OFAC Screening

Also called sanctions screening, SDN list screening, Office of Foreign Assets Control

Checking businesses, owners and sometimes customers against U.S. sanctions lists, a strict-liability obligation with no small business exemption.

What it is

The Office of Foreign Assets Control, part of the U.S. Treasury, administers economic sanctions. The best known list is the Specially Designated Nationals and Blocked Persons list, but sanctions programs extend to countries, regions, sectors and vessels as well as named individuals and entities. In payments, OFAC screening happens at several points. Your acquirer screens your business and every beneficial owner at boarding and re-screens periodically. Card networks require members to ensure their third party agents comply with sanctions law. Depending on the product, screening may also occur on cardholders, on cross-border transactions, and on payout recipients. The features that make sanctions different from other compliance obligations are worth understanding. Liability is generally strict, meaning intent is not required. There is no de minimis threshold that exempts small businesses. And a positive match, or a suspected match, does not result in a declined transaction and a polite explanation; funds may be blocked and reported, and the customer cannot simply be told why. False positives are common because the lists match on names, and common names generate hits. That is why screening systems produce alerts for human review rather than automatic rejections, and why boarding can pause while a hit is cleared.

Why it matters to your business

You cannot opt out of this and neither can your processor. If your boarding pauses on a sanctions review, the fastest resolution is complete and accurate identity information, including full legal names, dates of birth and addresses for every owner, so that a false positive can be cleared quickly. If you sell to customers outside the United States, ask your processor how sanctions screening is applied to your transactions and what happens to a blocked payment. Finding out during a dispute with a customer is much worse than finding out now. This is education, not legal advice. Sanctions compliance is a strict liability area of federal law and questions about your specific exposure belong with an attorney.

Where it gets contested

The friction merchants experience is mostly false positives, and the friction is asymmetric. A business owner with a name similar to a listed individual can face repeated delays across every financial relationship they open, with no accessible mechanism to pre-clear themselves. There is also a growing argument about scope creep in payments. As sanctions programs have become a more active instrument of foreign policy, the operational burden on acquirers has grown, and acquirers have responded by exiting categories with cross-border exposure rather than screening them. That is de-risking again, and it falls hardest on immigrant-owned businesses and merchants serving international customers. What is unresolved is transparency. A blocked transaction cannot always be explained to the customer, which puts merchants in the position of losing a sale and being unable to say why. There is no consumer-facing appeal that operates on a business timeline.

How to check it yourself

Ask your processor whether sanctions screening is applied only at boarding or also on transactions, and what notification you receive if a payment is blocked. Get the answer in writing and keep it with your merchant agreement.

Receipts

Claims above that are checkable, with where to check them. Published so you do not have to take anyone's word for it.

OFAC and sanctions screening on the business and every principal is a standard underwriting step
paymentcloudinc.com ↗
Visa requires members to manage third party agents including compliance with sanctions and anti-terrorist-financing law
usa.visa.com ↗
Nacha is adding return reason code R90 for sanctions compliance effective March 17, 2028
nacha.org ↗