OFAC (Office of Foreign Assets Control) is the U.S. Department of the Treasury agency that administers and enforces U.S. economic and trade sanctions. Its programs target foreign governments, regimes, individuals, vessels, and entities considered to threaten U.S. national security, foreign policy, or economic objectives. OFAC’s authority derives from a layered body of statutes — including the International Emergency Economic Powers Act (IEEPA), the Trading with the Enemy Act (TWEA), and the Foreign Narcotics Kingpin Designation Act — operationalized through executive orders and OFAC regulations.
OFAC publishes and maintains a series of sanctions lists, the most operationally significant of which is the Specially Designated Nationals and Blocked Persons (SDN) List. U.S. persons (citizens, permanent residents, U.S.-incorporated entities, and anyone physically in the United States) are generally prohibited from transacting with SDN-listed parties without an OFAC license. The “50 Percent Rule” extends those restrictions to entities owned 50% or more, individually or in the aggregate, by SDN-listed persons.
For non-U.S. companies and individuals, OFAC enforcement reaches further than many appreciate. Secondary sanctions can penalize non-U.S. parties that engage with certain sanctioned actors. U.S. dollar transactions cleared through U.S. correspondent banks, U.S.-origin technology, U.S.-person involvement (employees, directors), and U.S.-routed data flows all create OFAC nexus. As a result, international companies — including Turkish tech and crypto firms — routinely run OFAC screening as part of KYC and counterparty onboarding even when not subject to primary U.S. jurisdiction.
OFAC sanctions programs of particular relevance to Vircon Legal’s clients include Russia/Ukraine-related restrictions, Iran transactions regulations, North Korea sanctions, and the rapidly evolving framework for cryptocurrency-related designations — which since 2018 have included multiple wallet addresses and mixer protocols. The agency has also been increasingly active in designating Web3 actors, including DAO-adjacent entities, NFT marketplaces, and decentralized exchanges with insufficient sanctions controls.
Compliance with OFAC requires risk-based screening, transaction monitoring, blocked-property reporting, and — in the event of a potential violation — a careful evaluation of self-disclosure and license-application strategy. Penalties for OFAC violations can be severe, including civil money penalties calculated per transaction or per item, criminal prosecution for willful conduct, and reputational consequences that often eclipse the legal penalty itself.