The Office of Foreign Assets Control (OFAC) is an agency of the United States Department of the Treasury responsible for administering and enforcing US economic and trade sanctions. OFAC operates numerous sanctions programmes — targeting specific countries (such as Iran, Cuba, North Korea, and Russia), as well as individual persons, organisations, and vessels — with the aim of advancing US foreign policy and national security objectives. OFAC derives its authority primarily from the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA), supplemented by specific Executive Orders and Congressional legislation for each sanctions programme. OFAC maintains the Specially Designated Nationals and Blocked Persons List (the “SDN List“), which is one of the most important and widely used sanctions screening lists in the world.
Although OFAC is a US government body, its reach extends far beyond the United States. US dollar-denominated transactions anywhere in the world — and transactions involving any US person, US company, or US financial institution — are subject to OFAC jurisdiction. As a result, non-US businesses that process US dollar payments or have any connection to the US financial system must comply with OFAC rules or risk severe civil and criminal penalties, which can include multi-billion dollar fines. The concept of “secondary sanctions” extends OFAC’s practical reach even further, by threatening to penalise non-US entities that do significant business with certain sanctioned countries or persons, even without any direct US nexus. For compliance professionals globally, maintaining up-to-date OFAC screening is therefore a non-negotiable element of any sanctions compliance programme.
While the Specially Designated Nationals and Blocked Persons List (SDN List) is OFAC’s most well-known sanctions tool — involving a full asset freeze and near-total prohibition on dealings — OFAC also maintains a series of additional, less absolute lists that are collectively referred to as the non-SDN lists. These lists do not impose a blanket prohibition on all transactions with the listed persons or entities; instead, they impose more targeted, sector-specific, or transactional restrictions that vary depending on the particular sanctions programme under which the listing was made. The most significant non-SDN lists include the Sectoral Sanctions Identifications List (SSI List), which targets specific sectors of the Russian economy — such as energy, finance, and defence — under Executive Order 13662, prohibiting certain types of dealings (for example, the provision of new debt or equity financing above defined maturity thresholds) rather than all transactions; the Non-SDN Menu-Based Sanctions List (NS-MBS List), which identifies persons subject to one or more potential sanctions drawn from a defined menu of measures; the Foreign Sanctions Evaders List (FSE List), which targets non-US individuals and entities found to have violated or attempted to evade US sanctions relating to Syria or Iran; and the Non-SDN Palestinian Legislative Council List (NS-PLC List), which covers members of certain Palestinian legislative bodies.
From a compliance perspective, non-SDN lists are a source of significant complexity and are frequently misunderstood or — more dangerously — underweighted in sanctions screening programmes. A common misconception is that because a non-SDN listing does not trigger a full asset freeze, it is less serious or can be treated as merely advisory. This is incorrect: dealing with a non-SDN listed entity in a manner prohibited by the relevant sanctions programme is a violation of US sanctions law and can result in substantial civil and criminal penalties from OFAC, just as an SDN violation can. The compliance challenge is compounded by the fact that the restrictions applicable to non-SDN entities are programme-specific and transactional in nature — meaning that compliance teams must not only screen against the lists but also understand precisely what categories of activity are prohibited for each listed entity. Furthermore, OFAC’s fifty-percent rule — which provides that any entity owned fifty percent or more by an SDN is itself treated as blocked even if not explicitly named on the SDN List — applies by analogy in certain non-SDN contexts as well, requiring institutions to look beyond the face of the list and assess ownership structures carefully. Non-SDN screening should therefore be a standard and fully integrated component of any robust OFAC compliance programme, not treated as a secondary or optional exercise.
OFAC allows direct search of sanctioned individuals and entities via its website portal https://sanctionssearch.ofac.treas.gov/
