OFAC stands for Office of Foreign Asset Control. This is a US Treasury Department that is responsible for enforcing trade and economic sanctions against individuals and countries involved in narcotics, terrorism and numerous other disreputable activities.
Officially, the OFAC was created in the year 1950, as China got involved in the Korean War. It was President Truman that declared the situation to be a national emergency and practically froze all Korean and Chinese assets as subject to the US jurisdiction.
Table of Contents
The OFAC is enforcing an OFAC sanctions list based on the foreign policy of the US and current national security objectives. All the policies are aimed at terrorists, narcotics traffickers and foreign nations that are considered to be a threat to the economy of the nation and national security. This does include the entities that use mass destruction weapons. Actions are lawfully authorized through legislation.
The OFAC is allowed to also take action in the event of a national emergency. In this case, assets can be frozen when they are covered by US jurisdiction.
Most of the sanctions of the OFAC are based on United Nations mandates. The mandates are usually performed thanks to a cooperation with the allied nations. Trade policies and sanctions are needed for the entire international community to convince the nation that is sanctioned or the targeted group to change behavior.
Policies put in place make it difficult for sanctioned entities to continue current activities through a disruption of economic lives. Basically, the country is pressured to conform to specific regulations or laws. If this does not happen and the disreputable activity is not discontinued, operations cannot continue.
As a simple example, when there is a terrorist group that was proven to fund activities through a specific commodity that is now sold on the worldwide market, different sanctions can be introduced in order to reduce or cut the revenue source. OFAC can possibly reduce the ability of the group to support new recruit training and weapons acquisition, among many other things.
When there is a belligerent country that supports or invades a rebellion taking place in a neighbor country, assets and trades can be frozen by the OFAC. The agency enforces the sanctions in order to force the country to halt actions. Alternatively, the goal may be to just force the country to enter negotiations so that the conflict can be ended.
Through programs that were administered by the OFAC, sanctions were issued on different countries. This includes North Korea, Ukraine, Russia, Syria, Cuba and Iran. Actions were also taken against different individuals, like drug traffickers, usually through property blocking.
The sanctions issued by the OFAC have been criticized in various situations but there were numerous examples where they were justified and led to positive results. Businesses that want to work with other entities that are affected by OFAC sanctions need to be careful and respect all the current restrictions. This is much easier said than done so working with an experienced professional is mandatory in such a case.