Emily Clarke

What is OFAC Screening?

The world of business has gone global thanks to the Internet, and while this opens many more opportunities to business owners, it also raises the potential for problems. Specifically, the issue of foreign actors who may have ill intentions gaining access to sensitive financial data in the United States is a serious concern. Terrorists, criminals and other bad actors often try to gain influence over the U.S. financial system by working through financial institutions.

Additionally, the potential for enemy actors to profit off of the United States is a concern. To stop this from happening, financial institutions that do business with interests outside the United States have a variety of regulatory requirements they must fulfill.

Office of Foreign Assets Control

Under the administration of the U.S. Department of Treasury, the Office of Foreign Assets Control (OFAC) is responsible for overseeing transacting companies that operate in the United States but have financial dealings with foreign customers. This may be the case in situations involving private label recipient onboarding or similar circumstances.

Even in cases not involving private label recipient onboarding, as long as a U.S.-based organization is conducting transactions in U.S. dollars with foreign entities, OFAC is involved in the United States. An OFAC screening is a process by which foreign transactions are checked to ensure they are not being conducted with denied entities. These are entities that have been deemed ineligible to transact with businesses in the United States. Sanctions can also prevent some entities from being allowed to transact in U.S. dollars in the United States.

Why Are Some Entities Denied?

Entities could be denied for several reasons, but one of the top reasons is ties to terrorist organizations. State-sponsored terror could also cut government-affiliated companies off as well. If a company or individual is on a watch list, they must undergo OFAC screening. In the case of a government or jurisdiction, sanctions that have been applied may result in a denial. A denial restricts both the U.S.-based company and the foreign entity from completing transactions using U.S. dollars within the United States.

Author Resource:-

Emily Clarke writes about multiple payment platforms, payouts API, marketplace payouts and more. You can find her thoughts at payouts API blog.