OFAC blocked assets refer to the financial resources, such as bank accounts, real estate, and other tangible or intangible property, of individuals or entities that have been identified as engaging in or supporting illicit activities. These assets are blocked or “frozen” under various sanctions programs, rendering them inaccessible to their owners. In effect, the blocked assets are isolated and removed from the global financial system, which can have a significant impact on the targeted parties’ ability to carry out their operations or finance their activities. This measure not only hampers the sanctioned parties’ financial resources but also serves as a signal to other entities to avoid conducting business with them.
The Office of Foreign Assets Control (OFAC) is a part of the United States Department of the Treasury that administers and enforces economic sanctions programs, primarily against countries and groups of individuals involved in terrorism, narcotics trafficking, or other illicit activities. One of the key components of OFAC’s enforcement is the freezing of assets, or “blocking” of assets, of designated individuals or entities. This process is designed to deter illicit activities, deprive sanctioned parties of resources, and safeguard the United States financial system from being exploited by these parties.
The process of blocking assets requires close coordination between OFAC, other U.S. government agencies, and the private sector, such as banks and other financial institutions. Financial institutions operating in the United States are required to identify and report any accounts or transactions involving designated individuals or entities, effectively assisting OFAC in the implementation of its sanctions programs. As a result, OFAC blocked assets demonstrate the United States’ commitment to combatting terrorism, narcotics trafficking, and other illicit activities, and serve as a powerful tool in enforcing economic sanctions and safeguarding the U.S. and global financial systems.
When the OFAC mentions “blocked” property, it essentially refers to frozen assets. Examples of assets that may be blocked under OFAC sanctions include:
All persons, including financial institutions, in possession of property blocked under a sanctions program must report it. The reporting requirement is not limited to financial institutions that receive and block payments or transfers but applies to everyone who is required to block property. As stated in 31 C.F.R. § 501.603(a)(1), this requirement is mandatory and applies to all U.S. persons (or persons subject to U.S. jurisdiction) who possess or control any property or interests in property blocked according to a sanctions program requiring blocking.
A license from OFAC serves as authorization to engage in a transaction that would otherwise be prohibited. There are two categories of licenses: general licenses and specific licenses. General licenses grant permission for a specific type of transaction to a class of individuals without requiring them to apply for a separate license.
On the other hand, a specific license is a written document provided by OFAC to a particular individual or entity, granting authorization for a specific transaction following a written license application.
When conducting transactions under general or specific licenses, individuals must ensure that they strictly adhere to all license conditions. Failure to comply with these conditions may result in a violation of the sanctions.
Additionally, OFAC regulations may include statements outlining OFAC’s specific licensing policies for particular transaction types. These policy statements inform the public of certain transactions that align with U.S. foreign policy and national security objectives. Transactions that adhere to these policies are more likely to be granted a license by OFAC, as the agency has already carefully evaluated them.
Organizations and entities engaged in commerce, trade, or humanitarian efforts in countries targeted by sanctions or with targeted individuals should confirm whether a transaction is prohibited. They should also determine if they need to obtain a specific license or assess the applicability of a general license to the intended transaction or activity.
At present, OFAC-administered sanctions programs target the following countries:
Angola, The Balkans, Belarus, Burma/Myanmar, The Ivory Coast/Cote d’Ivoire, The Central African Republic, Cuba, The Congo/Democratic Republic of Congo, Iran, Iraq, Lebanon, Liberia, Libya, North Korea, Russia, Sierra Leone, Somalia, Sudan/Darfur, South Sudan, Syria, Ukraine, Yemen, and Zimbabwe.
Moreover, sanctions target individuals and entities identified as Specially Designated Nationals due to their suspected involvement in or support of terrorism, international narcotics trafficking, or the proliferation of weapons of mass destruction.
Banks, mortgage lenders, and other credit-issuing entities are required to conduct due diligence to ensure that credit recipients are not subject to OFAC sanctions as Specially Designated Nationals or members or supporters of a targeted regime. Before extending credit or conducting financial transactions, failing to verify OFAC’s SDN list can result in blocked or suspended accounts, the imposition of reporting requirements, and civil and criminal penalties that may include multimillion-dollar fines and up to 20 years in prison.
