Its clear that when a party’s name appears on the list of Specially Designated Nationals and Blocked Persons (“SDN List”) administered by the United States Department of the Treasury’s Office of Foreign Assets (“OFAC”) that they are blocked persons with whom U.S. persons cannot engage in most transactions. However, there are times when a party is blocked for purposes of OFAC administered sanctions regulations and yet does not appear on OFAC’s SDN List. In such scenarios, it is important for sanctions compliance personnel to be able to identify such parties, block transactions with those parties, and prevent any violations stemming from those parties activities.

To determine whether or not a party is blocked when they do not appear on the OFAC SDN List, it must be determined whether the party is owned or controlled, directly or indirectly, by an identified OFAC SDN. In cases of entities, this means that the OFAC SDN maintains, directly or indirectly, a 50% or greater interest in the entity. In addition, if an entity is effectively controlled by an OFAC SDN with a less than 50% interest in the entity, then that entity will also be blocked.

Since there are no OFAC mandated compliance practices, it is up to one’s own compliance program to determine how far to go in seeking to identify those parties which are owned or controlled by OFAC SDNs, but that do not appear on the OFAC SDN List. This of course will differ from company to company, as every organization has their own tolerance for risk and limits on the budget and man hours they can expend on OFAC compliance. It is important to keep in mind, however, that an OFAC compliance program should be more than just keyword screening via the use of interdiction software. At some point, human involvement and investigation will be needed to augment due diligence efforts. When it gets to that point it is important to keep in mind that digging deeper than usual may uncover an SDN who does not appear on the OFAC SDN List.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.