Expert Advice on Screening Against the OFAC Specially Designated Nationals and Blocked Persons (“SDN”) List.
Date posted: January 2, 2018
Compliance officers for healthcare organizations frequently ask whether they should be screening employees, and others with whom they do business, against the Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons list (“SDN List”). As part of the U.S. Department of the Treasury (“Treasury Department”), OFAC is responsible for administering and enforcing programs imposing economic sanctions against groups of individuals, such as terrorists and narcotics traffickers. Sanctions may be of a selective or comprehensive nature (i.e., blocking assets or imposing trade restrictions), essentially making the determination of whether or not an entity or individual is permitted to do business with the United States. The SDN list is “….a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.”
The Treasury Department has a history of imposing economic sanctions, dating back to the War of 1812. The Office of Foreign Funds Control (the “FFC”) was established during World War II, and played a leading role in economic warfare by blocking enemy assets, foreign trade, and financial transactions. OFAC, as we know it today, is the successor of the FFC, and was created in 1950 to block Chinese and North Korean assets during the Korean War. All U.S. persons and entities within the United States, U.S. incorporated entities operating abroad, and some foreign subsidiaries of companies owned or controlled by U.S. companies, are required to comply with OFAC regulations or risk substantial civil and criminal penalties.
The SDN list was primarily designed for use by financial institutions to prohibit dealings with any individual or entity appearing on the list. The industries most involved in OFAC screening are international businesses, particularly in banking, finance, and insurance. As a result, OFAC alerts can show up on credit reports, and employers may prefer not to hire someone on the SDN list. A significant problem encountered by employers is the return of a screening list with numerous false hits, due to the large number of common Arabic names that can be translated into English in many different variations.
Screening against the OFAC SDN List is not required for healthcare providers or managed care entities, and the screening process may create more problems than benefits. OFAC screening data primarily consists of name-only listings, rarely including other matching data on a consistent basis. From a Human Resources perspective, incomplete data yielding multiple potential matches gives rise to the possibility of discriminatory practices, unless a great deal of care is used in applying that information. Specifically identifiable data is frequently unavailable to confirm a match; this means that a potential hit cannot be fully resolved without confronting the individual for a detailed briefing of their background. This process can be very troublesome and may lead to charges of discrimination, profiling, defamation of character, etc. The result is that OFAC may or may not be a useful supplement to a standard criminal check or screening against state credentialing agencies, the OIG List of Excluded Individuals, and state Medicaid sanction lists. The overwhelming majority of healthcare related entities do not screen against the OFAC SDN, unless there are special concerns associated with an entity operating outside the United States in particular areas of interest designated by the Treasury Department.
Additional information regarding OFAC SDN screening is available at: https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx