What Is OFAC? Why Sanctions Screening Matters in Accounts Payable
Understanding the SDN List, vendor screening, and the internal controls that help keep prohibited payments out of Accounts Payable.
Every Accounts Payable (AP) department has a responsibility to make sure payments go to legitimate vendors. One important part of this process is checking whether a vendor is subject to U.S. government sanctions.
That is where the Office of Foreign Assets Control (OFAC) comes in.
What Is OFAC?
OFAC is an agency within the U.S. Department of the Treasury. It administers and enforces economic and trade sanctions based on U.S. foreign policy and national security objectives.
These sanctions may target individuals, companies, organizations, and governments involved in terrorism, drug trafficking, weapons proliferation, or other activities that threaten U.S. interests.
For AP departments, the concern is straightforward: a payment to a prohibited party can violate federal law.
What Is the SDN List?
OFAC maintains the Specially Designated Nationals and Blocked Persons (SDN) List.
This list identifies individuals and organizations whose property and interests in property are generally blocked under U.S. sanctions.
U.S. businesses generally cannot conduct transactions with these parties unless authorized.
However, the SDN List is not the only resource AP departments should consider. OFAC also maintains other sanctions lists that carry different restrictions.
Why Vendor Screening Matters
Vendor screening should be part of an organization's internal control procedures.
Before establishing a new vendor, AP personnel should follow company procedures to determine whether the vendor presents sanctions-related risks.
Screening may also be appropriate when vendor information changes or before payments are released.
A company cannot assume that a vendor approved several years ago remains acceptable today. Sanctions lists change regularly.
Understanding the 50 Percent Rule
One important OFAC requirement is the 50 Percent Rule.
An entity that is owned 50 percent or more, directly or indirectly and in aggregate, by one or more blocked persons is generally considered blocked, even when the entity itself does not appear on the SDN List.
This makes vendor ownership information an important compliance consideration.
Read OFAC's official 50 Percent Rule guidance
Five Practical Controls for AP Departments
- Screen new vendors according to the company's risk-based compliance procedures.
- Review existing vendors periodically based on risk and sanctions-list changes.
- Investigate potential matches before clearing alerts or releasing affected payments.
- Maintain documentation of screening results, decisions, and approvals.
- Escalate unresolved matches to the compliance or legal department.
A possible name match does not automatically mean a vendor is prohibited. Proper investigation is essential.
Where to Check OFAC Sanctions
The U.S. Treasury provides a free OFAC Sanctions List Search Tool , which searches both SDN and consolidated non-SDN lists.
Companies should also consult the official OFAC website for current regulations and guidance.
The Bottom Line
OFAC screening is more than a vendor onboarding task. It is an ongoing compliance responsibility that helps protect organizations from prohibited transactions, financial penalties, and reputational damage.
For Accounts Payable professionals, effective sanctions screening is another essential layer of strong internal controls.
From the APPG Archives
Accounts Payable Professionals Group first covered OFAC and the SDN List in January 2011. See how this important compliance topic was explained 15 years ago in our original article: What Is OFAC and the SDN List?
Official Sources and Further Reading
Editorial Note: This article was developed with the assistance of artificial intelligence and edited, reviewed, and approved by Robert Ruhno, Executive Director of the Accounts Payable Professionals Group (APPG).
This article is intended for educational purposes and does not constitute legal advice. Organizations should consult their compliance or legal professionals regarding applicable sanctions requirements.
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Robert Ruhno
Executive Director
Robert leads APPG’s mission, editorial direction, member community, and efforts to advance the Accounts Payable profession.
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Mariann leads APPG’s education strategy, professional-development resources, and initiatives designed to help AP professionals strengthen their skills and careers.
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