OFAC (Office of Foreign Assets Control) is the U.S. Treasury agency enforcing sanctions that prohibit or restrict financial and commercial dealings with specified foreign actors and regimes.

How it works

OFAC publishes the Specially Designated Nationals (SDN) List and country-based programs (e.g., comprehensive sanctions on certain jurisdictions). Banks, law firms, and fund administrators screen names against lists during KYC onboarding, wire processing, and M&A diligence. Matches trigger blocking, enhanced review, or rejection of transactions.

Venture funds screen LPs at subscription; startups screen large enterprise customers, distributors, and sometimes key hires with international ties. Non-U.S. companies with U.S. banking or investors often follow OFAC rules as a practical matter.

Licenses may allow limited activity, but reliance on licenses is slow and uncertain for routine venture transactions.

Why it matters

• Founders: International cap tables and go-to-market plans need early compliance counsel. A blocked wire mid-round wastes months; banks may close accounts if screening gaps appear.
• Investors: Fund formation and LP onboarding stall on OFAC hits. Secondary sales and cross-border co-investment require the same hygiene as primary subscriptions.

Common mistake

Assuming small startups are “too small” for sanctions compliance. Banks apply screening to any account that moves institutional capital — size does not exempt you from process.

Related ideas

See also KYC, AML compliance, legal diligence, and export controls.