OFAC Screening
OFAC screening is the process of checking payment recipients against the US Treasury's Office of Foreign Assets Control sanctions lists before executing any transaction.
The Office of Foreign Assets Control (OFAC) administers and enforces US economic and trade sanctions against designated foreign countries, individuals, and entities. OFAC maintains the Specially Designated Nationals and Blocked Persons (SDN) list — a database of over 15,000 individuals and organizations with whom US persons are prohibited from transacting. Violating OFAC sanctions is a strict liability offense: the penalties apply regardless of whether the violation was intentional.
OFAC screening is the process of checking payment recipients, senders, and counterparties against the SDN list and other OFAC-maintained sanctions programs (country embargoes, sector sanctions, secondary sanctions). Every payment platform, bank, and money service business is required to screen transactions before processing. A "hit" on the SDN list requires blocking the transaction, retaining the funds, and filing a report with OFAC.
Bitwage screens every contractor, vendor, and payment against OFAC's SDN list and all active sanctions programs before any funds move. Screening runs at onboarding and at each payment execution. This is a blocking step — if a match is found, the payment is halted and the compliance team reviews before any action is taken. Companies relying on manual OFAC screening face significant exposure; automated, integrated screening is the only scalable approach for businesses paying contractors across dozens of countries.
OFAC Screening FAQ
Common questions about ofac screening in the context of international payments.
Bitwage blocks the payment automatically and notifies the business. US regulations require blocking (not returning) any funds associated with an SDN match and reporting to OFAC within 10 business days. We'll work with your compliance team on the required steps. This situation is rare — the vast majority of OFAC alerts are false positives (similar names) resolved by additional documentation.
Yes. OFAC explicitly requires screening for crypto transactions. OFAC has designated specific crypto wallet addresses on the SDN list. Paying to a sanctioned wallet address violates OFAC regulations the same as a wire transfer to a sanctioned individual. Bitwage screens wallet addresses against OFAC's published crypto address database before executing any bitcoin payments or usdc payments.
OFAC updates the SDN list multiple times per week, sometimes daily. Bitwage subscribes to real-time OFAC database updates to ensure every screening uses the most current list. See kyc aml for the broader compliance framework that OFAC screening operates within.
More Compliance & Tax Terms
Expand your knowledge of international payment terminology.
1099-NEC Filing
Form 1099-NEC is the IRS information return used to report payments of $600+ to non-employee service providers, required to be filed by January 31 each year.
AML (Anti-Money Laundering)
Anti-Money Laundering (AML) refers to the laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income through financial systems.
BSA (Bank Secrecy Act)
The Bank Secrecy Act (BSA) is the primary US anti-money laundering law requiring financial institutions to assist government agencies in detecting and preventing money laundering.
Bank Secrecy Act (BSA) Compliance
The Bank Secrecy Act (BSA) is the primary US AML law requiring financial institutions to maintain records, file reports, and implement controls to detect and prevent financial crimes.
Beneficial Ownership
Beneficial ownership refers to identifying the natural persons who ultimately own or control a legal entity, a requirement for AML compliance when onboarding business customers.
CDD (Customer Due Diligence)
Customer Due Diligence (CDD) is the standard AML process of verifying customer identity, understanding their business, and assessing the risk of financial crime before and during a financial relationship.
CTR (Currency Transaction Report)
A Currency Transaction Report (CTR) is a mandatory filing submitted by financial institutions for cash transactions exceeding $10,000 in the United States.
Compliance Automation
Compliance automation uses software to handle KYC verification, sanctions screening, tax reporting, and regulatory monitoring — reducing manual compliance work.
Contractor Agreement
A contractor agreement is the legal contract between a company and an independent contractor defining scope of work, payment terms, IP ownership, and termination conditions.
Contractor Misclassification
Contractor misclassification occurs when a company treats a worker as an independent contractor when they should legally be classified as an employee.
Contractor vs Employee Classification
Contractor vs employee classification determines the legal employment relationship — affecting payroll taxes, benefits obligations, termination rights, and regulatory compliance.
Digital Services Tax (DST)
A digital services tax is a tax imposed by countries on revenue earned by large digital companies from activities within their jurisdiction.
Double Taxation
Double taxation occurs when the same income is taxed by two different jurisdictions — a common issue for international contractors and cross-border businesses.
E-Money License
An e-money license authorizes a company to issue electronic money — stored value that can be used for payments — under EU/EEA or UK regulatory frameworks.
EDD (Enhanced Due Diligence)
Enhanced Due Diligence (EDD) is an elevated level of AML scrutiny applied to high-risk customers, requiring deeper verification of identity, source of funds, and ongoing transaction monitoring.
FATF (Financial Action Task Force)
FATF is the intergovernmental body that sets global standards for anti-money laundering (AML) and counter-terrorist financing (CFT) policies, issuing country compliance ratings.
FinCEN
FinCEN (Financial Crimes Enforcement Network) is the US Treasury bureau that administers the Bank Secrecy Act and regulates money services businesses.
KYC / AML
KYC (Know Your Customer) and AML (Anti-Money Laundering) are regulatory compliance frameworks requiring financial institutions to verify customer identities and monitor for suspicious activity.
MSB (Money Services Business)
A Money Services Business (MSB) is a FinCEN-regulated category of non-bank financial institutions — including money transmitters, currency exchangers, and check cashers — that must register with FinCEN and comply with the Bank Secrecy Act.
Money Transmitter License
A money transmitter license is a state-level regulatory license required in the US for businesses that transfer money on behalf of others.
PEP (Politically Exposed Person)
A Politically Exposed Person (PEP) is an individual who holds or has held a prominent public function, requiring enhanced due diligence in financial transactions due to elevated corruption risk.
PSD2 (Payment Services Directive)
PSD2 is the EU regulation governing electronic payment services, requiring strong customer authentication and enabling open banking APIs.
Payment Compliance
Payment compliance encompasses the regulatory requirements for sending money internationally, including KYC, AML, sanctions screening, and reporting obligations.
Payroll Tax
Payroll taxes are taxes withheld from employee wages and paid by employers to fund Social Security, Medicare, unemployment, and other government programs.
SAR (Suspicious Activity Report)
A Suspicious Activity Report (SAR) is a mandatory report filed by financial institutions when they detect transactions that may indicate money laundering, fraud, or other financial crimes.
Sanctions Screening
Sanctions screening is the process of checking payment parties against government and international watchlists to prevent money transfers to prohibited individuals, entities, or countries.
Tax Treaty
A tax treaty (Double Taxation Agreement) is a bilateral agreement between two countries that determines how cross-border income is taxed to prevent double taxation.
Travel Rule (Crypto)
The Travel Rule requires crypto service providers to share sender and recipient information for transactions above certain thresholds, similar to bank wire reporting.
W-8BEN Form
Form W-8BEN is the IRS form non-US individuals complete to certify their foreign status and claim treaty benefits, reducing or eliminating US withholding on payments.
Withholding Tax (International)
Withholding tax is a tax deducted at source from payments to foreign contractors or vendors, typically required by the payer's country on cross-border payments.
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