OFAC sanctions explained

Legal basis

IEEPA is codified at 50 U.S.C. 1701 to 1706 ⁸. Under 50 U.S.C. 1701, the President may use its powers only to deal with an "unusual and extraordinary threat" with its source in whole or substantial part outside the United States ¹. A national emergency must first be declared for that threat, and the powers may not be used for any other purpose ¹.

Under 50 U.S.C. 1702(a)(1)(B), the President may block, regulate or prohibit dealings in property in which a foreign country or a foreign national has any interest, where the property is subject to US jurisdiction ².

In practice the President declares the emergency in an executive order, and OFAC writes the rules. One example is Executive Order 13818, the basis of the Global Magnitsky program, which OFAC implements through 31 CFR part 583 ⁸. Each program's regulations, including its definition of "U.S. person", sit in 31 CFR chapter V ³.

The SDN List and blocking

OFAC describes SDNs as individuals and companies whose assets are blocked and with whom U.S. persons may not deal without authorization ⁴. There is no fixed timetable for updates. Names are added or removed as needed ⁴.

Blocking means freezing. Blocked property may not be transferred, withdrawn or otherwise dealt in, and title stays with the blocked person ³. A party that holds blocked property must report it to OFAC within 10 business days ³. Property of a blocked entity that comes into US jurisdiction must be blocked and reported to OFAC ⁵.

The SDN List is not OFAC's only list. OFAC keeps other lists of persons subject to non-blocking sanctions ³.

The 50 percent rule

Under OFAC's 50 Percent Rule, an entity owned 50 percent or more in the aggregate, directly or indirectly, by one or more blocked persons is considered blocked ⁵. Such an entity does not need to appear on the SDN List to be blocked ^3,5.

"Indirectly" refers to ownership of shares through another entity or entities ⁵. The rule speaks only to ownership and not to control ⁵. An entity that is controlled by a blocked person but not owned 50 percent or more by blocked persons is not automatically blocked. OFAC may still designate it on other grounds ⁵.

• Example from OFAC guidance: if blocked persons own 50 percent or more of company A, and company A owns 50 percent or more of company B, company B is considered blocked ⁵.
• If a blocked person's stake in the middle company is below 50 percent, the chain breaks and the target is not considered blocked under the rule ⁵.

Secondary sanctions risk

Some OFAC authorities reach non-US parties for their own conduct. On 22 December 2023, a new executive order amended Executive Order 14024 on Russia ⁷. Section 11 of Executive Order 14024, as amended, authorizes sanctions on foreign financial institutions that have dealt with Russia's military-industrial base in the ways the order describes ⁷.

Under section 11(b), OFAC may prohibit or impose strict conditions on US correspondent or payable-through accounts for such a bank, or block the bank in full ⁷. OFAC issued a compliance advisory for foreign financial institutions on the same day ⁷.

Licenses

OFAC can authorize transactions that would otherwise be prohibited ³. A general license is self-executing. Anyone who meets its terms may rely on it without applying ³. A specific license is issued case by case to a named licensee ³.

Delisting

31 CFR 501.807 sets out how a listed person can ask OFAC to reconsider ⁶. The person may argue there is an insufficient basis for the listing or that the circumstances no longer apply, and may propose remedial steps such as a corporate reorganization ⁶. OFAC may ask for more information, may decline a meeting before its review ends, and gives a written decision ⁶.

The sources differ on how to file. The regulation, as amended on 10 May 2024, says the request must be sent by email to OFAC.Reconsideration@treasury.gov ⁶. OFAC FAQ 897, as read on 20 October 2026, directs petitioners to OFAC's Reconsideration Portal ⁴. A denied petitioner may file again with new arguments or evidence ⁴.