The United States has commercial and financial sanctions programs against terrorism, narcotics traffickers, racism, and some diplomatic and economic problems that threaten national security and interests . The office of Foreign assets Control (OFAC) is one of these functional financial sanction organizations in the United States.
What Is OFAC?
OFAC is the most functional financial sanctions organization in the United States based on Treasury Administration. It develops programs to protect U.S. foreign policy and national interests by connecting with U.S. domestic and foreign intelligence agencies. Moreover, OFAC is liable for the management of economic sanctions and the determination of administrative fines. OFAC programs regulate the United States person. To identify a U.S. person;
- U.S. person that wherever located
- Citizens of other countries with a permanent (legal) residence permit in the United States,
- U.S. Companies
- All persons and entities located in the U.S.
- Entities controlled by U.S. citizens.
- Besides, if the transaction has a connection with the U.S., it may need to comply with OFAC sanctions.
Modern sanctions programs have been implemented based on the International Emergency Economic Powers Act(IEEPA) since 1977. It aims to take measures against any usual and extraordinary external threats to its national security and economy. In addition, IEEPA provides economic sanctions to the president.
AML and OFAC Compliance for Financial Institutions
What Are The Types of OFAC Sanction Programs?
U.S. financial sanctions programs began as country-based sanctions that banned all activities and transactions involving a country, also known as traditional economic sanctions. Afterward, a new kind of sanction known as list-based sanctions has been created that targets specific people, institutions, and organizations. On the one hand, Secondary Sanction is another type of implementation by the United States. These affect third-country actors who do business with individuals, institutions, and organizations that the United States sanctions. In this context, OFAC programs are categorized under four main topics;
- country-based sanctions,
- list-based sanctions,
- secondary sanctions,
- and sectoral sanctions.
Country-based Sanctions
These are imposed within the country, depending on certain defined transactions and government regimes of interest. Country-based sanctions generally prohibit trade in services, trade in goods, financial transactions, and technology transfers.
List-based Sanctions
These are contributed significantly to U.S. foreign policy, national security, and the economy, distinctly identifying people and institutions threatening the U.S. government. Also, of course, these are the most frequently implemented by OFAC. OFAC has a Specially Designed Nationals and Blocked Person List (SDN). Narcotic trafficking, terrorism, cybercrimes, and human rights abuses are some of the SDN list provisions.
Secondary Sanctions
These are a new kind of sanction—it concerns non-US persons or third-country actors who do business with the U.S.
Sectoral Sanctions
These are new sanctions that the United States has begun implementing as Russia annexes Ukraine. U.S. Government prohibits funding for specific firms in Russia's financial and energy sectors.
