What Are SDN Sanctions? The 50% Rule, Licenses, and Penalties

SDN sanctions are U.S. Treasury restrictions that freeze the assets of people, companies, and organizations on the Specially Designated Nationals and Blocked Persons List and prohibit almost any dealing with them. The Office of Foreign Assets Control (OFAC), part of the Department of the Treasury, maintains the list and enforces the rules.¹ Get it wrong and the penalties are severe: civil fines up to $377,700 per violation, and for willful conduct, criminal fines up to $1 million and up to 20 years in prison.² The list is public and searchable, and the duty to steer clear of prohibited transactions sits with everyone who might come near one, from global banks to a person sending money to family abroad.

OFAC designates people and entities tied to terrorism, narcotics trafficking, weapons proliferation, and other conduct that threatens U.S. national security or foreign policy.¹ A designation can also flow from someone’s role in a sanctioned government, even when their own conduct looks ordinary.

What SDN Sanctions Prohibit

Once a person or entity is designated, all property and interests in property within U.S. jurisdiction are frozen. This is called blocking. The listed party still holds legal title, but cannot access, transfer, sell, or benefit from those assets. Blocked funds must sit in interest-bearing accounts, and only OFAC-authorized debits can leave them.³

The prohibitions stretch far beyond bank accounts. Any transaction involving an SDN’s property or interests is forbidden, including trade, financial services, and anything else that could deliver economic value to the blocked party.⁴ There is no minimum dollar amount. A $50 payment is treated the same as a $5 million wire. Indirect transactions count too: pay a middleman, and if the money reaches an SDN, you have a violation.

Who Has to Comply

OFAC sanctions bind every “U.S. person.” That category covers all U.S. citizens and permanent residents wherever they live, everyone physically present in the United States, and every entity organized under U.S. law along with its foreign branches.⁵ For certain sanctions programs, foreign subsidiaries owned or controlled by U.S. companies also have to comply.

Non-U.S. persons are not outside the fence. Anyone who causes or conspires to cause a U.S. person to violate sanctions, or engages in conduct designed to evade them, can face enforcement.⁵ This is why foreign banks that process dollar transactions through U.S. correspondent accounts screen so aggressively. A single transaction touching the U.S. financial system can bring them within reach.

The 50 Percent Rule

The SDN List is not the whole picture. Under OFAC’s 50 Percent Rule, any entity owned 50 percent or more, directly or indirectly, by one or more blocked persons is itself treated as blocked, even if it never appears on the list by name.⁶

OFAC aggregates ownership across multiple SDNs. If one SDN owns 25 percent of a company and a different SDN owns another 25 percent, that company is blocked even though neither holds a majority alone.⁶ The rule also runs through ownership chains: if a blocked entity owns 50 percent or more of Company A, and Company A owns 50 percent or more of Company B, Company B is blocked. The rule covers ownership only, not control. An entity controlled by an SDN with less than 50 percent ownership is not automatically blocked under this rule, though OFAC can designate it separately.

How to Check if Someone Is Sanctioned

OFAC runs a free online tool called the Sanctions List Search at sanctionssearch.ofac.treas.gov. It uses approximate string matching, so it can catch misspellings and name variations, and results come with a confidence score you can adjust with a slider.⁷ Each hit lists program codes identifying which sanctions program applies and how a confirmed match should be handled. The tool covers all OFAC lists in one query, which matters because relying only on the SDN List leaves gaps.

OFAC is explicit that the search tool is an aid, not a substitute for due diligence.⁷ Larger organizations run commercial screening software that checks the list automatically against customer databases, transaction records, and payment counterparties. For smaller businesses, running manual searches before onboarding new customers or processing unusual international payments is a baseline precaution.

When Prohibited Dealings Are Allowed: Licenses

Not every transaction involving a sanctioned party is permanently off-limits. OFAC issues licenses that authorize otherwise prohibited activity, and the two types work differently.p>

A general license authorizes a specific category of transactions for anyone who qualifies, without any application. General licenses are published in OFAC’s regulations and are self-executing.⁸ Common examples cover humanitarian goods, certain informational materials, and legal services. Every condition of the license has to be met. Partial compliance does not count.

A specific license is a written authorization issued to a particular person or entity for a particular transaction, and you have to apply for it. Applications go through OFAC’s online licensing portal and are reviewed case by case.⁹ OFAC’s policy is to deny a specific license request when an existing general license already covers the transaction, so check the general licenses first.⁸

Penalties

Enforcement runs on two tracks, and the civil track catches most people off guard.

Civil Penalties Are Strict Liability

Civil penalties are imposed on a strict liability basis. You can be fined even if you had no idea you were dealing with a sanctioned party.¹⁰ This is the single most important thing to grasp about SDN sanctions: ignorance is not a defense for civil liability.

The maximum civil penalty under IEEPA is the greater of $377,700 or twice the value of the underlying transaction. The cap is adjusted annually for inflation, and different authorizing statutes carry different maximums. Violations under the Foreign Narcotics Kingpin Designation Act, for instance, can reach $1,876,699 per violation.¹¹ OFAC classifies violations as either egregious or non-egregious based on willfulness, awareness, and harm to sanctions objectives. A non-egregious case that surfaces without self-disclosure is capped at $377,700 per violation. An egregious case can go to the full statutory maximum.

Criminal Penalties Require Willfulness

Criminal prosecution requires proof that the violation was willful. Under IEEPA, a person convicted of willfully violating sanctions faces a fine of up to $1 million, imprisonment of up to 20 years, or both. The 20-year term applies to individuals; organizations face the monetary fine. The statute of limitations for civil and criminal enforcement is 10 years from the latest date of the violation.²

Voluntary Self-Disclosure Cuts Penalties

If you discover a possible violation inside your organization, reporting it to OFAC voluntarily can reduce the consequences substantially. A qualifying voluntary self-disclosure cuts the base penalty amount by 50 percent when OFAC concludes a civil penalty is warranted.¹² The initial notification must either include a detailed report or be followed by one within 180 days. OFAC treats voluntary disclosure as one of the strongest mitigating factors, which is why organizations with real compliance programs build disclosure protocols into their procedures.

Getting Off the List

A person or entity on the SDN List can petition OFAC for removal. The process is administrative, not judicial, and it starts with a written request emailed to OFAC.Reconsideration@treasury.gov.¹³ OFAC does not accept removal requests by phone, and there is no separate online portal for delisting.

OFAC expects the petition to contain:¹³

A copy of a government-issued ID and the listed person’s name, mailing address, and email.
The date of the original listing and the SDN entry exactly as it appears on the list.
A detailed explanation of why the designation should be lifted, backed by evidence that the original basis no longer applies or was insufficient to begin with.
If someone else is writing on the petitioner’s behalf, a signed authorization letter identifying the representative and their relationship.

Grounds that may support delisting include a genuine change in behavior, the death of the listed person, the original basis no longer existing, or mistaken identity. The petitioner can also propose remedial steps, such as resigning from a role in a blocked entity or restructuring a company, under 31 C.F.R. § 501.807.¹⁴

After filing, OFAC typically sends its first questionnaire within 90 days. Follow-up questionnaires are common. OFAC verifies claims independently and may consult other agencies. Incomplete answers and missing documents are the most frequent cause of delay, and false or misleading information can lead to denial and separate enforcement action.¹³ OFAC acknowledges the process “can be lengthy.” Expect months of back-and-forth, and keep detailed records of every communication.

The SDN List Versus Other OFAC Lists

The SDN List is OFAC’s most restrictive list, but it is not the only one. The Sectoral Sanctions Identifications (SSI) List, for example, targets persons operating in specific sectors of the Russian economy under Executive Order 13662 and prohibits only the transaction types described in the directives attached to each listing, such as certain debt or equity dealings.¹⁵ It does not trigger a full asset freeze. A person can appear on both the SSI and SDN Lists, in which case the more restrictive SDN prohibitions govern.

OFAC also maintains the Non-SDN Menu-Based Sanctions List, the Foreign Sanctions Evaders List, and others, each carrying prohibitions tied to its authorizing order or statute. If you screen only against the SDN List, you can miss a restricted party sitting on a lesser-known one, which is why the Sanctions List Search tool checks all of them at once.⁷

1
Office of Foreign Assets Control. Office of Foreign Assets Control
2
Office of the Law Revision Counsel. 50 USC 1705 – Penalties
3
U.S. Department of the Treasury. Blocking and Rejecting Transactions
4
U.S. Department of the Treasury. Basic Information on OFAC and Sanctions
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U.S. Department of the Treasury. Who Must Comply With OFAC Sanctions
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U.S. Department of the Treasury. Entities Owned by Blocked Persons (50% Rule)
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U.S. Department of the Treasury. OFAC Sanctions List Search
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U.S. Department of the Treasury. What Is a License
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U.S. Department of the Treasury. OFAC Specific Licenses and Interpretive Guidance
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U.S. Department of the Treasury. OFAC FAQ 65 – Strict Liability
11
Federal Register. Inflation Adjustment of Civil Monetary Penalties
12
U.S. Department of the Treasury. Submit an OFAC Disclosure
13
Office of Foreign Assets Control. Filing a Petition for Removal from an OFAC List
14
eCFR. 31 CFR 501.807 – Procedures Governing Delisting from the Specially Designated Nationals and Blocked Persons List
15
U.S. Department of the Treasury. Additional Sanctions Lists