OFAC sanctions screening is the process of checking the individuals and entities you deal with against the sanctions lists maintained by the U.S. Treasury Department’s Office of Foreign Assets Control before money or property changes hands. OFAC administers economic and trade sanctions against foreign governments, terrorists, narcotics traffickers, weapons proliferators, and others designated under U.S. law.1Office of Foreign Assets Control. Office of Foreign Assets Control – Mission Get the screening wrong and the civil penalty can reach $377,700 per violation, with willful violations exposing individuals to up to 20 years in prison.
Who Has to Screen
Every U.S. person is on the hook. That covers U.S. citizens and permanent residents wherever they are in the world, any entity organized under U.S. law along with its foreign branches, and anyone physically present in the United States — including foreign nationals visiting or working on a visa.2eCFR. 31 CFR 560.314 – United States Person; U.S. Person3Office of Foreign Assets Control. FAQ 11 – Who Must Comply With OFAC Sanctions
A few programs reach further. The Cuba and Iran regulations pull U.S.-owned or U.S.-controlled foreign firms into the compliance net, so a U.S. parent cannot route a prohibited deal through an overseas subsidiary and treat it as someone else’s problem.4eCFR. 31 CFR 515.559 – Transactions by U.S.-Owned or Controlled Foreign Firms
Which Lists You Have to Check
The Specially Designated Nationals and Blocked Persons List, known as the SDN List, is the core. It names individuals and entities whose property must be blocked and with whom U.S. persons are generally forbidden to deal. Most SDN designations rest on the President’s authority under the International Emergency Economic Powers Act.5U.S. Department of the Treasury. Sanctions Programs and Country Information
Screening only the SDN List is one of the most common compliance failures. OFAC also maintains several non-SDN lists, bundled together as the Consolidated Sanctions List, each carrying its own restrictions:6Office of Foreign Assets Control. Additional Sanctions Lists
- Sectoral Sanctions Identifications (SSI) List, targeting specific sectors of a foreign economy — notably Russian financial, energy, and defense entities under Executive Order 13662 — with narrow transaction bans rather than a full block.7U.S. Department of the Treasury. Sectoral Sanctions Identifications List
- Foreign Sanctions Evaders (FSE) List, identifying foreign persons who have violated or helped evade U.S. sanctions.
- CAPTA List, for foreign financial institutions subject to correspondent or payable-through account sanctions.
- Non-SDN Chinese Military-Industrial Complex Companies (NS-CMIC) List, covering investment restrictions.
- Non-SDN Menu-Based Sanctions (NS-MBS) List, for persons subject to secondary sanctions under menu-based authorities.
- Non-SDN Palestinian Legislative Council (NS-PLC) List.
A company on the SSI or CAPTA list will not appear in an SDN-only search, and dealing with it under prohibited terms is still a violation.
The 50 Percent Rule: Names Are Not Enough
An entity can be blocked even if its name appears on no list at all. Under the 50 Percent Rule, any entity that is 50 percent or more owned, directly or indirectly, by one or more blocked persons is itself blocked automatically, with no separate designation required.8eCFR. 31 CFR 591.406 – Entities Owned by One or More Blocked Persons
OFAC aggregates ownership across blocked persons. If one SDN owns 25 percent of a company and a different SDN owns another 25 percent, that company is blocked, even when the two SDNs were designated under different sanctions programs. The rule also cascades down corporate tiers: a blocked holding company passes its blocked status to any subsidiary it majority-owns, and so on down the chain.9U.S. Department of the Treasury. Entities Owned by Blocked Persons (50% Rule)
Real compliance means investigating the ownership behind a counterparty, not only running its name. That matters most in industries built on layered holding structures, such as real estate, private equity, and international trade finance.
How to Run a Search
Before you search, collect identifying information. The full legal name is the minimum. Also gather aliases and “doing business as” names, physical addresses, nationality, and identification numbers such as passport or employer identification numbers. The more data points you have, the faster you can confirm or rule out a hit.
OFAC provides a free Sanctions List Search tool on the Treasury website that covers the SDN List and the non-SDN lists together.10Office of Foreign Assets Control. How to Search OFAC’s Sanctions Lists A slider bar sets the fuzzy-matching threshold. A value of 100 returns only exact character matches; a value of 50 returns anything the tool considers at least 50 percent similar.11U.S. Department of the Treasury. Sanctions List Search Lowering the threshold catches more spelling variants and transliterations but produces more results to review. OFAC deliberately does not recommend a specific setting, because the right sensitivity depends on your own risk profile.
One quirk to know: the ID field uses exact character matching, not fuzzy logic. Run identification numbers both with and without dashes or special characters.10Office of Foreign Assets Control. How to Search OFAC’s Sanctions Lists Save the output of every search. That documentation becomes your evidence of due diligence if a regulator ever asks.
Working Through Hits and False Positives
Results come back with a score and a type (individual, entity, vessel, and so on). A higher score means a closer match, but a hit is not proof. Common names produce false positives constantly, and a lower fuzzy threshold produces more of them.
When something matches, compare every available data point against what OFAC publishes for the listed party: date of birth, nationality, address, identification numbers. Most false positives resolve quickly at this stage. Many organizations then maintain what OFAC calls a “false hit list,” a documented record of names that routinely trigger alerts but have been vetted and cleared.12U.S. Department of the Treasury. False Hit Lists Guidance
A false hit list is not set-and-forget. OFAC expects compliance personnel to review it periodically and update it whenever the SDN List changes, a new sanctions program launches, or something material about a customer shifts, such as a new address, an ownership change, or a change in business activities.12U.S. Department of the Treasury. False Hit Lists Guidance A stale list that suppresses an alert for a name since designated is exactly the sort of failure that draws enforcement attention.
What to Do When a Match Is Real
Once you confirm a genuine match, any property or interest in property of the sanctioned party that you hold must be blocked immediately. Blocked means frozen in place. You cannot transfer, withdraw, export, or otherwise deal with the funds or property, and you cannot provide services to the sanctioned party.13eCFR. 31 CFR Part 501 – Reporting, Procedures and Penalties Regulations
Within 10 business days of blocking, file an initial blocking report with OFAC. The report has to identify the property held, the circumstances of the blocking, and the sanctioned party.14eCFR. 31 CFR 501.603 – Reports of Blocked, Unblocked, or Transferred Blocked Property Submit reports through the OFAC Reporting System or by email to the Sanctions Compliance and Evaluation Division.15Office of Foreign Assets Control. Filing Reports With OFAC
Rejected Transactions
Not every hit involves property you already hold. If a prohibited transaction comes in and you refuse to process it — say, a wire transfer you turn away — you still have to report the rejection to OFAC within 10 business days. The report includes a copy of the original transfer instructions, the date of rejection, and the legal authority you relied on to reject it.15Office of Foreign Assets Control. Filing Reports With OFAC The rejection reporting obligation applies to all U.S. persons, not just banks.
When a License May Allow the Transaction
A confirmed match does not always mean the deal is permanently off-limits. OFAC issues two kinds of licenses that authorize activity that would otherwise be prohibited.16U.S. Department of the Treasury. OFAC Licenses A general license authorizes a category of transactions for an entire class of people with no application required, though it usually carries conditions to read carefully. A specific license is a written authorization OFAC issues to a particular person in response to a formal application, reviewed case by case. Common situations include releasing blocked funds, humanitarian transactions, and winding down a relationship that predates a new designation.
Apply before you act. Proceeding first and applying later is still a violation.
Penalties
The statutory civil penalty under the International Emergency Economic Powers Act is the greater of $250,000 or twice the value of the underlying transaction.17Office of the Law Revision Counsel. 50 USC 1705 – Penalties After annual inflation adjustments, the current maximum civil penalty stands at $377,700 per violation.18Federal Register. Inflation Adjustment of Civil Monetary Penalties Each transaction can count as a separate violation, so a pattern of noncompliance escalates fast.
Willful violations carry criminal penalties: up to $1,000,000 in fines and, for individuals, up to 20 years in prison.17Office of the Law Revision Counsel. 50 USC 1705 – Penalties Criminal prosecution is generally reserved for deliberate evasion or knowing disregard; inadvertent violations typically stay on the civil side.
Voluntary Self-Disclosure
Finding a violation yourself, before OFAC does, is worth acting on. A qualifying voluntary self-disclosure can cut the base civil penalty in half.19U.S. Department of the Treasury. Submit an OFAC Disclosure
To qualify, the disclosure has to include, or be followed within 180 days by, a sufficiently detailed report giving OFAC a complete picture of what happened.19U.S. Department of the Treasury. Submit an OFAC Disclosure A vague initial notice without follow-up does not earn the reduction. The report should cover the nature of the violation, the parties involved, the dollar amounts, and the corrective steps already taken. Organizations that self-disclose and can show they have strengthened their screening in response consistently see better outcomes than those whose violations surface through other channels.