctions imposed through U.S. laws and executive orders.
Consequences of SDN Listing
Being named to the SDN list has severe consequences:
- Asset blocking – All property and interests in property belonging to SDNs in the U.S. or in the possession of U.S. persons are frozen.
- Transaction prohibitions – U.S. persons are broadly prohibited from dealing with SDNs.
- Reputational damage – Being publicly listed carries stigma and risks for SDNs.
- De-risking – Many foreign banks and firms will not do business with listed parties to avoid sanctions risks.
In effect, SDN listing cuts off designated entities from the U.S. financial system and makes them radioactive globally.
Secondary Sanctions
For certain programs like Iran and Russia, foreign persons engaging in significant transactions with listed SDNs also face potential U.S. secondary sanctions, including being added to the SDN list themselves.
How Entities Get Added to the SDN List
OFAC uses multiple legal authorities to designate parties as SDNs and add them to the list, including:
- Country-specific sanctions programs on nations like Iran, Syria, North Korea, etc.
- Global terrorism, narcotics trafficking, and human rights authorities.
- Weapons of mass destruction (WMD) and cyber-related authorities.
- Transnational criminal organization authorities.
Suggestions for potential SDN listings can come from U.S. agencies, law enforcement, financial institutions, and other sources.
Evidentiary Standards
OFAC must have evidence that meets the applicable legal standard to designate an entity as an SDN. This includes:
- Engaging in sanctionable conduct under program authorities.
- Acting on behalf of blocked persons.
- Being owned or controlled by blocked persons.
OFAC also provides designated parties with unclassified summaries explaining the basis for their listings.
Searching the SDN List
OFAC makes the SDN list available in multiple formats, including:
- Downloadable Excel, CSV, and XML files for screening.
- PDF and TXT lists for browsing.
- An online search tool for lookups.
The SDN list is updated frequently, often with little notice. Users need to refresh their copies regularly to have the latest version.
Sanctions Screening
Financial institutions and companies commonly screen their customer databases and transactions against the full SDN list using specialized sanctions filtering software. This helps catch any prohibited dealings with listed entities.
SDN Lookup Tool
OFAC’s website offers an online search tool for convenient SDN list lookups. Users can search by name, country, sanctions program, and other filters.
Checking names against the online SDN search is an important public compliance step before dealing with potential matches.
Getting Off the SDN List
SDN designations are not necessarily permanent. Delisting can occur if:
- The listing basis is found invalid or expires.
- A petition for delisting is approved by OFAC.
- There is a demonstrated change in behavior by the SDN.
- The SDN dies or no longer exists.
Petition for Delisting
SDNs can submit a petition to OFAC requesting administrative reconsideration of their designation. The petition should explain in detail why the listing is inappropriate or should no longer apply.
OFAC carefully reviews reconsideration requests on a case-by-case basis. Per the OFAC guidelines, common reasons for delisting include:
- The basis for designation no longer applies or was invalid.
- A change in behavior, cooperation, or policies by the SDN.
- New evidence exonerates the SDN.
- Mistaken identity or false positives.
If the petition is approved, OFAC issues a public notice removing the party from the SDN list.
License for Access to Funds
In certain cases, OFAC may allow a delisted party to apply for a specific license to access their previously frozen funds for living expenses, legal fees, or other approved uses.
Conclusion
The SDN list is one of the most effective tools for enforcing U.S. sanctions. Being designated as an SDN carries severe consequences. While delisting does occur, it requires meeting a high legal bar through the OFAC reconsideration process. Due to the complexity, obtaining specialized legal counsel is advisable for pursuing removal from the SDN list.