Specially designated nationals (SDNs) are individuals and businesses owned or controlled by countries sanctioned by the United States Treasury (specifically, the Office of Foreign Assets Control) (OFAC).
The OFAC SDN list stands for Specially Designated Nationals and Blocked Persons. It is a list that is publicly kept by OFAC that lists individuals who were appointed as SDNs by the U.S. government since they have been judged to be engaged in actions that endanger or undermine U.S. foreign policy or national security objectives. According to the different sanctions and programs managed by OFAC, individuals, entities, vessels, governments, and organizations can all appear on the OFAC SDN list.
The OFAC SDN List is regularly updated with the names of people, companies, and organizations suspected of taking part in a variety of criminal acts.
Tens of thousands of businesses, groups, and people who have been determined to constitute a threat to American national security, as well as foreign and economic policy, are included on the list. The assets of SDNs are frozen and vulnerable to seizure. SDN transactions are typically prohibited for American people and corporations, and those who do so risk legal repercussions. In addition to a restriction on new debt (including all instruments like bonds, loans, bills of exchange, etc.) with a maturity of more than 90 days, financial sanctions include a ban on investments in the stock of the blacklisted individuals and companies in which they hold a controlling stake.
Who Is On The Specially Designated Nationals List?
SDNs are appointed for a number of reasons, such as:
- Being in accordance with a scheme of sanctions particular to a country (e.g., a senior government official of a country against which the US has imposed sanctions)
- Taking part in actions that are expressly forbidden (e.g., terrorism, drug trafficking, or cyber-related activities)
- On the grounds of their ownership or control structure (e.g., a group owned/controlled by an SDN)
- On the basis of actions for, or on behalf of, a selected country, group, institution, or individual (e.g., a party considered to have supported a banned government's commission of violations of human rights.)
Importance and Purpose of the SDN List
The OFAC SDN list is issued as part of OFAC's efforts to prevent the financial system from being used for terrorism financing and money laundering.
It is a component of the US Treasury's Selective Sanctions strategy, which, as opposed to the more thorough approach of sanctioning entire nations, targets specific people and organizations engaged in illegal activity.
US citizens are prohibited from doing business with anyone who is an SDN. Under the US Patriot Act, anyone who gives any person or entity that appears on the OFAC SDN list support for terrorism, drug trafficking, or unlawful military use would face the consequences.
Who is Required to Comply with the Specially Designated Nationals and Blocked Persons List?
All US individuals are subject to OFAC sanctions, with the following definition of "US individuals":
- They are all US citizens or permanent resident immigrants, regardless of where they live.
- They are all individuals and entities in the United States, regardless of nationality.
- They are all businesses with US incorporation, as well as their overseas branches.
In some circumstances, foreign subsidiaries that are owned or controlled by US corporations, as well as foreign individuals in possession of US-origin commodities, may also be subject to the OFAC requirements in addition to US persons.
An organization is regarded as owned or controlled by a US person for these purposes if they:
- Hold 50% or more of the entity's stock by vote or value.
- Have a majority of the seats on the entity's board of directors.
- Have authority over the entity's actions, rules, or personnel decisions.
Process of Getting Removed From The SDN List
There can be many reasons why OFAC adds a person or entity, for example, money laundering, terrorist financing, drug trafficking, human trafficking, etc. The reason for being placed on the OFAC SDN List can be found through reports issued by the Department of Treasury during the appointment.
Additionally, in order to be removed from the list, a person or organization must submit a petition or request for administrative evaluation to the OFAC. OFAC examines this request and initiates the process accordingly, although it may take months or even years to complete. This administrative assessment should effectively indicate and discuss that it has changed the person or organization's behavior and will no longer engage in prohibited activities. It is also necessary to demonstrate that they are leaving any activity that could potentially be sanctioned after the enforcement obligation. So if a person or organization assigned as an SDN claims that it should not be on the OFAC SDN list and proves it, OFAC is likely to remove the requester or institution from the list.
How to Search the Sanctions List?
OFAC provides an SDN list search engine. By adding precise criteria, such as searching by country or particular sanction, users can limit their results.
Codes that describe why a person or organization has been added to the list are included with the names retrieved by a search: "BPI-PA" indicates, for instance, that entrance has been "blocked pending investigation" in accordance with the Patriot Act.
When a word or character string is submitted into the Sanctions List OFAC SDN Search, along with any name or name component that exists on the SDN List and/or other sanctions lists, the Sanctions List Search tool uses an appropriate string matching to look for potential matches. As a result of a user's search, the Sanctions List Search contains a slider bar that may be used to establish a threshold (a confidence rating) in order to increase the accuracy of any potential matches.
Users can find parameters such as calls by country and special sanctions. When financial institutions have high volume customers and transactions, it can be quite inefficient to manually search for each potential customer or a party's relationship. Given the busy business pace of financial institutions, it is inefficient and time-consuming to scan all potential customers or corporate relationships individually manually. Therefore, compliance with OFAC SDN lists can best be achieved through automated scanning software and procedures. This software automatically detects people and organizations in this list and generates alerts.
What Should You Do If Your Search Returns a Match?
If you encounter a name match on the OFAC SDN list that raises concerns, it's advisable to carefully assess the results, distinguish between exact matches and probable ones, and consider additional factors like location. Employing a screening provider that offers contextual information can streamline the process and enhance workflow efficiency. Please get in touch with OFAC by phone or email for more confirmation and instructions on what to do if you're still concerned about a possible match.