Key Takeaways

  • OFAC checks are mandatory screenings conducted to ensure compliance with U.S. sanctions and anti-terrorism laws.
  • These checks involve screening against multiple government-maintained lists, not just the SDN list.
  • Employers and businesses across industries are required to conduct OFAC checks as part of due diligence.
  • Non-compliance with OFAC regulations can lead to severe civil and criminal penalties.
  • Advanced technology and automation can help companies perform accurate and efficient OFAC checks.

What Is an OFAC Check?

If you have questions about an OFAC check, you've come to the right place. The Office of Foreign Assets Control (OFAC) in the U.S. Treasury Department regulates penalties, or sanctions, put on foreign countries and other groups that engage in activities that threaten our nation's security and economic well-being. Their goal is to stop money flow to those involved with terrorism, narcotics, and/or human trafficking by requiring American businesses to check who they are doing business with.

The U.S. government imposes sanctions and restrictions on trading with certain nations and their companies. Companies are responsible for checking which nations and companies they are not allowed to engage in business interactions with.

OFAC Search

You can look up a person's or company's name in an OFAC search on the U.S. Treasury's website. All documents are public and easy to access. They are updated when necessary and there are records of post information. There will be a check on the person's or company's name against the Specially Designated National list. An example of a search is:

John Andrew Doe, Smith, George Q. Airways Charters, Inc.

You can search for up to 500 names at a time. It is a company's or individual's responsibility to stay up to date with new information.

How OFAC Screening Works

OFAC screening is the process of checking individuals, organizations, or entities against government watchlists maintained by the U.S. Department of the Treasury. The most notable list is the Specially Designated Nationals (SDN) list, but others include:

  • Foreign Sanctions Evaders (FSE) List
  • Sectoral Sanctions Identifications (SSI) List
  • Non-SDN Iran Sanctions Act (NS-ISA) List
  • Non-SDN Palestinian Legislative Council (NS-PLC) List
  • Non-SDN Chinese Military-Industrial Complex Companies (NS-CMIC) List

Screening software typically compares customer or transaction data—like names, addresses, or tax IDs—against these lists. Because OFAC does not provide a formal clearance or confirmation process, businesses must assess and document any matches thoroughly to determine if a "true match" exists.

Lists Firms Should Check Regularly

  • Office of Foreign Assets Control (OFAC) Home Page
  • OFAC Alphabetical Listing of Specially Designated Nationals (SDNs) and Blocked Persons
  • OFAC Alphabetical Listing of Foreign Sanctions Evader (FSE)
  • OFAC Alphabetical Listing of Sectoral Sanctions Identifications (SSI)
  • OFAC Alphabetical Listing of Palestinian Legislative Council (PLC)

What Is an OFAC Background Check and Should I Use It?

Making a positive identification can be difficult since many of the names are common Arabic names. Automated OFAC checks should only contain names. It is important to remember to make correct identifications and avoid discrimination.

Who Must Conduct OFAC Checks

OFAC checks are required for a broad range of industries and entities, including but not limited to:

  • Financial institutions (banks, credit unions)
  • Fintech and payment processing companies
  • Import/export businesses
  • Insurance companies
  • Employers (as part of background checks)
  • Real estate and escrow agents
  • Freight and logistics firms

Any U.S. person or company engaging in transactions—financial or otherwise—must ensure they are not dealing with individuals or entities subject to sanctions.

How Well Do You Know Your Customer?

The major issue for financial services, banking, and other regulated industries is knowing their customers and their customers' needs. This goes beyond knowing a face at your counter, a voice on the phone, or the handwriting of a signature.

Identity Verification

An OFAC search consists of more than validating Social Security numbers. Financial institutions such as banks are most likely to fall victim to charges of having illegal dealings because of the anonymity of their client base and concentration of funds. To avoid financial loss they should take extra care to screen for fraud so that individuals and organizations can see how other companies intend to commit fraud. Fraudulent entities can try many different methods to use an American business. An OFAC search provides you with the ability to identify straw buyers, sub-entities, and aliased individuals.

Consequences of Non-Compliance

Failure to comply with OFAC regulations can result in significant consequences:

  • Civil penalties: Up to hundreds of thousands of dollars per violation, depending on the sanction program.
  • Criminal penalties: Including fines of up to $1 million and imprisonment for willful violations.
  • Reputational harm: Negative publicity and loss of trust from clients and stakeholders.
  • Business restrictions: Government contracts may be lost, and banks can freeze related accounts.

Regular internal audits and compliance programs are essential to mitigate these risks.

Why It's Important

Whether your business is a physical space, virtual storefront, or operated via phone, you need to definitively identity your customers. Otherwise you risk liabilities, such as being complicit. Exercising caution is crucial because it can help keep the U.S. secure. Terrorists and criminals seek to use the business community. This came to the government's attention. They learned that it is easier to interfere with or track the flow of criminal funds than it is to prosecute the underlying criminal activity. Proper Customer Identity Verification in addition to an OFAC search provides a clear mind because of its detailed screening process.

Specially Designated Nationals

The known terrorists, narcotics traffickers, and those involved in the proliferation of weapons of mass destruction are included in the list of OFAC SDNs. All employers in the United States are legally required to comply with the OFAC requirements. They must screen their employees. Individuals and organizations in the United States are responsible for ensuring that they don't engage in business dealings with individuals or entities listed on the Office of Foreign Asset Control (OFAC) lists.

The OFAC enforces economic and trade sanctions based on U.S. foreign policy and national security goals. Their goal is to make sure terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction do not benefit from business dealings with U.S. businesses or individuals. The federal law was designed to combat money laundering and terrorist financing. It increased the number of industries required to conduct screenings. It the responsibility of businesses in America to ensure that they are not benefiting criminals or terrorists by checking the OFAC list.

Using Technology to Streamline OFAC Checks

With increasing complexity and frequency of updates to OFAC lists, manual checking is both inefficient and error-prone. Many companies now use compliance software that integrates:

  • Real-time list updates: Ensuring the latest sanctions data is always used.
  • Automated screening workflows: Reducing the need for manual comparison.
  • False positive management: Helping filter out low-risk potential matches through advanced algorithms.
  • Audit trail capabilities: Creating logs for regulatory compliance and internal review.

Implementing such tools can significantly reduce risk and improve operational efficiency.

Frequently Asked Questions

  1. What does an OFAC check look for?
    An OFAC check screens individuals or entities against government watchlists to determine if they are subject to sanctions that prohibit business interactions.
  2. Is an OFAC check required for all employees?
    Yes, in many cases, especially for companies in regulated industries. Employers must ensure they are not hiring individuals listed on the SDN or other OFAC lists.
  3. How often should OFAC checks be performed?
    Checks should occur at onboarding and periodically thereafter, especially when customer or transaction data changes or new lists are released.
  4. What happens if I get a match on the OFAC list?
    A potential match must be investigated to determine if it's a true positive. If confirmed, transactions must be blocked, and the match should be reported to OFAC.
  5. Can I rely solely on a name match for OFAC compliance?
    No. Because many names are common, further identifiers such as date of birth, address, or passport number should be reviewed before concluding it's a match.

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