Doing Business with Customers on the SDN List

The SDN list is the Specially Designated Nationals list. It is a list of persons and entities that have been designated by the U.S. government. Their assets have been blocked by the U.S. government and anything that U.S. persons or any property that U.S. persons have access to for the designated person or entity on the SDN list must be blocked at the time of the designation. Doing business with customers on the SDN list can be difficult to navigate, which is why it is important to get in touch with a knowledgeable lawyer that has the experience necessary to help.

What Kind of Information is Recorded on the SDN List?

The kind of information recorded on the SDN list is first and last names of persons, the program or sanctions regime that they have been designated under, the nationality of designated person or entity, the date of birth of designated persons, their place of birth, and the type of identification found on a passport or residency or state ID, including ID number, and the country of the ID, the issue and expiration date of the ID. It may also include aliases since sometimes people go by different aliases.

Sometimes persons on the SDN list go by an alias and that is where proper and comprehensive due diligence comes into play to ensure that the person is not someone on the SDN list, but does not have enough information to determine, such as a match with the person or entity on the SDN list. It is important to do due diligence before doing business with customers on the SDN list.

Updating the SDN List

The most stringent sanctions regimes that are currently active would be North Korea, Iran, and Cuba. There are much more stringent regulations on a specific individual by way of the designation on the SDN. The SDN list gets updated on an as-needed basis. If a person, for instance, subscribes to the OFAC notification system, they would get an email at any point in time of the day or any point in time of the week and month, referencing an update to the SDN list.

Ensuring Compliance with the SDN List

Companies could ensure that they are complying with the SDN list as it is updated by having a compliance officer on staff and a subscription to the OFAC notification system. They would get notification as it is updated, which would allow the companies to be ready and make these changes that might help them stay compliant with the OFAC regulation.

What to Do if a Potential Customer is on the List

If a prospective customer or an existing customer could be on the SND list, it is important to understand a person’s obligations, past or present, with regards to their dealing with the person. It is important to first make sure that a person has an actual hit on the SDN list and it is not a false-positive hit. This could be done by comparing the background information of the customer with the designation listing, before doing business with customers on the SDN list.

If they are almost an identical match, it is highly likely that a person may have an SDN hit and would need to see all business activity, review what has been done so far, and in a manner of being compliant with U.S. sanctions, submit a voluntary self-disclosure informing OFAC of the business activity that occurred. Once banks or businesses identify a potential hit with the SDN list, many times they freeze accounts or seize all activity temporarily until they have obtained more information on the customer or the prospective customer to ensure that they are being compliant with U.S. sanctions. Many times people not on the SDN list are hit with this issue and start wondering whether they actually are on the SDN list.

It is important to note that a U.S. person would say that it is unlikely that they are on the SDN list typically without their knowledge. For most people, it should not come as a surprise for them. If it is a surprise to them, then they are probably on the SDN list and it is just business going through compliance measures.

Importance of Screening Customers

It is important for the business to ensure that they are screening all potential customers and current customers that they have not done to make sure they are not doing business with customers on the SDN list. The various names listed on that OFAC has put out, but there is comprehensive compiled list on sanctions search at ofac.treas.gov.

It is important to have sanctions compliance programs preemptively screen for any potential business activity with the person or entity that is on the SDN list. This could be done both manually and digitally with ongoing checks by compliance officers or employees as well as software.