OFAC: Structure, Authorities, and the SDN List

Institutional Placement and Mandate

The Office of Foreign Assets Control (OFAC) is a component of the U.S. Department of the Treasury, situated within the Office of Terrorism and Financial Intelligence (TFI) alongside the Financial Crimes Enforcement Network (FinCEN), the Office of Intelligence and Analysis, and the Office of Terrorist Financing and Financial Crimes. TFI is led by an Under Secretary; OFAC itself is headed by a Director who reports to the Assistant Secretary for Terrorist Financing. OFAC traces its institutional lineage to the Office of Foreign Funds Control, established by Executive Order 8389 on April 10, 1940, to block Norwegian and Danish assets following the German invasion. OFAC in its present form was created in December 1950 after the People's Republic of China entered the Korean War, when President Truman declared a national emergency and blocked all Chinese and North Korean assets under the Trading with the Enemy Act of 1917 (TWEA).

The Statutory Toolkit

OFAC's authorities derive from a layered statutory architecture. The Trading with the Enemy Act (TWEA), 50 U.S.C. §§ 4301–4341, applies only during declared wars and now governs almost exclusively the Cuba embargo (grandfathered by the 1977 amendments). The workhorse statute is the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701–1708, enacted in 1977, which authorizes the President to regulate transactions and block property of foreign persons upon declaration of a national emergency under the National Emergencies Act (NEA), 50 U.S.C. § 1601 et seq. Nearly every modern country program — including those targeting Iran, Russia, Venezuela, Syria, and Belarus — rests on an IEEPA-based executive order.

Program-specific statutes layer additional authority on top of IEEPA. Key instruments include the Iran Sanctions Act of 1996 (Pub. L. 104–172), the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA, Pub. L. 115–44, codifying Russia, Iran, and North Korea measures), the Global Magnitsky Human Rights Accountability Act of 2016 (22 U.S.C. § 2656 note), the Antiterrorism and Effective Death Penalty Act of 1996 authorizing Foreign Terrorist Organization designations, the Foreign Narcotics Kingpin Designation Act of 1999 (21 U.S.C. §§ 1901–1908), and the Hong Kong Autonomy Act of 2020.

United Nations Security Council sanctions resolutions are implemented domestically through the United Nations Participation Act of 1945 (22 U.S.C. § 287c), which provides an independent statutory basis distinct from IEEPA.

Operational Divisions

OFAC operates through several functional divisions: the Licensing Division, which issues general and specific licenses authorizing otherwise-prohibited transactions; the Compliance and Enforcement Division, which investigates violations and negotiates settlements (e.g., the $8.9 billion BNP Paribas penalty announced June 30, 2014, for Sudan, Iran, and Cuba violations); the Office of Global Targeting (OGT), which builds designation packages; the Sanctions Compliance & Evaluation Division; and the Chief Counsel (Foreign Assets Control) within Treasury's Office of General Counsel. Civil penalties under IEEPA were raised by the 2007 IEEPA Enhancement Act to the greater of $250,000 or twice the value of the transaction per violation; criminal penalties reach $1 million and 20 years' imprisonment. Penalty amounts are adjusted annually for inflation under the Federal Civil Penalties Inflation Adjustment Act; the IEEPA civil maximum stood at $377,700 per violation as of January 2024.

What the SDN List Is

The Specially Designated Nationals and Blocked Persons List (SDN List) is OFAC's master consolidated list of individuals, entities, vessels, and aircraft whose property and interests in property are blocked under one or more sanctions programs. A U.S. person who comes into possession or control of blocked property must (i) immediately freeze it, (ii) refuse to engage in any dealings absent OFAC authorization, and (iii) report the blocking to OFAC within 10 business days under 31 C.F.R. § 501.603. "Property" is defined expansively in the Reporting, Procedures and Penalties Regulations (31 C.F.R. Part 501) to include contracts, securities, and any present, future, or contingent interest.

Each SDN entry carries one or more program tags — e.g., [SDGT] for Specially Designated Global Terrorist under E.O. 13224 (September 23, 2001), [IRAN] under the Iranian Transactions and Sanctions Regulations (31 C.F.R. Part 560), [RUSSIA-EO14024] under E.O. 14024 (April 15, 2021), [VENEZUELA] under E.O. 13692 (March 8, 2015). The tag identifies the legal authority and determines the scope of prohibitions, license eligibility, and delisting standards.

The 50 Percent Rule

OFAC's 50 Percent Rule, articulated in guidance dated August 13, 2014, provides that any entity owned 50 percent or more, directly or indirectly, individually or in the aggregate, by one or more blocked persons is itself blocked by operation of law — even if not separately named on the SDN List. This rule has substantial diligence implications: counterparties must trace ownership through corporate layers. Aggregation across multiple SDNs is decisive — two SDNs each holding 30 percent produce a blocked entity.

Designation, Delisting, and Judicial Review

Designations are typically effected by adding a name to the SDN List pursuant to an existing executive order; no advance notice is provided, consistent with the holding in Holy Land Foundation v. Ashcroft, 333 F.3d 156 (D.C. Cir. 2003), which upheld OFAC blocking against First and Fifth Amendment challenges. Designated parties may petition for reconsideration under 31 C.F.R. § 501.807, submitting evidence and proposed remedial measures. Notable delistings include En+ Group, GAZ Group, and EuroSibEnergo on January 27, 2019, following Oleg Deripaska's relinquishment of control. Judicial review under the Administrative Procedure Act is available but deferential; the D.C. Circuit's decision in Kadi v. Geithner (2012) and Zarmach Oil Services v. Treasury (2014) illustrate the narrow scope.

Beyond the SDN List

OFAC maintains parallel restricted-party lists with distinct legal effects: the Sectoral Sanctions Identifications (SSI) List under Directives 1–4 of E.O. 13662 (Russia, March 20, 2014), which imposes targeted prohibitions rather than full blocking; the Non-SDN Menu-Based Sanctions (NS-MBS) List; the Foreign Sanctions Evaders (FSE) List under E.O. 13608 (May 1, 2012); the Non-SDN Chinese Military-Industrial Complex Companies (NS-CMIC) List under E.O. 13959 as amended by E.O. 14032 (June 3, 2021); and the Correspondent Account or Payable-Through Account Sanctions (CAPTA) List. Compliance officers must screen against the consolidated set, not the SDN List alone.