Frequently Asked Questions about OFAC
October 14, 2015
By Caitlin Steinke and Tina Monshipour Foster, Law Firm of Tina Foster
This article provides a basic overview of what OFAC is, what it does, and what it can mean for you and your business.
What is OFAC?
The Office of Foreign Assets Control (OFAC) is a division of the US Treasury Department. OFAC oversees and enforces economic sanctions programs. Sanctions programs are used in furtherance of foreign policy and national security goals, and are individually tailored to accomplish these goals. Whether they are broad or narrow, they involve trade restrictions and the blocking of assets. OFAC regulations identify transactions that are prohibited under sanctions programs.
Who must comply with OFAC regulations?
OFAC regulations apply to all US persons. This includes: (1) all US citizens and legal permanent residents, no matter where they are located, (2) all individuals and entities within the United States, and (3) all US-incorporated entities and their foreign branches. Certain sanctions programs can broaden this list further, such as including foreign subsidiaries owned or controlled by US companies.
What are the consequences of violating OFAC regulations?
Criminal penalties for violating OFAC regulations can include up to 30 years imprisonment, and up to $20 million in fines. Civil penalties can include over $1 million in fines.
Who or what do sanctions programs target?
Sanctions programs can be against entire countries or groups of individuals. It is important to note that sanctions programs that are country-specific also extend to individuals and entities owned or controlled by, or acting for or on behalf of, the targeted country. For example, sanctions targeting Iran extend to companies controlled by the Iranian government. Sanctions programs that target groups of individuals, such as "narcotics traffickers," include designated individuals, groups, and entities. Any individuals, groups, or entities included under a country-specific or group-specific sanctions program are known as Specially Designated Nationals (SDNs). OFAC publishes the SDN list online, and it is frequently updated. The assets of SDNs are blocked (ie. frozen), and US persons are prohibited from engaging in transactions with SDNs, wherever they are located.
Are there any exceptions to prohibited transactions?
Certain prohibited transactions may be allowed if they are expressly exempted by statute or authorized by OFAC. OFAC regulations often include general licenses, which specify instances in which a particular group of US persons may engage in specific transactions that would otherwise be prohibited under that sanctions program. A US person wishing to engage in a prohibited transaction that is not exempted by statute or authorized by a general license can apply to OFAC for a specific license. Specific licenses are granted on a case-by-case basis, and authorize a specific US person to engage in an otherwise prohibited transaction. If the specific license is granted, the US person must follow its terms and conditions precisely, or be at risk of violating OFAC regulations.
Does OFAC publish guidance on how to interpret its regulations?
OFAC maintains a very informative and up-to-date website that includes interpretive rulings on OFAC policy, overviews of sanctions programs, guidance on applying for specific licenses, and a very comprehensive FAQs page.
This article provides only general information, and is not intended as legal advice. Please consult with an attorney for guidance on specific legal matters.