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 SDN list means 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 list is meticulously updated to ensure it accurately reflects those who pose a risk to the U.S., encompassing a broad spectrum of subjects from various sectors.
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?
The SDN List includes individuals and entities designated for various reasons, such as:
- Association with sanctions specific to a country (for example, being a high-ranking official in a nation subject to US sanctions).
- Involvement in prohibited activities (such as terrorism, drug trafficking, or cyber-related offenses).
- Based on their ownership or control (e.g., entities owned or controlled by an SDN).
- Due to actions on behalf of, or in support of, a specific country, organization, institution, or individual (for example, entities believed to have aided in the human rights violations committed by a sanctioned government).
Importance and Purpose of the SDN List
The OFAC SDN list is crucial in the United States' efforts to combat terrorism financing and enforce anti money laundering compliance. Issued by the OFAC, this list is a key element of the U.S. Treasury's strategy for selective sanctions. Unlike broad sanctions that target entire countries, selective sanctions focus on specific individuals and organizations involved in illicit activities.
Individuals and entities on the SDN list are identified as posing a threat to the U.S. financial system and national security by engaging in activities such as terrorism, drug trafficking, or illegal military endeavors. As a result, U.S. citizens and businesses are strictly prohibited from engaging in any form of transactions or dealings with those listed as SDNs.
Furthermore, under the provisions of the USA PATRIOT Act, severe penalties are imposed on anyone who provides support, whether financial or otherwise, to individuals or entities on the OFAC SDN list. This underscores the importance of the SDN list in safeguarding the integrity of the global financial system and promoting international security.
Who Must Comply with the SDN List?
Compliance with the SDN List is mandatory for a broad spectrum of US individuals and entities, as well as certain non-US entities under specific conditions.- Regardless of their location worldwide, all US citizens and permanent resident immigrants are required to adhere to the OFAC sanctions, including the SDN List.
- Any individual or entity located in the US, irrespective of their nationality, must comply with the regulations set forth by OFAC.
- Businesses incorporated in the US, along with their international branches, are subject to OFAC sanctions.
- In specific scenarios, foreign subsidiaries controlled or owned by US corporations, as well as foreign individuals in possession of US-origin commodities, may also fall under the jurisdiction of OFAC regulations.
An organization is regarded as owned or controlled by a US person for these purposes if they:
- Possess at least 50% of the entity's shares, whether by voting rights or value.
- Occupy the majority of positions on the entity's board of directors.
- Exercise control over the entity's operational decisions, policies, or staffing choices.
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 a high volume of 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.
How Can Sanction Scanner Simplify Your SDN List Compliance?
Sanction Scanner offers a powerful tool to simplify compliance with the SDN list and other global sanctions. Our platform provides real-time, accurate screening and monitoring, ensuring you can efficiently identify risks and maintain compliance.
With Sanction Scanner, you benefit from:
- Quick screening of the SDN and other sanctions lists.
- Automated compliance processes to reduce manual errors.
- Real-time updates to stay informed on the latest list changes.
- Detailed reporting for compliance documentation.
Discover how Sanction Scanner can support your compliance efforts. Request a demo today.
