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Office of Foreign Assets Control (OFAC) definition and meaning | AML glossary

What is the Office of Foreign Assets Control (OFAC)? Definition and AML compliance meaning.

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Office of Foreign Assets Control (OFAC) definition: What it means in AML compliance.

The Office of Foreign Assets Control (OFAC) is a division of the U.S. Department of the Treasury responsible for administering and enforcing economic and trade sanctions. These sanctions are applied to countries, individuals, and organisations involved in activities such as terrorism, narcotics trafficking, the proliferation of weapons of mass destruction, and other threats to national security, foreign policy, or the economy of the United States.

What does the Office of Foreign Assets Control do?

OFAC’s main role is to implement and manage sanctions programmes, which include:

  • Maintaining the SDN list: OFAC publishes the Specially Designated Nationals and Blocked Persons List (SDN List), which names individuals and entities whose assets are blocked and with whom U.S. persons are generally prohibited from doing business.
  • Issuing licences: OFAC grants general or specific licences to allow certain transactions that would otherwise be prohibited under sanctions.
  • Investigating and enforcing violations: OFAC investigates breaches of sanctions regulations and can impose significant civil penalties and fines.

Importance for compliance teams.

Firms operating globally, especially those with ties to the U.S. financial system, must comply with OFAC sanctions – even if they are not based in the United States. Non-compliance can result in:

  • Hefty financial penalties.
  • Reputational damage.
  • Restrictions on doing business with U.S. counterparts.

As a result, screening clients, vendors, and transactions against OFAC lists is a key part of any effective AML and sanctions compliance programme.

Examples of Office of Foreign Assets Control enforcement actions.

OFAC regularly issues substantial fines to firms that breach U.S. sanctions laws. Some notable cases include:

  • British American Tobacco (2023): Fined over $500 million for violations related to North Korea sanctions through subsidiaries and intermediaries.
  • Standard Chartered Bank (2019): Paid $657 million in OFAC penalties as part of a broader $1.1 billion global settlement for processing transactions through the U.S. involving sanctioned countries like Iran and Sudan.
  • Apple Inc. (2020): Settled for $467,000 after voluntarily disclosing violations tied to software sales involving a sanctioned entity in Slovenia.
  • Amazon (2020): Fined $134,000 for apparent violations including sales of goods to individuals located in Crimea, Iran, and Syria due to deficiencies in their sanctions screening processes.

As a result, screening clients, vendors, and transactions against OFAC lists is a key part of any effective AML and sanctions compliance programme.

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