What is Office of Foreign Assets Control (OFAC)?

--- title: What is Office of Foreign Assets Control (OFAC)? source_page: https://www.sardine.ai/fraud-aml-glossary/office-of-foreign-assets-control-ofac canonical: https://www.sardine.ai/fraud-aml-glossary/office-of-foreign-assets-control-ofac format: text/markdown description: OFAC is the US Treasury office that administers and enforces US economic and trade sanctions, publishes the SDN and other lists, issues guidance like the 50 Percent Rule, and grants licenses. Its rules apply broadly to US persons and often to any USD-denominated activity, giving them wide reach across global finance. --- **Quick links:** [Human page](https://www.sardine.ai/fraud-aml-glossary/office-of-foreign-assets-control-ofac) · [Home](https://www.sardine.ai) · [Customers](https://www.sardine.ai/customers) · [Blog](https://www.sardine.ai/blog) · [Demo](https://www.sardine.ai/demo) --- # What is Office of Foreign Assets Control (OFAC)? **Read time:** 4 OFAC is the US Treasury office that administers and enforces US economic and trade sanctions, publishes the SDN and other lists, issues guidance like the 50 Percent Rule, and grants licenses. Its rules apply broadly to US persons and often to any USD-denominated activity, giving them wide reach across global finance. OFAC is the US Treasury office that administers and enforces US economic and trade sanctions. It publishes the SDN and other lists, issues guidance like the 50 Percent Rule, and grants licenses, and its rules reach broadly across US persons and USD-denominated activity worldwide. What is OFAC, in plain English? OFAC, the Office of Foreign Assets Control, is the arm of the US Treasury that runs US economic and trade sanctions. It decides who gets sanctioned, publishes the lists everyone screens against, sets the rules for how sanctions work, and enforces them when firms get it wrong. For most sanctions programs, OFAC is the center of gravity. Concretely, it publishes the SDN List and other lists, issues guidance such as the 50 Percent Rule on indirectly owned entities, and grants licenses that authorize otherwise-prohibited dealings. When a firm needs to know whether an activity is allowed, blocked, or licensable, the answer traces back to OFAC rules and lists. What makes OFAC distinctive is its reach. Its rules apply to US persons but also often to any USD-denominated activity, which pulls a huge amount of global finance into its scope. A firm with no US presence can still be bound by OFAC simply because a transaction cleared in dollars. What OFAC does Who falls under its reach What it looks like in practice In practice A payments firm based outside the US processes a dollar transaction between two non-US parties. The team initially assumes OFAC does not apply because neither party is American and the firm has no US office. But the payment clears in USD through a US correspondent bank, which brings it within OFAC's reach. One party turns out to be majority-owned by an SDN, so under the 50 Percent Rule the interest is blockable. The firm holds the funds and reports. The lesson: it is easy to underestimate how far USD flows pull you into OFAC's scope. Why it matters to operators OFAC's extraterritorial reach is the reason it matters to firms far outside the US. Because its rules often bind any USD-denominated activity, a company with no US presence can still face OFAC obligations and enforcement. Underestimating how far dollar flows pull you into scope is one of the most common and costly misjudgments in sanctions compliance. In practice, programs treat OFAC lists and guidance as a baseline to build on, watch its enforcement actions to gauge what it expects, and use its licensing process to authorize dealings that would otherwise be prohibited. OFAC is not just a list source; it is the standard-setter whose expectations shape how a whole sanctions program is run. What to watch in the data USD exposure. Dollar-clearing activity can pull non-US firms into OFAC scope; map where your flows touch USD. 50 Percent Rule. Interests in entities majority-owned by SDNs are blockable even when the entity is not named. List coverage. The SDN List is a baseline; OFAC maintains other lists a program must also screen. Enforcement signals. OFAC actions reveal its expectations; track them to calibrate your controls. Licensing. A general or specific license is the route to authorize otherwise-prohibited dealings; do not proceed without one. Quick questions ### What does OFAC actually do? It administers and enforces US economic and trade sanctions. That means publishing the SDN and other lists, issuing guidance like the 50 Percent Rule, granting licenses, and bringing enforcement actions. It is the central US sanctions authority. ### Does OFAC apply to firms outside the US? Often yes. Its rules bind US persons, but also frequently reach any USD-denominated activity. A firm with no US presence can still be subject to OFAC when a transaction clears in dollars, which gives its rules wide global reach. ### What is the SDN List? The Specially Designated Nationals List is OFAC's core list of sanctioned individuals and entities. Their property is blocked and US persons are generally prohibited from dealing with them. It is the primary list most sanctions programs screen against. ### What is an OFAC license? An authorization to conduct a dealing that would otherwise be prohibited. General licenses permit categories of activity automatically; specific licenses are granted case by case on application. Licensing is how legitimate but restricted transactions get done lawfully. ### How does the 50 Percent Rule relate to OFAC? It is OFAC guidance stating that entities owned 50 percent or more, directly or indirectly, by one or more SDNs are themselves treated as blocked, even if not named. It extends a designation's reach to indirectly owned interests. Go deeper OFAC, US Treasury ↗ — Administers US sanctions programs, the SDN list, and licensing. European Banking Authority ↗ — EU banking regulator. Strong Customer Authentication under PSD2 and AML guidance.