OFAC Sanctions Screening in Commodity Trade: What Every Buyer Needs to Know
The Office of Foreign Assets Control (OFAC) administers and enforces US economic sanctions. For international commodity traders, even those not based in the US, OFAC's reach extends broadly through the correspondent banking system and USD-denominated transactions.
Who Does OFAC Apply To?
OFAC sanctions apply directly to US persons and entities, but have extraterritorial reach through secondary sanctions - which threaten to cut off non-US persons from the US financial system if they transact with sanctioned parties. Since most commodity transactions settle in USD and pass through US correspondent banks, OFAC compliance is effectively mandatory for any firm operating in global commodity markets.
SDN List: The Primary Screening Target
The Specially Designated Nationals (SDN) list is OFAC's primary sanctions list. It contains individuals, companies, and vessels designated under various sanctions programs (OFAC Iran, Russia, North Korea, Cuba, Venezuela, etc.). Any transaction with an SDN, or any entity 50%+ owned by an SDN, is prohibited. FTH screens all counterparties, beneficial owners, vessels, and jurisdictions against the full SDN list before initiating any deal structure or instrument request.
Secondary Sanctions & Jurisdictional Risk
Secondary sanctions create additional risk for firms transacting in or through high-risk jurisdictions - including Russia, Iran, North Korea, Cuba, Venezuela, Syria, and portions of Ukraine. Even if no SDN is directly involved, transacting through these jurisdictions may trigger enforcement. FTH applies a FATF-aligned jurisdiction risk matrix to all deals and escalates high-risk jurisdictions to human review.
FTH Compliance Screening Protocol
FTH's compliance layer runs automated OFAC SDN checks on: buyer entity and all named directors, seller entity and all named directors, freight forwarder, vessel name and IMO number, port and jurisdiction of origin/destination, and beneficiary banks. Every check is logged, timestamped, and attached to the deal record. High-risk flags are held for human review - no instrument is raised until compliance approval is granted.
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