Office of Foreign Asset control (OFAC) Compliance

OFAC is the acronym for the Office of Foreign Assets Control of the U.S. Department of the Treasury. It is responsible for administering and enforcing economic and trade sanctions against targeted foreign countries, terrorism sponsoring organizations and international narcotics traffickers, following U.S. foreign policy and national security objectives. OFAC acts under Presidential wartime and national emergency powers, as well as the authority granted through specific legislation to impose controls on transactions and freeze foreign assets under U.S. jurisdiction. Many of the sanctions are based on United Nations and other international mandates, which are multilateral in scope and involve close cooperation with allied governments.

The Office of Foreign Assets Control (OFAC) administers and oversees a series of laws that impose economic sanctions against hostile targets to further U.S. foreign policy and national security objectives. OFAC is responsible for promulgating, developing and administering the sanctions for the Treasury Department under eight federal statutes. All of the financial institution regulatory agencies cooperate in ensuring financial institution compliance with the OFAC Regulations.

OFAC laws and regulations promote national and international security by requiring asset freezing of: oppressive governments, international terrorists, narcotic traffickers and other specially designated persons. However, it is the OCC, FED, FDIC and OTS that examine a financial institution’s compliance with OFAC.

OFAC regulations for Financial Institutions

Financial institutions are required to monitor all transactions executed by or via them to identify those that involve any entity or person subject to OFAC regulations. In most situations, the institution should accept deposits and funds subject to OFAC regulations and freeze them (funds and accounts) so that the funds can’t be withdrawn (blocking). There are instances that require the institution to reject a transaction or funds rather than to accept and block them. Regulations vary according to the requirements imposed by the 8 federal statutes and the specific sanctions.