OFAC Controls on Transactions
The Office of Foreign Assets Control (OFAC) is a branch of the United States Department of the Treasury. Its purpose is to implement, administer, and enforce economic sanctions programs. Economic sanctions typically prohibit specified transactions or impose comprehensive trade embargoes against targeted foreign countries or regimes, as well as individuals who have been placed on the Specially Designated Nationals (SDN) and Blocked Persons list. Sometimes, a sanctions program provides only limited OFAC restrictions on transactions. However other times, nearly all trade and/or transactions with a blocked entity or nation are prohibited.
According to the U.S. Treasury Department, “[p]rohibited transactions are trade or financial transactions and other dealings in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute. Because each program is based on different foreign policy and national security goals, prohibitions may vary between programs.”
The comprehensiveness of prohibitions imposed by OFAC-administered sanctions vary widely by sanctions program. For example, there is a complete embargo on exports and imports to and from Cuba and Iran. However, some sanctions programs, like OFAC’s Highly Enriched Uranium (HEU) Agreement Assets Control Regulations (31 C.F.R. Part 540), deal with a very specific asset related to Russian disarmament of nuclear weapons.
OFAC’s control of transactions may include some or all of the following prohibitions:
- New investment in a blocked country or property owned or controlled by an SDN or in which the subject entity has an interest;
- Direct or indirect exportation, re-exportation, sale, or supply of any services to a specified country, regime, or foreign national;
- Importation of products originating from a subject nation or produced by an SDN, for example, Syrian oil or Cuban cigars;
- Any transaction dealing with products, goods, or services of origin in the subject nation;
- The facilitation of any transaction that would be prohibited if performed by a U.S. person under the specified economic sanctions regulations;
- The transfer of money to or from financial accounts located in a designated nation or in which a blocked person or SDN has an interest;
- The provision of credit or financial services to a person or entity on OFAC’s SDN list; and
- Travel to or within a prohibited nation without an appropriate OFAC license to do so.
While undertaking transactions with targeted nations, regimes, individuals, or entities are generally prohibited, the federal government does recognize that there are certain situations in which a specific transaction may be necessary or in furtherance of U.S. foreign policy or national security objectives. However, to perform these transactions a U.S. person or entity must secure or invoke the proper license to maintain OFAC compliance in conducting an otherwise prohibited transaction. For example, a Lawful Permanent Resident (LPR) of the United States may need legal assistance in lawfully liquidating assets in a foreign country or in demonstrating transparency and OFAC compliance in transferring funds from a nation subject to OFAC sanctions.