Sanctions / OFAC Policy
Screening of customers, owners, and transactions against OFAC sanctions lists, investigation of potential matches, and coordination with the sponsor bank on blocking and reporting.
| Field | Value |
|---|---|
| Document | Sanctions / OFAC Policy |
| Version | 1.0 |
| Owner | AML Compliance Officer |
| Review | Annual, or on material change to OFAC requirements or the sponsor bank's standards |
Authorities
This policy implements, within the sponsor bank's program:
- 31 CFR Chapter V, the OFAC regulations, including the Reporting, Procedures and Penalties Regulations at 31 CFR Part 501 that set the blocked-property reporting and recordkeeping requirements this policy supports.
- 50 U.S.C. 1701 et seq., the International Emergency Economic Powers Act, the statutory basis for most of the sanctions programs OFAC administers and for the strict-liability civil penalties that attach to dealing with a blocked person.
- OFAC's A Framework for OFAC Compliance Commitments (2019), which describes the five components of a sanctions compliance program: management commitment, risk assessment, internal controls, testing and auditing, and training.
- FFIEC BSA/AML Examination Manual, the Office of Foreign Assets Control section, which sets the examination expectations for screening, match investigation, blocking, and reporting.
- The sponsor bank's program agreement, which allocates blocking and reporting to the sponsor bank and screening, investigation, holds, and notification to the Company.
1. Purpose and Scope
This policy describes how the Company screens customers, transactions, and counterparties against the sanctions lists administered by the Office of Foreign Assets Control (OFAC) and coordinates with the sponsor bank on match investigation, transaction blocking, and reporting. Because the Company operates as a program manager under the sponsor bank's charter, the sponsor bank holds the primary obligation to block and report OFAC matches. The Company's role is to screen within its own operations, hold activity when a potential match appears, notify the sponsor bank promptly, and support the sponsor bank's blocking and reporting decisions. The allocation is simple: the Company screens, investigates, and holds; the sponsor bank decides and files.
This policy applies to all employees and to every product and service in the sponsor bank program. It covers fiat and digital-asset transactions and every customer relationship, including, for on-chain screening, the consumer wallets that transact through a customer's platform.
2. Regulatory Framework
OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals. The programs most relevant to the Company are:
- The Specially Designated Nationals and Blocked Persons (SDN) List: individuals, entities, vessels, and aircraft that are owned or controlled by, or act for or on behalf of, sanctioned countries or persons. Their property is blocked and transactions with them are prohibited.
- Comprehensive country and territory programs, under which nearly all transactions involving the sanctioned jurisdiction are prohibited.
- Sector- and program-specific sanctions and the consolidated non-SDN lists, which restrict particular activities with particular parties and may reach the Company's counterparties.
- The 50 percent rule: an entity owned 50 percent or more, directly or indirectly, individually or in the aggregate, by one or more blocked persons is itself blocked even though it does not appear on any list.
- Secondary sanctions exposure: some transactions lawful under primary sanctions may still expose the parties to secondary sanctions. The AML Compliance Officer monitors this exposure.
Sanctions liability is strict; intent is not an element of a violation. The program agreement may incorporate parts of the sponsor bank's own sanctions program. Where the sponsor bank's program imposes requirements that affect this policy, the AML Compliance Officer reviews and updates this document to keep it aligned.
3. Screening Program
3.1 Customer and Beneficial Owner Screening
Every customer, each of its beneficial owners, and each control person is screened against the SDN List and OFAC's consolidated sanctions list at onboarding through the identity verification platform's watchlist module. Screening runs when the customer submits its onboarding information, and a screening result is required before any account is activated or any transaction is processed. Screening is repeated at each periodic review under the Customer Identification and Due Diligence Policy and continuously against list updates. If OFAC adds or changes an entry in a way that matches or potentially matches a customer, beneficial owner, or control person, the AML Compliance Officer is alerted immediately and opens a match investigation under Section 4.
3.2 Digital Asset Transaction Screening
Every inbound and outbound digital-asset transaction is screened in real time through the blockchain analytics platform, which identifies wallet addresses associated with OFAC-designated persons. A transaction involving a designated address raises an alert and, where the payment flow permits, is blocked or held before it settles. The platform's configuration is aligned with the sponsor bank's blockchain screening standards before launch and after any change. When an on-chain sanctions alert fires:
- the transaction is held pending investigation where technically possible in the payment flow;
- the AML Compliance Officer is notified immediately, and no later than the same business day;
- the sponsor bank's compliance team is notified within one hour of the AML Compliance Officer becoming aware; and
- the sponsor bank determines whether to block the transaction, freeze assets, and file a blocking report with OFAC.
3.3 Fiat Payment Screening
Fiat payments (ACH, wire, and real-time payments) are screened by the sponsor bank within its own payment screening infrastructure. The Company documents with the sponsor bank what screening the sponsor bank runs on the program and which alerts it routes back to the Company for investigation. Until that routing protocol is in place, the AML Compliance Officer requests a weekly export of fiat payment sanctions flags from the sponsor bank's compliance team. Independently, the Company reviews the beneficiary of each wire at or above the threshold set in the program agreement against the SDN List before transmission, using the same watchlist screening, and screens cross-border wires for jurisdiction risk against OFAC's comprehensive country programs.
4. Match Investigation
4.1 What Constitutes a Potential Match
A potential match arises when a screening result returns a name, address, date of birth, or other identifier that is the same as or similar to an entry on an OFAC list. Potential matches include exact matches and close matches (typographical variations, transliterations, alternative spellings) that require investigation to confirm or clear. A screened party that is not itself listed but may be owned 50 percent or more by listed persons is treated as a potential match.
4.2 Investigation Steps
When a potential match is identified:
- The AML Compliance Officer or a designee opens a match investigation within one business hour of the alert.
- All activity on the relevant account or transaction is placed on hold pending the outcome, and the time of the hold is logged. For on-chain events the hold is automatic where the payment flow permits.
- The sponsor bank's compliance team is notified of the potential match within one business hour. This coordination notice is distinct from the confirmed-match notice in Section 4.3.
- The investigator compares the screening result to the list entry field by field: name and aliases, date of birth, addresses and countries, identification numbers, and any vessel or aircraft identifiers, recording which fields match, which diverge, and which are unavailable.
- The investigator gathers additional identifying information: the customer's own documentation and prior due diligence, corporate registry data, public records, adverse media, and, for on-chain events, the analytics platform's attribution detail.
- Where the screened party is not itself listed, the investigator applies the 50 percent rule to its ownership using beneficial ownership and registry data, and documents the ownership chain and the arithmetic.
- Where the match appears real, the investigator notes any OFAC general license that may authorize the transaction category. The analysis informs the sponsor bank's decision; it does not authorize the Company to release a hold on its own.
- The investigator reaches one of three determinations: confirmed OFAC match, false positive, or unable to determine from the available information. The determination, the evidence, and the reasoning are recorded in the match workpaper.
4.3 Determination Outcomes
| Determination | Action | Timeline |
|---|---|---|
| Confirmed OFAC match | Block the transaction and/or freeze the account; process no further transactions for the affected party; notify the sponsor bank as an immediate escalation, fastest channel first with written notice the same business day; provide the complete workpaper and any records the sponsor bank needs. The sponsor bank makes the blocking determination, files the blocking report with OFAC within ten business days of the block, and files the annual report of blocked property | Immediate blocking; sponsor bank notified within one hour of confirmation |
| False positive | Document the investigation, the specific fields that distinguish the customer from the list entry, and the clear determination with the supporting evidence attached; release the hold and resume normal activity only after the documentation is complete; retain the workpaper for five years | Documented within 24 hours; activity resumes after documentation |
| Unable to determine | Maintain the hold; escalate to the AML Compliance Officer; seek the sponsor bank's guidance with the partial workpaper (what matched, what could not be resolved, what would resolve it); process no transactions until the determination is made. If the impasse persists, the hold stands and the case is reviewed jointly with the sponsor bank until resolved; an unresolved match is never released for business convenience | Escalation within four business hours; sponsor bank guidance sought within one business day |
A documented false positive may be suppressed against the same list entry to prevent repeat alerts. Suppression is specific to the pair of customer and list entry, never blanket; every suppression is logged with its justification and reviewed at the quarterly sanctions report; and a new or updated list entry always re-alerts.
4.4 Confidentiality
The Company does not tell any customer, consumer, or counterparty that it is the subject of screening, a match investigation, a hold, or a blocking decision until the sponsor bank has made its determination and has decided that disclosure is appropriate, for example to tell a customer that funds are blocked. Inbound questions from an affected party receive only neutral operational language agreed with the sponsor bank, and the exchange is logged. The AML Compliance Officer consults the sponsor bank before any disclosure. Internally, case detail is shared on a need-to-know basis within the compliance function.
5. Ongoing Program Management
5.1 List Monitoring and Re-screening
The AML Compliance Officer monitors OFAC's SDN and consolidated list updates daily and confirms in the daily monitoring log that the watchlist screening and blockchain analytics platforms are current with the published lists. New designations and changed entries are re-screened against the existing customer, beneficial owner, and control person population promptly on publication, and any potential match enters the investigation process in Section 4.
5.2 Annual Review and Reporting
The AML Compliance Officer reviews the sponsor bank's sanctions policy at least annually and updates this policy to conform, and reviews the sanctions program with the sponsor bank's compliance team at least annually as part of the broader compliance program review. Each quarter the Company provides the sponsor bank a sanctions operating report covering screening volumes by surface, potential matches by outcome, average time to determination, the suppression list review, delta re-screening runs, and any confirmed events.
5.3 Training
All employees whose work touches onboarding, payments, or compliance receive sanctions training at least annually as part of the AML training program, covering the lists, the hold and notification clocks in this policy, and the confidentiality rules in Section 4.4.
6. Recordkeeping
Records of every screening run on every surface, every match investigation workpaper, every hold or blocking action with its timestamps, every suppression with its justification, and every sponsor bank notification are retained for at least five years. Records of blocked property and blocking actions are retained for at least five years from the date of the transaction, or the longer period OFAC regulations require. Records are kept in a format that can be produced for sponsor bank review and regulatory examination.
7. Effective Date and Approval
This policy takes effect on approval by the AML Compliance Officer, is reviewed annually or on any material change to OFAC requirements or the sponsor bank's screening standards, and is provided to the sponsor bank's compliance team.