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The Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury administers and enforces economic trade sanctions against foreign entities or individuals found to be in violation of agreements, policies or civil liberties recognized by the U.S. government. OFAC has jurisdiction over any U.S. citizen or transaction that has a strong U.S. nexus.
OFAC Sanctions
OFAC manages sanctions through either comprehensive restrictions, limited programs or list based programs. Comprehensive restrictions block nearly all trade with the targeted country or entity while limited programs set specific guidelines of how to interact with the targeted subject. List based programs are the most specific being that OFAC will regularly update their variety of lists with specific individuals or entities that are blocked from trade with any U.S. individual or entity. Once OFAC has placed sanctions on an individual or entity, depending on which program is relevant, said entity may be either blocked or rejected. Rejecting limits certain transactions with those designated while blocking is absolute.
OFAC Licenses
There are two types of OFAC licenses, a general license and a specific license. A general license is announced public and requires no special permission to be used. A specific license requires permission from OFAC and is granted on a subjective basis. The need for either type of license may be dependent upon a variety of factors in the transaction including who the end-user is, where the end-user is located, what the goods are and many other aspects of the transaction.
Sanctions Violations
If OFAC finds a violation of any of their imposed sanctions it has the discretion to either take no action, send a cautionary letter, send a letter stating a finding of violation, impose civil penalties or initiate a criminal referral. Even though OFAC has complete discretion in evaluating each violation, it imposes higher punitive actions for increasingly blatant or egregious actions. To avoid sanctions violations OFAC encourages businesses to develop internal compliance programs which would include multiple screening checkpoints.
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