OFAC compliance for token projects

How token projects can screen transfers and counterparties to reduce sanctions exposure across their ecosystem.

TL;DR

TL;DR: Token projects should screen transfer destinations and counterparties before settlement, since the token's smart contract inherits every transaction that flows through it.

Where token projects are exposed

A token's transfer function can be called by anyone and send value to any address. If a transfer settles to a wallet on the SDN List, the project has facilitated a transaction with a sanctioned party. OFAC strict liability means intent is not required and penalties start at $356,000 per violation.

Screening at the application layer

Smart contracts may be immutable, but the interfaces around them are not. A dApp or bridge can call sanctionsai.dev's sanctions_check before relaying a transfer, returning ALLOW or BLOCK in under 100 ms. Screening against 947 OFAC-listed crypto wallets and 19,218 SDN names catches flagged destinations before settlement.

Controls to adopt

Use the 4-Gate Agent Payment Protocol of SCREEN, SCORE, STOP, STAMP for every transfer flow. A BLOCK halts the transfer, risk_score flags borderline cases for review, and a STAMP log records that screening ran. Hourly-synced data across 16 jurisdictions keeps coverage current as the SDN List changes.