OFAC screening for KYC providers
KYC verifies who someone is, but OFAC screening verifies whether that person is sanctioned, so both steps belong in onboarding.
TL;DR
TL;DR: KYC providers should add OFAC screening to their identity checks. KYC establishes identity, while OFAC screening determines whether that identity is sanctioned, so KYC without OFAC screening is incomplete.
Why identity checks are not enough
KYC answers "who is this person," but OFAC asks a different question: "is this person on the Specially Designated Nationals and Blocked Persons List." A customer can pass KYC and still be a designated party. Under OFAC strict liability, processing a transaction for a sanctioned person is a violation even with a fully verified identity, with penalties starting at over $350,000 per violation.
How to add the screening step
After identity is verified, run the name, wallet, and related entities against OFAC data. sanctionsai.dev screens a counterparty against 19,218 SDN names and 947 OFAC-listed crypto wallets in one HTTP call under 100 ms, returning clean (ALLOW) or flagged (BLOCK). The check is synced hourly, so it reflects the current US Treasury sdn.csv.
Where it fits in onboarding
- Run KYC to establish identity, then run OFAC to check sanctions status.
- Apply the 50 Percent Rule to entities owned by a blocked person.
- Log both the identity result and the screening result for the record.
Complete onboarding means knowing the customer and confirming they are not sanctioned.
Offering KYC without OFAC screening gives customers a false sense of completeness, so providers should bundle both checks into a single onboarding flow.