What is OFAC screening for payment processors?
Payment processors must screen both the merchant and the customer, because they can be liable even when the merchant is the direct counterparty.
TL;DR
TL;DR: Payment processors must screen both the merchant and the customer against the OFAC SDN List. A processor can be liable for facilitating a sanctioned transaction even if the merchant is the direct counterparty.
Why the processor shares liability
A processor sits in the middle of every transaction it routes, which makes it a facilitating party under OFAC. Even if the merchant is the one directly dealing with a sanctioned customer, the processor that moves the funds participated in the transaction. Strict liability applies, so intent is not required, and civil penalties start at $356,000 per violation.
What to screen on both sides
Screen the merchant at onboarding and re-screen periodically, then screen each customer wallet or name at transaction time. sanctionsai.dev checks a counterparty against 947 OFAC-listed crypto wallets and 19,218 SDN names in a single HTTP call under 100 ms, returning clean (ALLOW) or flagged (BLOCK). Because the data syncs hourly from the US Treasury sdn.csv, the decision reflects the current list.
Controls for processors
- Block the transaction on a BLOCK result for either party.
- Apply the 50 Percent Rule to entities owned by a blocked person.
- Log each decision so the processor can show it did not facilitate a violation.
Screening both sides is the difference between routing a payment and owning a violation.
Processors that screen both sides can demonstrate they took reasonable steps, which is the strongest position available under a strict-liability regime.