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 include 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 cooperate 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.

RELATED TERMS
  1. Trade Sanction

    A trade sanction is a trade penalty imposed by one or more nation ...
  2. Foreign Direct Investment - FDI

    Foreign direct investment (FDI) is an investment made by a company ...
  3. Direct Investment

    1. The purchase or acquisition of a controlling interest in a ...
  4. Treasury General Account

    The Treasury General Account is the general checking account, ...
  5. Insider Trading Sanctions Act Of ...

    Legislation that allows the SEC to seek a civil penalty, of up ...
  6. War Risk Insurance

    War risk insurance provides financial protection against losses ...
Related Articles
  1. Investing

    How Russian Sanctions Impact Western Companies

    Last month the EU agreed to extend sanctions first imposed on Russia last year for the hostile involvement in Ukraine and set to expire at the end of this month.
  2. Investing

    Europeans Grow Frustrated With Russian Sanctions (RSX)

    The French Senate voted last week in favour of a non-binding agreement to urge the government to lift the EU's economic sanctions on Russia
  3. Investing

    Oil Prices Could Spike $10 as US Sanctions Odds on Venezuela Increase

    Political turmoil in Venezuela could force U.S. hand and put pressure on oil prices.
  4. Insights

    Axis and Allies: US And EU Sanctions Against North Korea

    A look at the sanctions imposed by United States and the European Union on North Korea, along with their effectiveness.
  5. Investing

    Norway, the Safest Oil Economy?

    Norway is one of the most stable oil-producing countries in the world. But for how much longer?
  6. Insights

    Current Countries Under A Western Embargo

    We look at which countries the United States and European Union have imposed an imposed embargoes on and why.
  7. Investing

    A Look At National Debt And Government Bonds

    Learn the functions of the U.S. Treasury, and find out how and why it issues debt.
  8. Taxes

    How U.S. Policy Affects Other Countries' Tax Rates

    U.S. tax policies don't just affect our own economy - many times, the entire world is influenced.
  9. Investing

    France’s Total SA Returns to Iran (TOT)

    France’s oil and gas major, Total SA (TOT), is expected to be the first major western oil company to return to Iran following the removal of economic sanctions tied to the country’s nuclear energy ...
RELATED FAQS
  1. What is a country ETF?

    Learn about the operational basics of exchange-traded funds (ETFs) and the foreign investment opportunities and advantages ... Read Answer >>
  2. Which economic factors impact treasury yields?

    Discover the economic factors that impact Treasury yields. Treasury yields are the benchmark yield for the rest of the world, ... Read Answer >>
  3. What does a negative balance in the capital account mean?

    Understand what a country's capital account represents and the significance of a negative, or deficit, balance in the capital ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center