By Cody Roberts, CRCM
When we bankers open accounts, we are always told to “check the OFAC list”. This happens in all departments – deposits, loans, and even trust. But what exactly is the OFAC list?
The Office of Foreign Assets Control (OFAC) is a department of the U.S. Treasury that administers and enforces economic and trade sanctions. For enforcement, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. The list also includes individuals, groups, and entities (such as terrorists and narcotics traffickers) designated under programs that are not country-specific, which are called “Specially Designated Nationals” or “SDNs.” The assets of these entities are blocked and U.S. persons are generally prohibited from dealing with them.
“U.S. persons” include U.S. banks, bank holding companies, and nonbank subsidiaries, and as such must comply with OFAC’s regulations. Basically, the OFAC regulations require that banks:
- Block accounts and other property of specified countries, entities, and individuals (SDNs).
- Prohibit/reject unlicensed trade and financial transactions with specified countries, entities, and individuals.
To accomplish this, banks “check the OFAC list”, which is done either manually (rarely) or automatically (such as via core processors, platform software, or correspondent banks) by comparing the names of customers, account signers, and pretty much anyone doing business at the bank to the SDN list. This comparison takes place at account opening and then periodically thereafter (such as a weekly or monthly or when the List changes). The list can be seen here in PDF format—all 1,056 pages of it.
If there is a match, actions must be taken by the bank regarding the entity or individual—such as blocking assets or rejecting the business—depending on the type of sanction. Generally, a call to OFAC is warranted to confirm what action should be taken. Thankfully, this almost never happens as banks tend to not do business with drug kingpins and international terrorists. A quick review of my peers found that they have never heard of a bank (either as a consulting client or at a bank where they worked) having a match.
For more information on OFAC programs, see the Office of Foreign Assets Control – Sanctions Programs and Information page here.
For more information on OFAC compliance, see the FFIEC BSA/AML Examination Manual InfoBase overview section on OFAC here.