Free video course
OFAC and US Sanctions: A Practical Guide for Compliance Professionals
Learn how OFAC sanctions work, who must comply, and how to handle blocked and rejected transactions from the SDN list to 10-day reporting obligations.
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What you’ll learn
- ✓ Explain OFAC's mandate and how its authority derives from both Congress and presidential emergency powers
- ✓ Describe the historical origins of US economic sanctions from the FFC in 1940 to OFAC's creation in 1950
- ✓ Distinguish between comprehensive and selective sanctions programs and identify the 36 active OFAC programs
- ✓ Apply the SDN blocking rule correctly and explain what your institution must do upon a confirmed match
- ✓ List the key compliance obligations including who must comply, penalty exposure, and OFAC reporting timelines
Before you start
- □ Basic understanding of financial crime compliance and why regulated entities must have controls in place
- □ Familiarity with AML and KYC screening concepts such as customer due diligence and watchlist screening
Course curriculum
- 01 What is OFAC and how did US economic sanctions begin? Learn what OFAC does, when it was founded, and how US economic sanctions trace back to the 1940 FFC and the 1950 Korean War emergency. OFAC enforces US economic and trade sanctions from within the Treasury. Its roots trace to a 1940 wartime agency called the FFC, created to block Nazi access to occupied nations' assets. OFAC itself was established in 1950 after Truman froze Chinese and Korean assets during the Korean War. Sanctions are either comprehensive, covering an entire country, or selective, targeting specific individuals or sectors. · OFAC is a US Treasury division that implements economic and trade sanctions against countries and designated individuals posing a threat to US national security.· Comprehensive sanctions prohibit all dealings with a target country; selective sanctions restrict named individuals, entities, or sectors within a broader relationship. 3 min · checkpoint
- 02 How do OFAC sanctions work and what is the SDN list? Understand the legal authority behind OFAC sanctions programs, what the 36 active programs cover, and what the SDN list means for your screening obligations. Sanctions authority flows from Congress and presidential emergency powers. OFAC administers 36 active programs targeting countries, terrorist networks, narcotics traffickers, and other designated threats. The SDN list names individuals and entities that US persons are prohibited from dealing with: a confirmed match requires immediate asset blocking. The list is publicly available from the OFAC portal at no cost. · Sanctions authority has two sources: acts of Congress and presidential emergency powers under statutes such as IEEPA.· The SDN list includes non-state actors such as drug traffickers and terrorists, not only parties connected to sanctioned countries. 4 min · checkpoint
- 03 Who must comply with OFAC sanctions and how are blocked transactions handled? Find out which entities must comply with OFAC, how rejected and blocked transactions differ, and what reporting obligations arise when funds are frozen. OFAC sanctions apply to all US persons, not just banks. Violations carry penalties of up to $20 million and 30 years in prison. Rejected transactions involve unconfirmed potential matches and require returning the funds. Blocked transactions involve confirmed SDN or sanctions matches: funds are frozen immediately, reported to OFAC within 10 business days, and disclosed in an annual report for as long as they are held. · All US persons, including non-financial businesses and individuals, are required to comply with OFAC sanctions regardless of size or industry.· Blocked funds must be reported to OFAC within 10 business days of blocking and disclosed in an annual report for every year they remain frozen. 4 min · checkpoint
Frequently asked questions
Is OFAC part of the Federal Reserve?
No. OFAC sits within the US Department of the Treasury, not the Federal Reserve. It enforces sanctions under authority delegated by Congress and the President through executive order. The Federal Reserve has its own supervisory role over bank compliance programs, but OFAC itself is a Treasury function.
Does my non-bank business need to comply with OFAC sanctions?
Yes. OFAC rules apply to all US persons, which includes US citizens, permanent residents, and any entity organized under US law regardless of whether they are a financial institution. A technology company, real estate firm, or retailer that conducts transactions with OFAC-designated parties is subject to the same penalties as a bank.
What is the difference between a comprehensive and a selective sanctions program?
Comprehensive programs prohibit virtually all trade and financial dealings with a specific country. Selective programs target named individuals, entities, or sectors while leaving other interactions with that country untouched. Iran and Cuba are examples of comprehensive programs; the narcotics trafficking and cyber-related designations are examples of selective programs that apply globally.
How often is the SDN list updated?
OFAC updates the SDN list regularly, sometimes multiple times per week. Your compliance program should use automated screening tools that pull the latest list in near real time or on a daily schedule. Relying on a weekly or monthly manual refresh creates a window during which you could process transactions involving newly designated parties.