The Office of Foreign Assets Control (OFAC) plays a central role in enforcing U.S. foreign policy and national security objectives.

Operating under the U.S. Department of the Treasury, OFAC administers and enforces economic and trade sanctions against foreign countries, governments, organizations, and individuals tied to threats such as terrorism, cybercrime, narcotics trafficking, and weapons proliferation.

For international companies operating across borders, OFAC compliance is not optional. Even unintentional violations can result in devastating civil penalties, criminal exposure, and reputational harm.

Many businesses violate OFAC regulations without realizing it—often through indirect transactions, insufficient due diligence, or reliance on flawed compliance systems.

Understanding how inadvertent violations occur is critical to protecting your company from enforcement actions.

Your best hope of a favorable outcome is with a skilled criminal defense attorney at Eisner Gorin LLP. To schedule a consultation, call (818) 781-1570 or contact us here.

Understanding OFAC Sanctions and Strict Liability

OFAC sanctions are enforced under a strict liability framework. This means the government does not need to prove intent, knowledge, or wrongdoing to impose civil penalties. A company can be penalized simply for engaging in a prohibited transaction—even unknowingly.

Sanctions may include:

• Asset freezes

• Trade prohibitions

• Restrictions on financial transactions

• Comprehensive country-based embargoes

To implement these measures, OFAC maintains enforcement tools such as the Specially Designated Nationals and Blocked Persons (SDN List), which identifies individuals and entities with whom U.S. persons and businesses are prohibited from dealing.

The OFAC “50 Percent Rule” and Hidden Ownership Risks

One of the most common compliance pitfalls involves indirect ownership.

Under OFAC's 50 Percent Rule, entities owned 50% or more, directly or indirectly, by one or more sanctioned persons are treated as sanctioned—even if the entity itself does not appear on the SDN List.

International companies may inadvertently violate sanctions by:

• Doing business with companies partially owned by sanctioned individuals

• Failing to identify layered ownership structures

• Relying on outdated ownership information

OFAC also cautions companies about entities in which sanctioned persons hold less than 50% ownership, as such entities may still be enforcement targets or later become sanctioned.

Facilitation Violations: A Hidden Risk for U.S. Persons

OFAC regulations prohibit facilitation, which occurs when a U.S. person indirectly enables a transaction that would be prohibited if done directly.

For example:

• A U.S. executive approving a foreign subsidiary's contract with a sanctioned entity

• A U.S. parent company providing operational support for a foreign affiliate's prohibited transaction

• A U.S. manager authorizing payments routed through sanctioned jurisdictions

Even indirect involvement can expose companies and individuals to enforcement actions.

Common Ways International Companies Inadvertently Violate OFAC

International operations involve complex global networks that increase compliance risk. Common scenarios include:

Insufficient Due Diligence

Failing to properly screen customers, vendors, or partners can result in dealings with sanctioned parties or entities located in embargoed countries.

Complex Supply Chains

Multi-layered supply chains may obscure the ultimate destination of goods or services, allowing sanctioned entities to receive products indirectly.

Indirect or Third-Party Transactions

Payments routed through intermediaries, foreign banks, or third-country distributors can trigger violations if sanctioned jurisdictions or entities are involved.

Rapidly Changing Sanctions Programs

OFAC sanctions lists and regulations change frequently. Without continuous monitoring, transactions that were once lawful may suddenly become prohibited.

Overreliance on Third-Party Compliance Software

Automated screening tools are useful—but not foolproof. Software failures do not excuse violations under strict liability standards.

OFAC Enforcement Process

When OFAC identifies a potential violation, it may initiate an investigation. Depending on the findings, OFAC may:

• Conclude that no violation occurred

• Determine that a violation occurred without penalty

• Impose a civil monetary penalty

• Refer the matter to the U.S. Department of Justice (DOJ) for criminal prosecution

OFAC strongly considers mitigating factors such as voluntary self-disclosure, cooperation, and remedial compliance measures.

Penalties for Violating OFAC Sanctions

Civil Penalties

Civil penalties can reach approximately $350,000 per violation or twice the value of the transaction, whichever is greater. In large transactions, exposure can quickly escalate into the millions.

Criminal Penalties for Willful Violations

If a violation is deemed willful, criminal penalties may apply, including:

• Fines up to $1 million per violation for corporations

• Up to 20 years in federal prison for individuals

• Asset forfeiture

• Additional charges, such as conspiracy or wire fraud

Beyond legal penalties, enforcement actions can severely damage investor confidence, disrupt operations, and jeopardize government licenses or contracts.

Why Early Legal Representation Is Critical

OFAC matters escalate quickly and involve overlapping civil and criminal exposure. Experienced federal defense counsel can:

• Conduct internal investigations

• Assess enforcement risk

• Interface with OFAC and DOJ on your behalf

• Negotiate penalty mitigation or settlements

• Defend against criminal charges

Early intervention often determines whether a matter resolves administratively or becomes a criminal prosecution.

Speak With a Federal OFAC Defense Attorney

If your company is under investigation or concerned about potential OFAC exposure, immediate legal guidance is essential. Waiting can eliminate mitigation opportunities and increase penalties.

Eisner Gorin LLP, a federal criminal defense law firm based in Los Angeles, California, represents companies and executives facing OFAC investigations and sanctions enforcement nationwide.

Contact us today at 818-781-1570 for confidential guidance and strategic defense.

Related Content:

• What is Trade-Based Money Laundering?
• Office of Foreign Assets Control (OFAC)
• Basic Information on OFAC and Sanctions