Office of Foreign Assets Control

The Office of Foreign Assets Control (OFAC) is a division of the United States Department of the Treasury that administers and enforces economic and trade sanctions in furtherance of U.S. national security and foreign-policy objectives. Its statutory authority derives chiefly from the Trading with the Enemy Act of 1917 (TWEA), the International Emergency Economic Powers Act of 1977 (IEEPA), the National Emergencies Act of 1976, and targeted statutes such as the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 and the Countering America's Adversaries Through Sanctions Act (CAATSA) of 2017. OFAC traces its institutional lineage to the Office of Foreign Funds Control, established in 1940 to block Nazi-era assets; the modern Office was formally created in December 1950 during the Korean War when President Truman declared a national emergency and blocked Chinese and North Korean assets. The President typically activates IEEPA by issuing an executive order declaring a national emergency, which OFAC then implements through regulations codified in Title 31 of the Code of Federal Regulations.

OFAC's central instrument is the Specially Designated Nationals and Blocked Persons List (the SDN List), which names individuals, companies, vessels, and aircraft whose U.S.-jurisdiction property is frozen and with whom U.S. persons are generally prohibited from transacting. Sanctions programs are either comprehensive (covering entire jurisdictions, as with Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions) or "list-based" and targeted (terrorism, narcotics trafficking, proliferation, human-rights abuses under the Global Magnitsky framework). OFAC also enforces the "50 Percent Rule," whereby entities owned 50% or more by blocked persons are themselves treated as blocked. It grants licenses—general or specific—authorizing otherwise-prohibited transactions, issues civil monetary penalties, and exercises secondary sanctions that reach non-U.S. actors dealing with sanctioned parties, giving its reach extraterritorial force tied to the dominance of the U.S. dollar and the SWIFT-adjacent correspondent banking system.

In the 2022–2026 period OFAC dramatically expanded its Russia program following the invasion of Ukraine, designating the Central Bank of Russia, major banks, oligarchs, and imposing the G7 oil price cap mechanism. It continues to administer programs against Iran's nuclear and missile network, Venezuelan officials, Chinese entities tied to Xinjiang and military-industrial activity, and Houthi designations. Major enforcement actions have produced multi-billion-dollar settlements—BNP Paribas paid roughly $8.9 billion in 2014 for sanctions violations—illustrating the penalty exposure of foreign banks. OFAC's blocking of assets and use of the dollar's centrality make it the operational engine of U.S. financial statecraft.

For the FSOT (U.S. Foreign Policy section), UPSC, and global-economy papers, OFAC is tested as the principal mechanism of economic coercion and "weaponized interdependence." Candidates should distinguish primary from secondary sanctions, link OFAC to IEEPA and CAATSA, and analyze how dollar hegemony enables extraterritorial enforcement and drives de-dollarization debates. Typical question angles ask how sanctions complement or substitute for military force, the role of the SDN List, and implications for third-country actors and Indian entities buying Russian or Iranian oil.