Complying with Executive Order 13224 means screening every counterparty against the Office of Foreign Assets Control’s list of Specially Designated Global Terrorists, freezing any property tied to a listed person or an entity they own, refusing prohibited transactions, and reporting what you block or reject to OFAC within 10 business days. Get it wrong and civil penalties reach $377,700 per transaction or twice the transaction value, whichever is greater; willful violations carry up to 20 years in federal prison and fines up to $1,000,000.
Who Has to Comply
The order binds every “United States person.” That category is broad: U.S. citizens and permanent residents wherever they are, entities organized under U.S. law along with their foreign branches, and anyone physically present in the country regardless of nationality.1U.S. Department of the Treasury. Executive Order 13224 – Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism A foreign visitor working at a New York office falls under the same rules as the bank that employs them.
Once someone is designated, all of their property and interests in property within the United States, or in the hands of a U.S. person anywhere, are frozen. “Interest” is defined as any interest of any nature, direct or indirect.2eCFR. 31 CFR 594.306 – Interest Frozen assets cannot be transferred, withdrawn, exported, or used in any way, and that reach covers bank accounts, real estate, investments, and digital assets alike. Contributing funds, goods, or services to a designated party is prohibited, and even small amounts of financial or logistical help count as violations.
Who Counts as a Blocked Party
The Treasury Department publishes the Specially Designated Nationals and Blocked Persons List, and everyone designated under Executive Order 13224 carries the “SDGT” tag beside their entry. The Secretary of State designates foreign persons who have committed, attempted, or pose a significant risk of committing terrorism; the Secretary of the Treasury designates those who provide support to designated terrorists or act on their behalf.3eCFR. 31 CFR Part 594 – Global Terrorism Sanctions Regulations Support includes financial backing, weapons, communications equipment, lodging, vehicles, false documents, and any other tangible or intangible property that facilitates terrorism.
The 50 Percent Rule
Screening a name against the list isn’t enough. Under OFAC’s 50 percent rule, any entity owned 50 percent or more in the aggregate by one or more blocked persons is itself treated as blocked, even if that entity has never appeared on any list.4U.S. Department of the Treasury. Entities Owned by Blocked Persons (50 Percent Rule) Shell companies and subsidiaries controlled by a designated person get caught here. Compliance means tracing ownership before you clear a transaction, not just running a name search.
What Changed in 2019
Executive Order 13886, signed in September 2019, broadened the designation authority. Treasury can now designate leaders of terrorist organizations based on their role alone, without separately proving that the leader facilitated a specific attack. The order also reached people who attempt terrorist acts or take part in terrorism-related training. For financial institutions, the change that mattered most: foreign banks that knowingly process significant transactions on behalf of a designated party now risk losing their U.S. correspondent accounts, which would largely cut them off from dollar-denominated commerce.3eCFR. 31 CFR Part 594 – Global Terrorism Sanctions Regulations
Screening in Practice
Most banks and larger businesses run automated software that checks names, aliases, and identifying details against the SDGT data in real time. OFAC updates the list often, sometimes adding dozens of names at once, so a copy downloaded months ago won’t do. Wire transfers, new account openings, and trade finance deals that touch a listed party trigger an immediate duty to block the transaction and report it.
Reporting What You Block or Reject
When a U.S. person blocks property, the report to OFAC is due within 10 business days. It must identify the blocked person, describe the property and its value, explain the transaction that led to the blocking, and cite the legal authority.5eCFR. 31 CFR 501.603 – Reports of Blocked, Unblocked, or Transferred Blocked Property If blocked property is later released or transferred under a license, that event also requires a report within 10 business days.
Rejected transactions, which are prohibited transactions where funds are returned to the originator rather than frozen, must also be reported within 10 business days.6U.S. Department of the Treasury. Blocking and Rejecting Transactions On top of transaction-level reports, anyone still holding blocked property files a comprehensive annual report to OFAC by September 30 each year.7Office of Foreign Assets Control. Frequently Asked Questions Missing a reporting deadline is itself a compliance failure and can draw enforcement attention on its own.
When You Can Still Do Business: Licenses and Exemptions
Not every interaction with a blocked party is automatically illegal. OFAC issues general licenses that authorize whole categories of transactions for everyone without an application, and specific licenses that are written approvals granted to a particular person for a particular transaction after applying.8Office of Foreign Assets Control. Frequently Asked Questions Specific license applications go through OFAC’s online portal, must identify all parties and fully describe the transaction, and can be resubmitted if denied.9eCFR. 31 CFR Part 501 Subpart E – Procedures
Several counter-terrorism general licenses cover agricultural commodities, medicine, medical devices, NGO operations, and personal remittances in affected areas.10U.S. Department of the Treasury. Selected General Licenses Issued by OFAC Anyone relying on one has to meet its conditions exactly. Separately, the Berman Amendment to IEEPA permanently exempts informational materials — publications, films, photographs, artwork, music, and news feeds — from sanctions restrictions.11Office of the Law Revision Counsel. 50 USC 1702 – Presidential Authorities The exemption doesn’t cover transactions where artwork functions primarily as an investment asset or a way to move value for a blocked person.12U.S. Department of the Treasury. Advisory and Guidance on Potential Sanctions Risks Arising from Dealings in High-Value Artwork
Penalties for Violations
Enforcement runs through 50 U.S.C. § 1705, which creates two tracks. Civil penalties apply even when the person didn’t know they were breaking the law. The maximum civil fine is the greater of $377,700 or twice the value of the underlying transaction.13eCFR. 31 CFR 510.701 – Penalties That $377,700 figure is the inflation-adjusted cap for 2025 and stays in effect for 2026 after the White House canceled the scheduled annual adjustment due to missing economic data.14The White House. M-26-11 Cancellation of Penalty Inflation Adjustments for 2026 On large transactions the “twice the transaction value” number can dwarf the flat cap.
Criminal prosecution applies when a violation is willful, meaning the person knew the conduct was prohibited or acted with reckless disregard for the law. A conviction carries fines up to $1,000,000 per violation and up to 20 years in federal prison.15Office of the Law Revision Counsel. 50 USC 1705 – Penalties Businesses also face collateral consequences: loss of operating licenses, debarment from federal contracts, and reputational damage that can outlast the fine.
Voluntary Self-Disclosure
Finding a violation inside your own operation and telling OFAC before anyone else does can cut the base civil penalty in half. A qualifying voluntary self-disclosure produces a 50 percent reduction in the proposed penalty.16U.S. Department of the Treasury. Department of Commerce, Department of the Treasury, and Department of Justice Voluntary Self-Disclosure Guidelines The disclosure won’t qualify if a third party has already reported the violation, if it contains false or misleading information, if senior management didn’t authorize it, or if it’s materially incomplete. Responding to an OFAC subpoena or filing a license application doesn’t count either. When something surfaces internally, bring counsel in before someone else picks up the phone.
If You’ve Been Designated
A designated person can petition OFAC for removal through administrative reconsideration. The petition goes to OFAC’s reconsideration email and must include proof of identity, the date and details of the listing, and a detailed explanation of why the designation should be lifted. Grounds can include an insufficient original basis or changed circumstances.17U.S. Department of the Treasury. Filing a Petition for Removal from an OFAC List OFAC generally acknowledges receipt within seven business days and aims to send its first questionnaire within 90 days. Petitioners can also request a courtesy document identifying the unclassified information underlying their designation, or file a Freedom of Information Act request with Treasury.
If reconsideration fails, the designation can be challenged in federal court under the Administrative Procedure Act, which asks whether the decision was arbitrary, capricious, or beyond OFAC’s statutory authority. Courts give OFAC substantial deference because designations involve national security and foreign affairs judgments. Successful challenges are uncommon, but they have happened when the government’s evidentiary basis was thin or procedural requirements weren’t met.