OFAC screening for custody providers

Crypto custodians must screen deposits, withdrawals, and the ultimate beneficial owners behind each account they hold.

TL;DR

TL;DR: Crypto custody providers must screen deposits, withdrawals, and the ultimate beneficial owners of custodial accounts against the OFAC SDN List before any funds move.

Why custodians carry the duty

A custodian holds the keys and executes transfers, which makes it the facilitating party in any transaction. A deposit from, or withdrawal to, a designated address is a prohibited transaction, even if the account holder is not sanctioned. OFAC strict liability applies, so intent is not required, and penalties start at over $350,000 per violation.

What a complete screen covers

Screen three things: the source address on deposit, the destination address on withdrawal, and the ultimate beneficial owner of the account. A named owner can be a shell for a blocked person, which is why the 50 Percent Rule matters: entities owned 50% or more by a designated party are also blocked. sanctionsai.dev checks addresses and names against 947 OFAC-listed crypto wallets and 19,218 SDN names in one HTTP call under 100 ms, returning clean (ALLOW) or flagged (BLOCK).

Controls to put in place

• Block flagged deposits and withdrawals automatically.
• Re-screen beneficial owners whenever ownership changes.
• Log every decision for audits and regulatory review.

Custody is a position of trust, and screening is part of that trust.

Periodic re-screening matters because a beneficial owner who was clean at onboarding can become a designated party later.