The Office of Foreign Assets Control (OFAC) and U.S. sanctions policies form the backbone of America’s national security and foreign policy efforts. While these frameworks are designed to curb illicit activities such as terrorism, human rights abuses, and corruption, they often create complex compliance environments for non-governmental organizations (NGOs) and nonprofits. Organizations operating internationally must balance their missions with strict legal requirements, particularly when providing humanitarian aid in regions under sanction.

Understanding OFAC’s Role and Its Impact on NGOs

OFAC administers and enforces economic sanctions to achieve U.S. foreign policy objectives. These sanctions target individuals, entities, and regimes linked to activities threatening U.S. interests, including terrorism, drug trafficking, and nuclear proliferation. While these measures aim to limit harm to innocent civilians, NGOs and nonprofits often face operational barriers due to broad interpretations and rigid compliance protocols.

The Scope of OFAC Sanctions

OFAC sanctions generally fall into two categories:

• Comprehensive Sanctions: These embargoes prohibit nearly all transactions involving specific countries (e.g., Iran, North Korea, Syria). Comprehensive sanctions create significant hurdles for NGOs operating in these regions, requiring detailed licensing for humanitarian operations.
• List-Based Sanctions: These target specific individuals or entities, such as those on the SDN list. Organizations are prohibited from engaging in financial or material transactions with these parties, including indirect dealings.

Sanctions’ Unintended Consequences

While sanctions aim to pressure bad actors, they often impede NGOs’ ability to provide critical aid. For example:

• Banking and Financial Transactions: Financial institutions frequently adopt overcompliance measures, refusing to process transactions even when licenses permit them, to avoid potential liability .
• Humanitarian Licenses: Although OFAC issues general and specific licenses to facilitate aid, navigating the application process can delay urgent humanitarian responses .

Compliance Challenges

Nonprofits often struggle with:

Unclear Boundaries:  Operating in or near sanctioned regions creates significant ambiguity for nonprofits. While the primary objective of these organizations is to deliver aid or advance social welfare, the risk of inadvertently engaging with sanctioned parties or entities complicates even routine operations. For example:

• Indirect Transactions: Funds or supplies provided to local partners may unintentionally flow to restricted individuals or organizations, especially in regions controlled by sanctioned entities such as terrorist groups or embargoed governments.
• Humanitarian Licenses: Although OFAC issues licenses to authorize certain transactions, the parameters of these licenses can be vague, leaving organizations uncertain about whether specific activities fall within the permitted scope.
• Compliance in Practice: Nonprofits often find themselves navigating a labyrinth of legal definitions to determine whether their activities violate sanctions. For instance, if an NGO provides food aid in a region where a designated terrorist organization holds de facto control, does that constitute material support?

Evolving Policies: Sanctions programs are inherently dynamic, with frequent updates to the Specially Designated Nationals (SDN) list, new executive orders, and shifts in U.S. foreign policy. For nonprofits, staying ahead of these changes is both essential and challenging:

• Frequent Updates: A new designation on the SDN list can render ongoing activities suddenly non-compliant, forcing organizations to halt operations or scramble to apply for specific licenses.
• Regional Volatility: Political developments, such as changes in control of a sanctioned territory or evolving relationships between governments, can shift the applicability of sanctions almost overnight. For example, U.S. policies toward regions like Yemen or Gaza can pivot quickly based on geopolitical events .
• Resource Limitations: Unlike multinational corporations, many nonprofits lack the internal infrastructure or legal expertise to track these changes in real-time, leaving them vulnerable to inadvertent violations or operational disruptions.

Fear of Penalties:The strict liability nature of U.S. sanctions laws exacerbates a culture of overcompliance. Under OFAC’s enforcement framework:

• Strict Liability: Organizations can face severe penalties for sanctions violations, even without intent or knowledge of the infraction. For example, unknowingly transferring funds to an SDN-affiliated entity can result in significant fines, reputational damage, and potential operational shutdowns .
• Overcompliance Culture: To mitigate these risks, nonprofits and their financial intermediaries—such as banks—often adopt overly cautious policies. Financial institutions may block legitimate transactions out of fear of violating sanctions, leaving nonprofits unable to access funds needed for aid delivery.
• Resource Drain: The high stakes of noncompliance lead to a disproportionate allocation of resources toward compliance activities. Instead of focusing on their core mission, nonprofits must invest heavily in legal support, training, and monitoring systems to avoid missteps.

The Legal Landscape for NGOs: Risks and Responsibilities

NGOs are legally obligated to comply with U.S. sanctions when their activities intersect with U.S. jurisdictions. This includes transactions involving U.S. persons, the U.S. financial system, or U.S.-origin goods and services.

Key Legal Risks

• Direct Violations: Engaging in unauthorized transactions with SDNs or embargoed jurisdictions.
• Material Support Laws: Providing goods, funds, or services to organizations affiliated with terrorism—even unintentionally—can result in severe penalties.
• Secondary Sanctions: Non-U.S. NGOs can face penalties if they engage in significant transactions with designated individuals or sectors.

Common Scenarios Triggering Legal Risks

• Aid in Embargoed Jurisdictions: Delivering supplies to regions like Syria or Crimea without proper licensing.
• Collaborating with Quasi-Governmental Entities: Regions under the control of designated entities (e.g., the Taliban) pose unique challenges, as humanitarian aid can indirectly benefit sanctioned groups .
• Banking Barriers: Transactions involving sanctioned countries are often flagged or blocked by financial institutions, delaying aid delivery and increasing costs .

Navigating the Compliance Maze: Strategies for NGOs

To effectively operate within the constraints of U.S. sanctions, NGOs must adopt proactive compliance measures. These strategies ensure legal operations while minimizing disruptions to their missions.

A. Building a Strong Compliance Framework

A comprehensive compliance framework involves:

• Risk Assessment: Identifying activities, regions, or partners that may trigger sanctions.
• Policies and Procedures: Developing written guidelines tailored to the organization’s risk profile. Policies should include protocols for restricted party screening, license applications, and documentation.
• Regular Training: Ensuring staff understand the nuances of sanctions compliance, including identifying red flags and reporting potential violations.

B. Conducting Due Diligence

Knowing your partners and counterparties is critical:

• Screening Tools: Use tools to cross-check individuals and entities against sanctions lists, including the SDN list and restricted party lists .
• Ongoing Monitoring: Relationships with local partners must be continuously evaluated to ensure compliance as circumstances evolve.

C. Applying for OFAC Licenses

When operating in sanctioned regions, NGOs may need:

• General Licenses: Pre-authorized for certain activities, such as disaster relief.
• Specific Licenses: Tailored permissions for activities not covered by general licenses. Applications must include detailed descriptions of the transaction, the parties involved, and its humanitarian purpose.

D. Managing Financial Challenges

Banks’ reluctance to process transactions linked to sanctioned jurisdictions often disrupts operations. NGOs can address this by:

• Engaging with Financial Institutions: Educating banks about licenses and compliance measures.
• Maintaining Clear Documentation: Providing detailed records to justify transactions and reduce the risk of delays.

E. Responding to Potential Violations

Despite best efforts, inadvertent violations may occur. Steps to mitigate damage include:

• Immediate Action: Cease the activity and investigate thoroughly.
• Voluntary Disclosure: Reporting violations to OFAC can reduce penalties, demonstrating good faith compliance