Office of Foreign Asset Control (OFAC) - Explained
What is OFAC?
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Table of ContentsWhat is the Office of Foreign Asset Control?What Does the Office of Foreign Asset Control Do?Mode of operation of OFAC
What is the Office of Foreign Asset Control?
The Office of Foreign Asset Control (OFAC) is an agency within the United States Department of the Treasury. It is responsible for gathering Financial intelligence (FININT) about financial entities of interest and enforcing economic and trade sanctions against foreign countries, organizations and individuals or groups of individuals such as terrorists and narcotics traffickers, that are perceived as threats to U.S. national security.
What Does the Office of Foreign Asset Control Do?
Although the U.S. Department of the Treasury was involved in economic sanctions against foreign nations as far back as the War of 1812, it was only in 1950 that the Division of Foreign Assets Control was formed as a precursor to OFAC. Chinas entry into the Korean War led to an emergency situation back in the United States and fueled the formation of the agency as a countermeasure to block all Chinese and North Korean assets within it control. The Division of Foreign Assets Control finally evolved into the Office of Foreign Asset Control (OFAC) via an order of the Treasury Department in 1962.
Mode of operation of OFAC
U.S. foreign and national security policies are essentially the driving force behind OFAC. The agency is primarily concerned with the activities of foreign countries (especially those that proliferate weapons of mass destruction), organizations and individuals (or groups of individuals) such as terrorists, weapons dealers and narcotics traffickers. When such activities are perceived as being particularly detrimental to the national security or economy of the United States, OFAC either takes legally-authorized actions or other measures that are in keeping with the emergency powers granted to the President of the United States. Most of the agency's actions involve freezing foreign assets that are under the jurisdiction of the United States.United Nations directives also play a major role in governing OFAC sanctions. These sanctions are, basically, tools of persuasion that the U.S. employs to mount pressure on countries to conform to regulations. However, the agency is expected to cooperate with other allied nations of the UN when formulating and enforcing such sanctions. Sanctions especially come in handy as tools to restrict sales of certain commodities in the international market, especially ones whose proceeds are known to finance terrorist activities. OFAC sanctions can go a long way in thwarting core activities of terrorist groups such as recruitment and weapon acquisition.In the event of a hostile nation invading another country or aiding a violent revolution there, the usual OFAC response is to restrict trade activities of the aggressor and freeze its assets. Such sanctions often forces the hostile country to suspend its aggressive activities and agree to participate in a compromise. The Office of Foreign Asset Control has in the past placed sanctions on belligerents like North Korea, Iran, Cuba and several other hostile nations. It has also penalized individuals or group of individuals such as narcotics traffickers by confiscating their properties within U.S. jurisdiction.