DEFINITION of Office of Foreign Asset Control (OFAC)
The Office of Foreign Asset Control (OFAC) is a department of the U.S. Treasury that enforces economic and trade sanctions against countries and groups of individuals involved in terrorism, narcotics and other disreputable activities.
BREAKING DOWN Office of Foreign Asset Control (OFAC)
OFAC was officially created in 1950 when China entered the Korean War. President Truman declared the event a national emergency and froze all Chinese and Korean assets subject to U.S. jurisdiction. OFAC's predecessor was the Office of Foreign Funds Control (OFFC), which was established in response to the Nazi invasion of Norway in 1940.
How the Office of Foreign Asset Control Operates
OFAC enforces sanctions based on U.S. foreign policy and national security objectives. According to this federal agency, those policies are aimed at foreign nations, terrorists, and traffickers of narcotics who pose a threat to national security or the nation’s economy. This includes entities who proliferate weapons of mass destruction. The agency’s actions are authorized by legislation. OFAC can also take action under national emergency powers granted to the President of the United States to perform such deeds as freezing assets that fall under U.S. jurisdiction.
OFAC runs many of its sanctions based on mandates by the United Nations. These mandates are often performed in cooperation with allied nations. The use of sanctions and trade policies is a way for the international community to persuade the sanctioned nation or group to change some behavior. The policies make it more challenging for the sanctioned entity to continue their regulation their current activities by disrupting their economic lives. This is done as a way to pressure a country to conform to certain laws or regulations or to discontinue disreputable activity.
For example, if a terrorist group is known to fund their activities through a commodity sold on the international market, sanctions might be introduced to cut off this revenue source. OFAC’s efforts on this front could reduce the group’s ability to support the training of new recruits and the acquisition of weapons.
If a belligerent country were to invade or support a violent rebellion in a neighboring country, trade and other assets could be frozen. OFAC would take charge of enforcing these sanctions, which might compel the belligerent country to halt its actions or at least agree to talks to possibly end the conflict.
Programs administered by OFAC have included sanctions on Iran, North Korea, Cuba, Syria, and Ukraine-Russia–related sanctions. The agency has taken action against individuals, such as drug traffickers, by blocking all property owned by such criminals.