What Is the OFAC Specially Designated Nationals (SDN) List?

“Economic sanctions have emerged as one of the top tools in the national security arsenal. Sanctions can help disrupt the operations of state sponsors of terrorism, human rights abusers, and weapons proliferators by cutting off their sources of funding.”

–US Department of Treasury 

Did you know that the Office of Foreign Assets Control (OFAC) has sanctioned more than 250 individuals and entities targeting Russia as of January 2025?

Failure to screen such sanctioned entities against the Specially Designated Nationals SDN Lists or Non-SDN List on time could cost your business a fortune.

So, the crucial question is: Are your business operations fully compliant with AML regulations concerning these lists?

The Specially Designated Nationals SDN and Blocked Persons list includes a list of individuals and entities that are controlled or owned by countries that the OFAC sanctions under US law.

These particular sanctions are imposed for several illicit activities, including the proliferation of destructive weapons, narcotics trafficking, money laundering, and related activities that are detrimental to the United States’ national security.

All individuals and entities within the United States, as well as all U.S. incorporated businesses and their overseas branches, foreign subsidiaries, and all U.S. citizens and permanent resident aliens, regardless of their location, are subject to OFAC laws or the SDN List.

Let’s now evaluate the OFAC SDN list and its significance in identifying the sanctioned entities across the region of the United States.

What is the SDN List Meaning?

As published by OFAC, “An SDN list is a database that includes the names of individuals, entities, and groups, as well as maritime vessels and aircraft that are sanctioned by OFAC of the US Treasury Department.”

These country-specific sanctioned persons and businesses are collectively referred to as “Specially Designated Nationals,” or “SDNs.” U.S. individuals are typically restricted from engaging with them, and their assets are frozen.

The USA Patriot Act also makes it illegal to provide “material support”, such as training or other services, to terrorists and terrorist groups listed on the SDN list.

Who is Subject to OFAC Compliance?

Under specific scenarios, certain US individuals and entities are mandated to adhere to the OFAC sanctions and SDN list guidelines, including:

• All US-based organizations, individuals, and resident immigrants, regardless of their ethnicity, are required to adhere to the sanction regulations set forth by the Office of Foreign Assets Control.
• US-based businesses with diverse branches operating in different countries must ensure that their organizational conduct complies with the sanctions established by OFAC.
• Any foreign subsidiary owned by the US corporations and all the international entities in possession of US commodities are obliged to comply with OFAC’s sanctions.

Role of OFAC SDN List in Ensuring AML Compliance

Every year, several thousand individuals and entities are added to the SDN lists since they pose a significant level of threat to the foreign policy and national security of the United States.

OFAC SDN list is significant for the country’s security as it undermines the terrorists’ and money launderers’ illicit practices by ensuring prior recognition of the unauthorized entities.

In light of these provisions, US-based organizations and citizens are restricted from engaging in any transactional activity with such entities.

Under the US AML/CFT regime, the country’s financial firms are mandated to combat the financing of sanctioned entities as per the Bank Secrecy Act guidelines and OFAC’s sanction programs.

Financial institutions, majorly credit unions, money service businesses, and banks, are susceptible to sanction penalties due to their prominent role in facilitating international transactional operations.

Due Diligence Obligations Required for SDN List Search

Every individual and entity is under strict obligation by the OFAC to prevent transactional engagement with entities recognized on the SDN list. This is considered to be a legal obligation as it is crucial for the company’s due diligence processes.

As a business or individual entity is mentioned in an SDN list, the OFAC freezes the bank accounts and seizes all the known assets that they own.

The identification of such entities requires an enhanced level of compliance obligations, some techniques of which are briefly examined below:

• To search for impostors, companies across the United States are required to integrate a risk-based diligence approach. This includes the emphasis on the examination of high-risk entities that are likely to be sanctioned by OFAC.
• Compliance with SDN lists is essential in certain industries, including shipping, healthcare, and financial institutions. All these sectors necessitate the assessment of SDN lists to understand the transactional patterns of high-risk entities.

Institutions must adopt enhanced measures to block the transactions, assets, and possessions of entities that are enlisted in the SDN database to ensure AML/CFT compliance as per the OFAC guidelines.

Purpose Behind the Establishment of the SDN List

The primary objective of the SDN list is to counter terrorist financing, narcotics trafficking, and money laundering threats in order to safeguard the country’s national security from sanctioned entities.

As per the match list 2024 SDN, SkyGeek Logistics, Inc. settled for $22,172 with OFAC for violations of Russia’s foreign activity sanction regulations.

The Specially Designated Nationals list is significant when it comes to advancing the foreign policy goals of the United States.

Through the imposition of economic sanctions on designated entities, the regulatory bodies restrict the exposure of the country’s organizational operations from illicit entities, which ultimately reduces the overall criminal operations.

OFAC offers a credible SDN list search engine that streamlines the process of identifying sanctioned entities.

When regulators submit a character string to the SDN search engine, the OFAC’s database utilizes an effective string matching module to seamlessly identify the potential matches in real time.

This streamlines the identification process of sanctioned entities, allowing businesses to stay protective of such entities to counter the facilitation of illicit activities.

OFAC’s Landmark Action Against Kinahan Cartel

In 2022, the Kinahan Cartel was designated as a transnational criminal organization by the US Department of Treasury OFAC pursuant to Executive Order 13581.

During this phase, major action was taken against three associated businesses and seven key members due to their facilitation of sanctioned activities.

The action was taken against the entities that were found to be involved in international drug trafficking and criminal activities. The founder of the Kinahan Cartel was found to be involved in overseeing the property aspects of the enterprise.

The company’s operational manager was found to be sourcing deadly narcotics from South America.

Sanctions Implications of the Case

This case had several implications. OFAC emphasized that all the assets associated with these entities must be frozen.

Additionally, US entities were prohibited from engaging in any transactional activity with them.

This action was the epitome of OFAC’s commitment to seizing transnational crimes that could pose a threat to the economy’s global security measures in any form.

Proceedings of Effective SDN List Screening Mechanism

During the SDN list screening process, the recognition of an entity’s legitimate credentials is of significant importance. It includes the evaluation of the entity’s “doing business as (DBA) names, country of citizenship, and aliases (AKAs). This data streamlines the flagging of sanctioned entities across the SDN lists, along with comprehensive name-screening measures.

The SDN list is likely to contain entities with similar profiles that could lead to false hits at times. Once a search query is initiated, it is crucial to verify it against the OFAC guidelines.

During this process, all transactional activities with the concerned entity are temporarily paused until the “hit” is identified.

Benchmarks for Screening OFAC’s SDN Database

Screening of the SDN list is paramount to undermining money laundering and related sanctioned activities, as it provides an overview of the entity’s risk patterns across the United States.

Here is the dissection of the key practices that are important during the SDN list screening process:

• During the SDN database screening, businesses must opt for such screening solution providers that facilitate real-time processing and customizable data match criteria. This assists the lower false positive management, ensuring credible and up-to-date information of sanctioned entities.
• Depending on the findings of investigations or persistent legal conduct, OFAC may remove people from the SDN list. Alternatively, those on the list can request that the OFAC remove them. So, find a sanction screening solution that regularly updates its sanction delisting data.
• One of the most important requirements for designating an SDN is that its assets be frozen right away before being taken out of U.S. jurisdiction. Find a solution provider that not only updates data in real time but also generates alerts for any sanctioned and delisting parties.

Remain Vigilant of Sanctioned Entities with AML Watcher’s Real-Time Screening

Failure to comply with OFAC’s sanction regulations results in heavy fines and reputational penalties for the business.

Therefore, choosing the right sanction screening solution provider is vital to staying ahead of the regulatory repercussions that result from violations of OFAC’s guidelines.

Through its Sanctions screening system, AML Watcher provides real-time SDN List screening.

Businesses can ensure compliance with OFAC and other global regulations through the integration of real-time sanction screening checks and streamline the criminal assessment against the SDN lists.

Want to know how? Here’s the answer:

• AML Watcher continuously checks transactions, entities, and clients against the most recent OFAC SDN List and other international sanctions lists.
• When a match is found, automated notifications are generated, allowing for immediate investigation and action.
• Context-driven screening offers detailed insights to help businesses accurately assess the risk of detected matches and reduce unnecessary alerts.
• Sanction delists are regularly updated to ensure that companies are always in compliance with the most recent regulatory developments.
• The system ensures thorough sanctions compliance across jurisdictions by integrating multiple international sanction lists.
• Efficient name screening lowers the possibility of risk of exposure with sanctioned entities by ensuring that only genuine customers are to deal with.