Office of Foreign Assets Control (OFAC)

Overview

The Office of Foreign Assets Control (OFAC) is a division of the U.S. Department of the Treasury responsible for administering and enforcing U.S. economic and trade sanctions. OFAC implements measures to advance U.S. foreign policy and national security objectives by targeting foreign countries, regimes, terrorists, narcotics traffickers, proliferators of weapons of mass destruction, and other actors engaged in activities contrary to U.S. interests.

Brief history

OFAC traces its roots to wartime controls on foreign funds and was formally established after World War II. It gained its modern role for administering sanctions and blocking assets in response to national emergencies and foreign policy crises.

Legal authority

OFAC actions are authorized by:
* Congressional legislation creating statutory sanctions.
* Executive orders issued by the President under national emergency powers.
* International mandates, such as UN Security Council resolutions, often implemented in coordination with allies.

How OFAC enforces sanctions

Key enforcement mechanisms include:
* Designations: OFAC designates individuals, organizations, and entities that are then subject to restrictions.
* Asset blocking: Property and interests in property under U.S. jurisdiction are frozen.
* Transaction prohibitions: U.S. persons and entities are generally prohibited from dealing with designated parties or engaging in prohibited transactions.
* Export controls and secondary sanctions: Restrictions can extend to non-U.S. persons and entities that facilitate proscribed activities.

Specially Designated Nationals (SDN) List

OFAC maintains the Specially Designated Nationals and Blocked Persons (SDN) list. Persons and entities on the SDN list have their U.S.-based assets blocked, and U.S. persons are broadly prohibited from transacting with them. The SDN list is a primary compliance tool for financial institutions and businesses.

Types of sanctions and tools

Sanctions programs and tools are tailored to policy goals and may include:
* Comprehensive country-wide embargoes or sectoral sanctions.
* Targeted designations of individuals, companies, or government entities.
* Restrictions on banking, investment, and access to the U.S. financial system.
* Prohibitions on imports, exports, and technology transfers.
* Limits on sovereign debt purchases in U.S. markets.

Notable programs and examples

OFAC administers many programs; examples include sanctions related to:
* Russia — expanded significantly in response to military actions in Ukraine, including blocking major Russian financial institutions from U.S. systems, targeting elites, restricting access to technology, and prohibiting purchases of Russian sovereign debt.
* Iran, North Korea, Cuba, Syria — longstanding country- or regime-based programs.
* Terrorism and narcotics trafficking — designations to disrupt funding sources and operations.
* Foreign interference in U.S. elections — executive authorities allow sanctions against actors who seek to influence U.S. electoral processes.

Impact and objectives

Sanctions aim to:
* Impose economic costs and limit access to international markets and finance.
* Disrupt illicit revenue streams and capacity to procure weapons or technology.
* Pressure named actors to change behavior without using military force.

Compliance and consequences

U.S. persons, businesses, and financial institutions must implement screening and due diligence to avoid prohibited dealings with sanctioned parties. Violations of OFAC sanctions can result in significant civil and criminal penalties, frozen assets, and reputational damage.

Key takeaways

• OFAC is the U.S. Treasury office that administers and enforces U.S. economic and trade sanctions.
• Authority comes from Congress, presidential orders, and international mandates.
• Tools include designations, asset blocks, transaction prohibitions, and export controls.
• The SDN list is central to enforcement; U.S. persons are generally barred from transacting with listed parties.
• Sanctions are intended to pressure and isolate actors engaged in activities contrary to U.S. national security and foreign policy goals, while minimizing direct military engagement.