From Norm Pattis' latest column:
I hope all of you have checked your client lists lately. Representing the wrong person without the permission of the federal government can net you a fine of up to $1 million for an innocent mistake; do so intentionally, and face fines of up to $10 million and 30 years in prison. Welcome to Club Fed.
Whether you know it or not, you need a federal license to accept fees from certain clients. On the list? Those suspected of aiding terrorists, narcotics traffickers, and countries subject to U.S. embargos. Needless to say, the list has grown by leaps and bounds since Sept. 11, 2001.
Thousands of names are on the United States Treasury Department's list of Specially Designated Nationals and Blocked Persons. The list runs more than 140 pages in length, and has three columns densely packed with names, nationalities, dates of birth and other identifying information in tiny, hard-to-read type. The list is updated regularly and can be found at www.ustreas.gov/offices/eotffc/ofac. There is also a special federal hotline for the Office of Foreign Assets Control [OFAC]: 1  540-6322.
I found this information from the OFAC's FAQ:
As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called "Specially Designated Nationals" or "SDNs." Their assets are blocked and U.S. persons are generally prohibited from dealing with them. [09-10-02]
The list of SDN's is available here.
Would someone please send me an email regarding this program. I'm not sure what to make of it. Anonymity assured.
UPDATE: A reader writes:
Before I started law school last year I was a compliance officer for a major bank and OFAC was one of my areas of responsibility. Its true that US citizens are generally prohibited from engaging in transactions with individuals/entities on the SDN list unless granted a license by OFAC.
The good news is, you will likely not have a problem if the person you are dealing with has a US bank account. Banks have become very sensitive to screening their accountholders against the SDN list since 9/11 due to OFACs "enhanced enforcement" efforts. So, if your client pays by check, you should be OK. If in doubt, you can always check the SDN list at OFAC's website and call if you have a potential hit.
It was my impression that OFAC was not keen on fining those who innocently engage in transactions with those on the SDN list. (Although they may seize the funds involved.) Their main concern was regulating financial services companies who have the resources to adequately screen transactions. Even then, they didn't always fine companies that violated OFAC regs.