Office of Foreign Assets Control (OFAC) is an office within the U.S. Department of Treasury that is responsible for administering and enforcing the economic and trade sanctions in accordance with the US foreign policy and national security interests.
OFAC may enforce sanctions against individuals, entities, or countries. The scope of sanctions depends on the foreign policy objectives and may be comprehensive or selective in nature. The sanctions may entail blockage of assets, prohibition of transactions, and other trade restrictions. OFAC may allow exceptions from the prohibitions through case-by-case exemptions or general licenses to conduct categories of transactions.
OFAC was established in December 1950.
OFAC has stated its mission on its website as:
The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.
Specially Designated Nationals (SDNs) refers to various individuals and companies whose assets are blocked are blocked and US persons are prohibited from dealing with them. These include individuals and companies owned or controlled by, or acting for or on behalf of, countries targeted for sanctions. It includes lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.
Sanctions Lists refers to lists, which are separate from SDNs, issued by OFAC that contains list of names of individuals and entities whose assets are blocked are blocked and US persons are prohibited from dealing with them. Foreign Sanctions Evaders (FSE) List, Sectoral Sanctions Identifications (SSI) List, and The List of Foreign Financial Institutions Subject to Part 561 (the Part 561 List) are examples of Sanctions Lists.
The sanctions apply to all US persons, which means it is applicable to all US financial institutions, corporations, and individuals. The OFAC regulations and sanctions requirements applies to all US citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches.
Mortgage loan originators, mortgage brokers, mortgage lenders, and other participants are all required to comply with OFAC regulations. Accordingly, they should ensure they have the processes to ensure they are not transacting with any sanctioned individual or entity. For instance, at the time of account opening, the names of borrowers, account signers, purchasers, sellers, and other related parties must be checked against the OFAC Sanctions Lists to ensure there is not match with a sanctioned entity. Similarly, the payer and payee on any transactions related to mortgage loans should be screened against the OFAC Sanctions List. If a transaction has been blocked or rejected then the lender is required to report it to OFAC in ten days. There are additional annual reporting requirements.
To ensure compliance with OFAC regulations, mortgage lenders should develop appropriate procedures and programs that commensurate with the size and complexity of their businesses.
Office of Foreign Assets Control
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220
|Toll Free Hotline Number:||1-800-540-6322|
|OFAC Licensing Division:||1-202-622-2480|
OFAC has the authority to promulgate and interpret regulations to administer and enforce sanctions. The regulations are codified in the Code of Federal Regulations under the treasury regulations from 31 CFR 500 to 31 CFR 599 (Chapter V of Title 31). These regulations apply to mortgage lenders, brokers, and originators. The agency also publishes guidelines and FAQs to help understand the OFAC requirements.
OFAC has the authority to bring in civil and criminal proceedings for violating the Sanctions regulations. The OFAC penalties are codified in 31 CFR 501. OFAC publishes the list of enforcement actions at its Civil Penalties and Enforcement Information webpage of its website. The chart below presents the yearly trends in the number of OFAC enforcement actions and the associated fines/settlements.
|Trends in OFAC Enforcement Actions|
|Year||Number of Penalties or Settlements||Total Penalties or Settlements (USD)|
Below are few FAQ's that are reproduced from OFAC FAQ webpage that relate to mortgage lending. However, this is not a comprehensive list and many additional requirements may apply.
45. Does my bank need to check the OFAC list when selling cashier's checks and money orders? In the case of cashier's checks, do I need to check both the purchaser and the payee? As a mortgage lender, do I need to check both the purchaser and the seller's name against the Specially Designated Nationals list? Do I need to check their names against all of OFAC's other sanctions lists?
Every transaction that a U.S. financial institution engages in is subject to OFAC regulations. If a bank knows or has reason to know that a target is party to a transaction, the bank's processing of the transaction would be unlawful. [09-10-02]
46. If a loan meets underwriting standards but is a true "hit" on OFAC's Specially Designated Nationals (SDN) list, what do we use as a denial reason on the adverse action notice?
If you have confirmed with OFAC that you have a "good hit" on the SDN list or one of OFAC's other sanctions lists, there is no reason not to explain that to the customer. The customer can contact OFAC directly for further information. [09-10-02]
70. What Is This OFAC Information On My Credit Report?
Credit bureaus and agencies in particular have adopted new measures to ensure compliance with OFAC regulations. Before issuing a credit report, they use screening software to determine if a credit applicant is on OFAC's Specially Designated Nationals (SDN) list or one of OFAC's other sanctions lists. This software matches the credit applicant's name and other information to the names on OFAC's sanctions lists. If there is a potential match, the credit bureaus may place a "red flag" or alert on the report. This does not necessarily mean that someone is illegally using your social security number or that you have bad credit. It is merely a reminder to the person checking your credit that he or she should verify whether you are the individual on one of OFAC's sanctions lists by comparing your information to the OFAC information. If you are not the individual on the sanctions list, the person checking your credit should disregard the OFAC alert, and there is no need to contact OFAC. However, if the person checking your credit believes you are the person on one of OFAC's sanctions lists, then he or she should call the OFAC Hotline to verify and report it. [01-30-15]
71. How Can I Get The OFAC Alert Off My Credit Report?
request the removal of incorrect information on his/her credit report. To accomplish this, consumers should contact the credit reporting agency or bureau that issued the credit report. For more information on consumers' rights under the FCRA, visit the Federal Trade Commission's website at https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act or the Consumer Financial Protection Bureau at 855-411-2372. [01-30-2015]
Fannie Mae Sellers Guide Section A3-2-01: Compliance With Laws state:
Lenders must comply with the OFAC regulations. All lenders that deliver mortgage loans to and/or service mortgage loans for Fannie Mae must establish and maintain an effective OFAC compliance program. Lenders may not deliver to Fannie Mae any mortgage loan in which the borrower, key principal, or principal is a “specially designated national and blocked person” on the list (SDN List) maintained by OFAC. It is the lender’s responsibility to determine and verify that each borrower, key principal, and principal is not listed on the most recent OFAC SDN List prior to delivery of the mortgage loan to Fannie Mae.
For specific information about the servicer’s responsibilities for ensuring compliance with the OFAC regulations, see the Servicing Guide.
Freddie Mac Bulletin 2010-22, provides the guidance from Freddie Mac on OFAC Compliance
Office of Foreign Assets Control
Effective January 1, 2011, Servicers are required to notify Freddie Mac within 24 hours of filing a blocked property or rejected transaction report with OFAC. We have added a new sub-section to Section 53.8, Compliance with applicable law, which contains instructions for notifying Freddie Mac within 24 hours of filing a blocked property or rejected transaction report with OFAC for Mortgages serviced for Freddie Mac.
All Seller/Servicers are currently required to comply with OFAC requirements and should already have OFAC compliance controls in place. The Guide revisions specify that Freddie Mac expects Seller/Servicers to establish and maintain an effective OFAC compliance program that ensures compliance with OFAC regulations.
In addition, the following revisions are effective immediately:
The new sub-section to Section 53.8 also requires Servicers to periodically screen the Mortgages that they service for Freddie Mac against OFAC's SDN List.
To help ensure compliance with these Guide requirements, Seller/Servicers should inform their relevant compliance personnel of Freddie Mac’s OFAC screening and notification requirements. Chapter 6, Chapter 53, Servicer Agreements, and Directory 1 have been updated to reflect these changes.
Updated: May 20, 2017