OFAC Screening
OFAC screening is the process of checking customers and transactions against the Office of Foreign Assets Control's sanctions lists to prevent transactions with designated individuals, entities, and countries.
OFAC (Office of Foreign Assets Control) administers US economic sanctions programs. Financial institutions — including non-bank embedded finance programs operating under a sponsor bank — are required to screen customers and counterparties against OFAC's Specially Designated Nationals (SDN) list and other sanctions programs.
OFAC screening must occur: at customer onboarding (KYB/KYC stage), when beneficial ownership information changes, and on an ongoing basis as the SDN list is updated. Transaction-level OFAC screening is required for certain payment types and high-risk customer segments.
For embedded finance programs: the sponsor bank is the primary OFAC compliance entity, but the platform has delegated obligations to screen customers and flag potential matches before transactions process. Most KYB/KYC vendors (Alloy, Middesk, Persona) include OFAC screening as part of their verification workflow.
OFAC hit management: when a potential match is identified, it must be investigated before the transaction proceeds. Clear procedures for handling OFAC alerts — escalation path, documentation, and SAR filing if warranted — must be part of the program's compliance design.