Ensuring financial security: How firms comply with the OFAC SDN list


A recent post by Alessa has detailed what the Office of Foreign Assets Control Specially Designated Nationals and Blocked Persons List is.

The Specially Designated Nationals and Blocked Persons List (SDN) is a fundamental component of financial security in the United States.

Maintained by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury, it serves as a record of individuals, groups, and entities believed to be detrimental to the U.S. economy and security.

The SDN list plays a critical role in safeguarding against various threats such as terrorism, money laundering, and narcotics trafficking. Being listed has significant implications, prohibiting U.S. citizens and businesses from engaging in both direct and indirect transactions with the entities and individuals mentioned. Violating these sanctions carries severe legal and financial penalties.

A comprehensive array of individuals and entities, diverse in nature, find themselves on the SDN list. It encompasses those from countries targeted by OFAC’s sanctions programmes and others worldwide deemed harmful. The range includes individuals involved in international terrorism, money laundering, narcotics trafficking, and entities from small businesses to multinational corporations and governmental organisations.

Compliance with the SDN list is mandated by U.S. law, obliging all U.S. individuals and businesses, including those residing or incorporated abroad, to adhere to it. Financial businesses, such as banks and money services businesses (MSBs), alongside other sectors like insurance companies and online marketplaces, face a higher risk of sanctions penalties due to their role in facilitating transactions.

In order to comply, U.S. companies must adopt proactive due diligence processes. Techniques include Know Your Customer (KYC) Processes, transaction monitoring, employee training, a risk-based approach, maintaining accurate records, and regularly updating policies. These measures are essential to identify any potential exposure to SDN-listed individuals or entities and ensure a robust anti-money laundering and sanctions compliance programme.

The SDN list is dynamic, and subject to frequent updates by the OFAC based on new intelligence, policy changes, and shifts in security priorities. Understanding this ever-evolving nature is vital for maintaining compliance, necessitating regular screenings against the most current version of the list.

Technology stands as a pivotal ally in supporting SDN list compliance. While OFAC provides essential tools for checking the list, employing technology can significantly reduce the time-consuming nature of manual checks, exemplified by solutions such as Alessa.

Read the full post here.

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