OFAC Settlement Glossary Part 1
Core terms for understanding how OFAC enforcement actions are resolved, usually through a monetary penalty.
TL;DR
TL;DR: A settlement is the resolution of an OFAC enforcement action, typically a monetary penalty paid to close an apparent violation. Because OFAC enforces strict liability, many cases settle even without intent to violate.
What an OFAC settlement is
When OFAC identifies an apparent violation of its sanctions programs, it may open an enforcement action. Most cases are resolved through a settlement, in which the company agrees to pay a civil penalty and often commits to compliance improvements. Settlement avoids prolonged litigation and gives the respondent a final, published resolution. The size of the penalty depends on factors such as the value of the transaction, the company's compliance history, and the presence of aggravating or mitigating factors.
Why it matters for agent payments
Civil penalties start at $356,000 per violation, so a single unscreened agent payment can cost far more than the payment itself. Settlements are public, which means reputational harm on top of the fine. Preventing the violation in the first place is far cheaper than settling one. Screening a counterparty before the agent pays, the clean equals ALLOW, flagged equals BLOCK logic of sanctionsai.dev, keeps the transaction out of the enforcement pipeline entirely.
Terms covered in Part 1
- Enforcement action: an OFAC proceeding for an apparent violation.
- Civil penalty: a monetary fine, not a criminal sanction.
- Respondent: the party that answers the enforcement action.