Chapter 2 of 3 · 4 min

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.

TL;DW

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.

Watch: An Easy Guide on OFAC and US Sanctions

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Lesson · 3 parts

US sanctions programs draw their authority from two distinct sources. Congress passes legislation creating specific sanctions frameworks, such as laws targeting state sponsors of terrorism or major drug-trafficking organizations. The President also holds emergency powers under statutes like the International Emergency Economic Powers Act, allowing the executive branch to freeze assets and impose trade restrictions when a national emergency is declared. OFAC enforces both types of authority, translating congressional mandates and executive orders into operational programs that financial institutions and businesses are legally required to follow.

As of mid-2021, OFAC administered 36 active sanctions programs. These range from comprehensive country programs covering nations such as Iran, Cuba, and North Korea to selective programs focused on terrorism financing, cybercrime, and narcotics trafficking. Each program has its own set of designated entities and prohibited activities, and OFAC updates them regularly. For your compliance work, the practical consequence is that screening against only the most visible country programs is not enough: your AML and CTF procedures must cover all active programs simultaneously to avoid gaps.

The Specially Designated Nationals and Blocked Persons list identifies individuals and entities that US persons are prohibited from dealing with. The list covers parties owned or controlled by targeted governments as well as non-country designees such as terrorists and narcotics traffickers. When your institution confirms an SDN match, you must block the funds or assets immediately. Those assets cannot be returned and remain frozen until OFAC grants authorization. US persons are generally prohibited from any financial or commercial contact with SDN-listed parties, and the list is freely available through the OFAC portal.

Study notes

Part 1 of 3 · 2:48 to 3:33

The legal authority behind US economic sanctions

Concept OFAC sanctions draw authority from two distinct legal tracks. The first is statutory: Congress passes laws mandating specific sanctions, such as the Iran Sanctions Act. The second is executive: the President can declare a national emergency under IEEPA and impose sanctions by executive order without waiting for new legislation. Most active programs operate under both layers simultaneously, which is why OFAC can quickly add new designees and why your compliance team must monitor for mid-program updates, not just new program launches.

Why it matters Presidential emergency powers allow sanctions to take effect within hours of a triggering event. If a foreign group launches a cyberattack on critical US infrastructure, an executive order can freeze their assets the same day. This speed is why your compliance systems cannot treat OFAC list updates as routine monthly events. SDN list changes happen multiple times per week, and a transaction processed between a designation update and your next screening sync creates direct liability exposure for your institution.

Part 2 of 3 · 3:56 to 5:14

OFAC's 36 active sanctions programs and what they cover

Concept Each of OFAC's sanctions programs operates as a self-contained regulatory framework: it has its own list of designated parties, its own prohibited transaction categories, and its own licensing exceptions that allow specific activities to continue with OFAC approval. Programs are not static: OFAC adds new designees, removes parties who meet delisting criteria, and updates permitted activities as geopolitical situations evolve. Your compliance program must track these updates across all active programs, not only the ones that currently affect your customer base.

Example Consider a global bank operating in 40 countries. Of OFAC's 36 programs, at least 15 may affect transactions flowing through that bank on any given day: payments involving Iranian counterparties, Cuban suppliers, Venezuelan government entities, Russian defense contractors, and more. Each program has its own designated parties, prohibited transaction types, and licensing exceptions. A bank that only screens against the Iran program while missing narcotics trafficking designations has a material compliance gap that regulators will identify during examination.

Pitfall A common configuration error is treating every OFAC program as a country-level restriction. Many programs are not country-based at all: the Narcotics Trafficking Designations, the Foreign Terrorist Organizations list, and the cyber-related sanctions program target individuals and entities worldwide regardless of nationality or domicile. If your screening tool is set up to flag only transactions involving specific countries, you will miss SDN-designated individuals from jurisdictions with no active country program. Your screening must cover the full SDN and consolidated lists.

Part 3 of 3 · 5:14 to 6:24

What the SDN list is and what a confirmed match requires you to do

Concept Under OFAC's 50% rule, any entity owned 50% or more, individually or in aggregate, by a designated SDN is itself treated as blocked under US sanctions law, even if that entity's name does not appear on the SDN list. This means direct name matching is not sufficient. Your sanctions due diligence must also investigate beneficial ownership structures to identify whether a counterparty's parent company, controlling shareholder, or fund manager holds a position that triggers this rule.

Try it Navigate to the OFAC sanctions list search tool at the Treasury website. Search for a well-known blocked entity by name, such as one you have seen in financial news. Review the full SDN entry: note the listed aliases, the program it was designated under, and the date of designation. Now check whether the entry references a parent company or affiliated entities. This walkthrough will calibrate how your screening system needs to handle complex corporate structures and alias variations.

Key terms

SDN (Specially Designated National): An individual or entity placed on OFAC's Specially Designated Nationals and Blocked Persons list, with whom US persons are prohibited from conducting transactions.
IEEPA (International Emergency Economic Powers Act): A US statute that grants the President authority to regulate international commerce and freeze assets after declaring a national emergency.
Sanctions program: A distinct OFAC regulatory framework targeting a specific country, region, or type of activity, each with its own set of designated parties and prohibited transactions.
Blocked assets: Funds or property that have been frozen under OFAC authority because they belong to or are controlled by a designated party, and which cannot be transferred, paid, or released without OFAC authorization.
Beneficial ownership: The natural persons who ultimately own or control an entity, relevant under OFAC's 50% rule for identifying indirect SDN exposure through corporate structures.

Key takeaways

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.

Watch out

Under OFAC's 50% rule, any entity owned 50% or more by a designated SDN is itself treated as blocked, even if it does not appear on the list by name. Direct name matching alone is not sufficient.

Check your understanding

What is the difference between a comprehensive and a selective sanctions program, and what must your institution do the moment it confirms an SDN match on a transaction?

Comprehensive programs prohibit all economic and financial dealings with a named country. Selective programs designate specific individuals, entities, or sectors for restrictions while leaving other dealings with that country untouched. When your institution confirms an SDN match, it must block the funds immediately: they are frozen and cannot be returned to any party. A 10-business-day report to OFAC is then required, and the funds must be tracked in an annual report for as long as they are held.

How do OFAC sanctions work and what is the SDN list?

01 2:48 Concept The legal authority behind US economic sanctions ▾

02 3:56 Concept OFAC's 36 active sanctions programs and what they cover ▾

03 5:14 Concept What the SDN list is and what a confirmed match requires you to do ▾