SDN: Enforcing U.S. Sanctions Globally

The Specially Designated Nationals (SDN) list is a key component of the United States’ sanctions programme, maintained by the Office of Foreign Assets Control (OFAC). It identifies individuals, companies, organisations, and even vessels or aircraft with whom all US persons are legally prohibited from doing business due to their connection to activities that threaten national security or breach foreign policy interests.

Entities on the SDN list may be involved in terrorism, drug trafficking, weapons proliferation, or severe human rights abuses. For instance, if an international corporation supplies restricted materials to a sanction-violating nation, they may be added to this list. By implementing these restrictions, the US government seeks to isolate and block such bad actors from the global financial system.

The SDN list is managed by OFAC, part of the US Department of Treasury. OFAC collaborates with law enforcement and international partners to regularly update this list by designating new entries or delisting those no longer deemed a threat under active sanctions programmes.

All individuals and entities under US jurisdiction, including citizens, businesses, and organisations operating internationally, are mandated to comply with OFAC’s sanctions. This ensures that the SDN list serves as a global deterrent for unlawful activities.

For businesses, compliance with SDN regulations is critical: failing to monitor or abide by updates can lead to harsh penalties, even for unintentional violations. Screening solutions like LSEG World-Check platform provide the tools to stay informed by integrating the constantly updated SDN list directly into compliance operations.

The SDN list exists under several US legal authorities, including:

International Emergency Economic Powers Act (IEEPA): Allows the regulation of economic activities during national security threats.

Trading with the Enemy Act (TWEA): Regulates trade with hostile nations.

Presidential Executive Orders: These specialised sanctions target specific jurisdictions, entities, or activities (e.g., EO 14024 restricting harmful Russian activities).

These laws empower OFAC to freeze assets, restrict trade, and enforce compliance measures. For instance, an SDN designation can block access to $US-clearing payments globally, preventing sanctioned entities from participating in international trade or investment.

Being listed as an SDN has severe implications, including:

1. Blocked Assets: All assets within US financial systems or under US control are immediately frozen.
2. Prohibited Transactions: US persons cannot engage in any financial or business dealings with SDNs.

These restrictive measures extend beyond US borders. For instance, companies outside the United States that knowingly facilitate significant transactions with SDNs risk secondary sanctions and can themselves be added to restricted lists.

Scenario in Practice: A technology start-up in Asia was discovered selling surveillance software to a sanctioned regime. Their inclusion on the SDN list meant all their US-based accounts were frozen, crippling their operations.

Each SDN entry includes detailed identifiers to help businesses verify a match during screening processes. Fields may include:

• Primary Name and Aliases: Key aliases and even mistranslated variations.
• Home Country/Registration Details: Reflecting national affiliation.
• Sanctions Programmes Tags: Such as [IRAN] or [CYBER2], indicating why the designation applies.
• Entity Type: Whether the SDN is an organisation, vessel, or individual.
• Supporting Notes: Context or official reasoning underlying the designation.

These comprehensive details reduce ambiguity during due diligence, especially when processed through high-precision compliance solutions such as LSEG World-Check, which utilises secondary identifiers to minimise false positives.

The SDN list is freely accessible through OFAC’s websites, offering both downloadable files in XML/CSV and search functionality. However, manually relying on this presents a significant risk of oversight in large-scale organisations.

Modern compliance protocols demand automated integration into screening systems. Platforms like LSEG World-Check One streamline SDN list screening by embedding frequent updates and exclusive matching technologies to detect hidden linkages to restricted entities.

Adhering to OFAC sanctions involves the following mandatory activities for regulated firms:

• Screening client records, transactions, and beneficial owners against the SDN list.
• Conducting detailed investigations into potential matches until resolved.
• Reporting all confirmed transactions or blocked property directly to OFAC within 10 business days.
• Retaining compliance documentation for audits, including screening history, investigation logs, and resolutions.

To enhance efficiency, companies are adopting sanction solutions like LSEG World-Check One, which reduces false positives with AI and enriched metadata about sanctioned persons.

The SDN list influences not only US persons but global firms connected through dollar-clearing transactions. International businesses risk penalties if they facilitate transactions with SDNs - even inadvertently.

Example: A European transport line contracted SDN vessels for cargo transfers to ports in the Gulf. Despite not being under direct US jurisdiction, they faced fines and reputational damage due to shared exposure in dollar-based trade routes.

While the SDN list is OFAC-specific, broader sanctions frameworks exist:

• Specific SDN Focus: Direct targets under defined foreign policy concerns.
• Sector-Specific Measures: Restricts activities in certain industries (e.g., Russian energy).
• EU and Global Lists: Similar sanctions enforced globally through aligned programmes.
• Consolidated Data Packages: Tools like LSEG World-Check compile fragmented sanctions into single access points.