Unit
- Legal basis: The Office of Foreign Assets Control (OFAC) derives its authority from the Trading With the Enemy Act (TWEA) and the International Emergency Economic Powers Act (IEEPA). TWEA grants broad powers during wartime, while IEEPA authorizes economic sanctions during national emergencies declared by the President.
- Mission scope: OFAC administers and enforces economic sanctions programs against foreign countries, regimes, terrorists, narcotics traffickers, and entities engaged in proliferation of weapons of mass destruction. Its goal is to protect U.S. national security and foreign policy objectives.
- Presidential authority: The President, through executive orders, designates national emergencies and delegates authority to OFAC to implement sanctions. These orders specify the target, scope, and prohibitions of each sanctions program.
- Statutory framework: Key statutes include the Trading With the Enemy Act, International Emergency Economic Powers Act, the Antiterrorism and Effective Death Penalty Act of 1996, and the USA PATRIOT Act. Each law provides different tools for blocking assets, prohibiting transactions, and imposing licensing requirements.
- Regulatory implementation: OFAC publishes regulations in the Code of Federal Regulations (31 CFR Chapter V). These regulations detail prohibitions, definitions, exceptions, and licensing procedures for each sanctions program.
- Enforcement mandate: OFAC has civil enforcement authority to impose monetary penalties for violations. It also works with criminal authorities such as the Department of Justice for willful violations that may lead to prosecution.
- Sanctions list management: OFAC maintains the Specially Designated Nationals and Blocked Persons List (SDN List), which identifies individuals and entities whose assets are blocked and with whom U.S. persons cannot transact.
- Global reach: OFAC sanctions apply to U.S. persons, including citizens, permanent residents, entities organized under U.S. law, and their foreign branches. They also apply to transactions with a U.S. nexus, such as U.S. dollar clearing.
- Licensing framework: OFAC issues general and specific licenses that authorize transactions otherwise prohibited under sanctions programs. General licenses are published in regulations and automatically apply to anyone meeting the conditions, while specific licenses require a written application and OFAC approval on a case by case basis.
- Reporting obligations: Persons holding blocked property must file initial reports with OFAC within 10 business days and annual reports thereafter. Failure to report accurately or on time can result in civil penalties, even if the underlying blockage was proper.
- Recordkeeping requirements: OFAC regulations require that records related to sanctions compliance, including rejected transactions and blocked property, be maintained for at least five years. These records must be readily retrievable and available for OFAC inspection upon request.
Risk Assessment
HIGH RISK
Failure to understand OFAC's legal authority can lead to inadvertent violations and severe penalties. Organizations operating internationally face heightened risk because sanctions apply extraterritorially in many programs.
Quick Revision
- OFAC's authority comes from TWEA and IEEPA, allowing the President to impose sanctions during emergencies.
- The SDN List is the central sanctions list, blocking assets and prohibiting transactions.
- U.S. persons must comply; transactions with U.S. nexus are also subject to sanctions.