INTERNATIONAL TRADE LAW
Sanctions Screening: Clients, Vendors & Partners
Sanctions screening is checking the people and companies you do business with against U.S. government blocked-party lists before money or goods change hands. It is the central internal control in any sanctions program, because the Office of Foreign Assets Control (OFAC) enforces sanctions on a strict-liability basis — dealing with a blocked party is a violation whether or not you knew. Screening is how you find out before you act. This guide covers which lists to check, when to check them, the ownership trap that catches careful companies, and how to resolve a hit.
Which lists to screen against
OFAC publishes the lists that matter for U.S. sanctions screening. The Specially Designated Nationals (SDN) List names individuals and entities whose property is blocked and with whom U.S. persons generally may not deal. The Consolidated Sanctions List gathers OFAC’s non-SDN lists, which carry narrower restrictions. Screening counterparties against both is the baseline; depending on your business you may also screen against export-control lists maintained by other agencies.
Matching is not just about exact names. Sanctioned parties use aliases, transliterations, and slight spelling variants, so effective screening uses fuzzy matching and then human review — which is also where you weed out false positives.
The 50 Percent Rule: the trap that catches careful companies
The biggest screening mistake is checking only the names in front of you. Under OFAC’s 50 Percent Rule, any entity owned 50% or more — directly or indirectly, and in aggregate across multiple blocked owners — by one or more blocked persons is itself blocked, even though OFAC never lists it separately. If two SDNs each own 25% of a company, that company is blocked too.
The practical consequence: a name-only screen can come back clean on a counterparty that is, in fact, off-limits. For higher-risk relationships you have to look through to beneficial ownership, not just screen the entity on the invoice.
When to screen
Screening is not a one-time gate at onboarding. Build it in at the points where risk enters or changes.
| Trigger | What to screen |
|---|---|
| Onboarding | Every new customer, vendor, intermediary, and known beneficial owner |
| Each transaction | Counterparties to the deal, plus relevant parties to the shipment and payment |
| Ongoing / list updates | Re-screen your existing book whenever OFAC updates its lists |
| Relationship change | New owners, new ship-to parties, new intermediaries |
Because OFAC updates its lists frequently, a party that screened clean last quarter may not be clean today. Periodic re-screening of your existing relationships closes that gap.
Resolving a potential match
A screening hit is an alert, not a verdict. Have a written procedure so every alert is handled the same way: pause the transaction, compare identifying details (full name, date of birth, address, identifiers) to rule out a false positive, escalate genuine or unresolved matches to your compliance officer, and — if you confirm a true match — hold the transaction and, where required, block property and file the report OFAC requires. Document the decision and the reasoning either way; the record is part of your defense.
Avoid two opposite failures: clearing a real match to keep a deal moving, and “false-positive fatigue” that trains staff to wave alerts through. A risk-based threshold and clear escalation rules keep both in check.
Build screening into the wider program
Screening works only as part of a whole. Calibrate how hard you screen to the findings of your sanctions risk assessment, make screening and escalation a documented control within your compliance program, and make sure the staff running it are trained to read results and escalate properly. Keep the records: OFAC now requires retention of sanctions-relevant transaction records for ten years (extended from five, effective March 12, 2025).
Frequently asked questions
Is automated screening software enough on its own?
No. Software accelerates matching and flags potential hits, but it generates false positives and can miss alias or ownership matches. Trained human review of the alerts is what makes screening defensible.
Do we have to screen against the 50 Percent Rule if the entity isn’t listed?
Yes. A non-listed entity owned 50% or more in aggregate by blocked persons is blocked. For higher-risk counterparties you need to analyze ownership, not just match the entity’s name.
What do we do if we confirm a true match?
Stop the transaction. Depending on the program you may be required to block (freeze) the property and report it to OFAC within the required timeframe. Document everything and get counsel involved before you act on a confirmed match.
How often should we re-screen existing customers?
Re-screen whenever OFAC updates its lists and on a periodic schedule set by risk. Sanctions designations change constantly, so a one-time onboarding screen is not enough.
Screening is the control most likely to catch a problem before it becomes a penalty — and the one most often run too shallowly. Reidel Law Firm designs and reviews sanctions screening procedures, including 50 Percent Rule ownership analysis and match-resolution workflows, for U.S. exporters and importers on a flat fee: get a flat-fee compliance memo to start.
