Entities are listed by OFAC as part of a process which develops from identifying entities which may be engaging in sanctionable activities, investigating those entities and their activities, and coordinating a review with other US government agencies before publishing an OFAC listing. Collectively, the OFAC-listed individuals and entities are referred to as Specially Designated Nationals or SDNs. Being listed by OFAC imposes economic and trade sanctions on the listed entity. Upon listing, an entity is likely to experience several immediate impacts which disrupt trade and limit access to financial services. 
The listed entity is likely to first be notified of its designation by its banks, which would typically inform the entity that its bank accounts will be closed. Further notices may follow from other sources, including that the entity’s US assets will be frozen, and that existing commercial relationships may be severed (especially with US companies and citizens). 

After being OFAC-listed, an entity will need to apply for delisting and take other immediate actions to prevent further harm. The process of being removed from OFAC listing is complex, time-consuming and arduous. 

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A formal application seeking OFAC delisting must be submitted to the US Department of Treasury. The adjudication of an application is not an objective judicial process, and no third-party, independent oversight exists for OFAC delisting applications. Delisting applications also have a higher legal standard of evidence than OFAC listings, so it is easier to be listed by OFAC than it is to be removed from the OFAC list with the same evidence. Nevertheless, the US government is required to operate broadly under sets of rules and cannot act arbitrarily. Should an entity wish to engage with OFAC, OFAC is required to respond, provide information and engage with the listed entity. Further, OFAC is held to the reasons that it used to make the listing determination in the first place.
The OFAC listing of individuals poses a major challenge as people cannot change their family or their relations, but commercial businesses are different. If a commercial business becomes OFAC listed, it is important that it severs ties with any OFAC-listed entities to limit its exposure. This can include disinvestments by designated entities, removal of designated entities from commercial structures, disengaging in existing commercial ties, and changing business approaches.

 

US entities are generally prohibited from any commercial relationship with OFAC-listed entities. Since listed entities cannot transact with US persons, US-exposed entities may experience the most significant financial impact. Non-US persons should also be cautious of transacting with listed entities as they may be subjected to secondary sanctions. If a sanctioned entity has a controlling interest in any other entities, each of these entities is also automatically designated. Accordingly, it is important for businesses to be aware of these designations and their potential bearing on commercial activities, particularly if they have significant connections to US entities or operate and trade in US dollars.