The Office of Foreign Assets Control (OFAC) administers U.S. economic and trade sanctions programs, and screening against OFAC's lists is one of the most fundamental controls a financial institution can have. Yet sanctions screening is also one of the areas regulators scrutinize most closely, because gaps here carry strict liability regardless of intent.

What OFAC Screening Covers

At a minimum, sanctions screening means checking customers, counterparties, and transactions against OFAC's Specially Designated Nationals (SDN) List and other sanctions lists before onboarding a customer and on an ongoing basis afterward. Comprehensive programs also screen against comprehensively sanctioned countries and regions, and account for sectoral sanctions that restrict specific types of transactions rather than blocking a party outright.

Why Strict Liability Matters

OFAC sanctions violations are generally strict liability: a violation can occur even without intent to violate sanctions. That makes the design of your screening program, not just your intentions, the thing that actually protects the business.

Common Gaps We See

  • Name-matching thresholds set too loosely or too tightly: too loose creates false positives that overwhelm staff; too tight risks missing a true match.
  • Screening only at onboarding: sanctions lists are updated frequently, so customers and counterparties need to be rescreened on an ongoing basis.
  • Incomplete coverage of related parties: beneficial owners, authorized signers, and related entities are sometimes left out of screening scope.
  • No documented escalation process: staff need clear guidance on what to do with a potential match, including when to freeze a transaction and notify OFAC.

Building a Defensible Program

A defensible sanctions program combines the right screening technology with clear written procedures, documented risk-based thresholds, staff training, and periodic independent testing. Institutions operating internationally, or working with correspondent banking relationships, generally need a more robust program given the higher exposure to cross-border risk.