OFAC and Credit Reports
While the federal government has long enforced economic and trade sanctions against governments, regimes, and nations that threaten the national security, foreign policy, or economy of the United States, the Specially Designated Nationals (SDN) and Blocked Persons List identified by the Office of Foreign Assets Control (OFAC) has grown exponentially since the terrorist attacks that took place on Sept. 11, 2001.
In addition to counter-terrorism sanctions, OFAC implements economic sanctions against international narcotics traffickers and those involved in the proliferation of weapons of mass destruction (WMDs). The SDN list is extensive. It is more than 600 pages long and lists the names of approximately 7,000 individuals and entities identified as having involvement in terrorism, drug trafficking, WMD proliferation, and other activities that pose a risk to U.S. foreign policy or national security.
Americans are barred from transactions with those on the SDN list, including import and export activities, provisions of goods and services, and financial transactions. Such prohibitions also apply to credit bureaus and credit reporting agencies.
OFAC Credit Report Alerts
Credit bureaus, credit reporting agencies, and other requestors of credit information use interdiction software to determine if a credit applicant is on the SDN list. If the software finds a hit, the applicant is flagged and the credit reporting agency must determine whether or not the “hit” is accurate or if the software made a false positive match. To do this, OFAC recommends the credit reporting agency to complete a five-step process to identify whether the credit applicant is, in fact, an SDN or a blocked person:
- Check the OFAC SDN list
- Check the quality of the hit. For example, if the name on the SDN list is a vessel or company rather than an individual, or the person on the list is a different gender than the applicant, the “match” could be a false positive
- Check the completeness of the match. For example, if the applicant shares only one of two or more names in common with the person on the SDN list, the “match” is probably a false positive
- Check the additional information on the SDN list with identifying information on the credit application, such as full name, birth date, address, passport number, aliases, or a tax ID number
- If the above four steps have been completed and the creditor discovers a number of exact or similar matches, they are to call the OFAC hotline for further instructions
While the process of evaluating an OFAC alert on a credit report can seem time-consuming, those who fail to do so run the risk of conducting prohibited transactions with a blocked person, thus facing civil and criminal penalties including fines and imprisonment.
OFAC Alerts on Consumer Credit Reports
A consumer evaluating their own credit report may notice that they have been flagged as an OFAC or SDN risk. This simply indicates that when a credit reporting agency conducted a search of the SDN list, the interdiction software found a partial match with the applicant’s name.
An OFAC red flag on a credit report could indicate identity theft and the fraudulent use of a consumer’s social security number (SSN), but an OFAC alert could also indicate a false match. Under the Fair Credit Reporting Act (FCRA), consumers have the right to remove false information from their credit reports by contacting the credit bureau or credit reporting agency that discovered the “match.” Hiring an attorney for representation before the credit agency can help facilitate the removal of such false information.
In rare cases, an OFAC credit alert is the first notification a person has that they are actually on the federal government’s SDN list. If a person is mistakenly placed on the SDN list, it can have a devastating effect on that person’s economic freedom and their assets. SDN list removal is a challenging and opaque legal process. As such, SDN list removal can be facilitated by an experienced legal professional who has knowledge of OFAC operations and SDN list removal processes.