Clear DefinitionsOFAC Sanctions Compliance
1 min read
Pronunciation
[oh-fak sank-shuhns kum-ply-uhns]
Analogy
Like airport security checking your name against a watchlist before letting you board a plane.
Definition
Processes and controls to screen blockchain addresses, transactions, and counterparties against OFAC (U.S. Treasury Office of Foreign Assets Control) sanctions lists to prevent prohibited activity.
Key Points Intro
OFAC compliance ensures blockchain participants do not transact with sanctioned entities.
Key Points
List screening: Match addresses against SDN and consolidated lists.
Transaction monitoring: Flag transfers involving high‑risk jurisdictions.
KYC integration: Enforce identity checks before onboarding.
Recordkeeping: Maintain audit logs for regulatory reporting.
Example
A crypto exchange blocks deposits from addresses flagged on the OFAC SDN list and files a report for attempted interactions.
Technical Deep Dive
Compliance service ingests daily OFAC CSV, normalizes addresses, and integrates with transaction pipeline: each withdrawal request triggers a lookup; matches require manual review and automated wallet quarantine.
Security Warning
False positives can frustrate legitimate users; implement fuzzy matching thresholds and human review.
Caveat
OFAC list updates frequently; ensure daily sync and re‑screening of stored data.
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