OFAC Prohibited Transactions

Business, trade, and other financial and economic dealings with certain countries, entities, and individuals are considered a threat to the foreign policy, economic stability, and national security of the United States. Through Acts of Congress, Presidential national emergency powers, and international agreements, sanctions are imposed against targeted foreign nations and Specially Designated Nationals (SDNs). The Office of Foreign Assets Control (OFAC), a component of the U.S. Department of the Treasury, is the agency responsible for implementing, administering, and enforcing trade embargoes and economic sanctions.

The United States Treasury Department defines “prohibited transactions” as “trade or financial transactions and other dealings in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute.” The Department further states, “Because each program is based on different foreign policy and national security goals, prohibitions may vary between programs.”

Common Prohibited Transactions

While the nature of each sanction is specified in the law or laws pertaining to particular sanctions programs, there are certain prohibited transactions that are commonly involved in many OFAC sanctions programs.

Prohibited transactions with blocked nations, entities, or individuals may include the following:

• Making new investments in a country that is blocked or in property that a blocked government or Specially Designated National (SDN) owns, controls, or has an interest.
• Directly or indirectly exporting supplies or services to a blocked country, government, regime, or SDN.
• Re-exporting, selling, or supplying goods or services to a targeted foreign country, regime, or blocked individual.
• Directly or indirectly importing products originating from a blocked nation, targeted country, or which is produced by an SDN. Iranian goods and Cuban cigars are examples of products which may not be imported into the United States or by a U.S. person because the country of origin is subject to U.S. trade sanctions.
• Conducting any other transaction concerning goods, services, or products that originate from a targeted nation.
• Facilitating any transaction that economic or trade sanctions prohibit a U.S. person from conducting.
• Transferring funds to and/or from financial accounts in which an SDN or blocked person has an interest or which are located in a targeted nation.
• Extending credit or providing financial services to any person or entity listed on the SDN list.

In some circumstances, an exception may be granted to the prohibited transactions. An applicant may apply for a specific license from OFAC or utilize an already published general license that allows him or her to conduct business or engage in transactions that would otherwise be prohibited.

Currently, there are OFAC sanctions against a number of countries, organizations, and entities involved with terrorism, diamond trading, international drug trafficking, and the proliferation of weapons of mass destruction. In addition to prohibiting transactions with people and entities on the SDN list, OFAC oversees the following economic sanctions programs:

• Balkans-Related Sanctions
• Belarus Sanctions
• Burma Sanctions
• Central African Republic Sanctions
• Cote d’Ivoire (Ivory Coast) Sanctions
• Counter Narcotics Trafficking Sanctions
• Counter Terrorism Sanctions
• Cuba Sanctions
• Democratic Republic of the Congo-Related Sanctions
• Iran Sanctions
• Iraq-Related Sanctions
• Former Liberian Regime of Charles Taylor Sanctions
• Libya Sanctions
• Magnitsky Sanctions
• Non-Proliferation Sanctions
• North Korea Sanctions
• Rough Diamond Trade Controls
• Somalia Sanctions
• Sudan Sanctions
• South Sudan-Related Sanctions
• Syria Sanctions
• Transnational Criminal Organizations
• Ukraine-Related Sanctions
• Yemen-Related Sanctions
• Zimbabwe Sanctions

Learn more about prohibited transactions and the specific sanctions programs here.

Due Diligence

Those engaged in international business , trade, or financial transactions are expected to exercise due diligence in ensuring that the person or entity with whom they are conducting business is not on the SDN list or is not a nation subject to U.S. economic sanctions.  Compliance with OFAC regulations is strict liability, meaning that ignorance of the law or facts does not excuse non-compliance.

Searching the SDN list, investigating possible hits, securing appropriate OFAC licenses, maintaining transparency in transactions and dealings with foreign nationals, and self-reporting of potential violations can all be examples of the due diligence required or encouraged of businesses, individuals, and non-profit organizations.

Sanctions regulations often change as individuals and entities are continually added to and removed from the SDN list. Emerging threats and international crises can quickly lead to the imposition of new sanctions against previously untargeted persons, governments, or countries. Sanctions may also be intensified or amended at any time by Executive Order issued by the President or by directives issued by the Treasury Department.

Staying abreast of sanctions, compliance requirements, and prohibited transactions can be challenging. An experienced OFAC sanctions lawyer can help individuals and companies maintain compliance while engaging in international transactions.