What is OFAC screening?

The check a United States exchange runs against sanctions lists published by the Office of Foreign Assets Control, which name specific blockchain addresses as well as people and companies.

A match blocks the transfer and can freeze the account. The obligation falls on the exchange, so customers outside the United States are screened too whenever the venue, its banking partners, or the dollar itself is involved.

The list most often cited is the Specially Designated Nationals and Blocked Persons list, published by the United States Treasury. Since 2018 it has included digital currency addresses as an identifier type alongside names, aliases, and passport numbers, which is what makes it directly enforceable on chain.

How it works

Screening runs at several points, not one. Identity is checked at signup and rechecked when the lists update, which happens frequently. Counterparties are checked on fiat transfers. Blockchain addresses are checked on deposits and withdrawals, generally through a transaction monitoring vendor that also scores indirect exposure.

Indirect exposure is the part that surprises people. A deposit does not have to come from a listed address to be flagged. Monitoring tools trace how many hops separate your funds from a sanctioned or high-risk address and assign a risk score, and an exchange sets its own thresholds for review, restriction, or refusal.

Sanctions are strict liability. There is no requirement that you knew, and good faith is not a defense against the exchange's obligation to block. That is why a venue can restrict an account without explaining much, and why appeals are slow.

Listings also change. The Treasury sanctioned the Tornado Cash mixer in 2022 and removed those sanctions in 2025 after a court ruling, which shows that a designation is a policy decision that can be reversed, while the exchange's own risk appetite about the underlying activity may not change at the same pace.

Example

Illustrative sequence. You buy coins from an individual in a peer-to-peer trade at a small discount and deposit them at a regulated exchange.

The monitoring system reports that the funds are two hops from an address associated with a sanctioned entity. The deposit is held and the account is restricted. You are asked to document the source of funds, and the honest answer, that you bought from a stranger, does not establish provenance. The realistic outcomes are a lengthy review, a return of the funds to the sending address, or a closed account. None of that requires you to have done anything wrong.

Why it matters when you buy

The practical rule follows directly: buy through a regulated venue and keep the record, because that record is what establishes where your coins came from. A discount from an unknown counterparty is priced for the risk you are absorbing. Screening practices and licensing by venue are recorded at the exchange directory, and the country-level rules are summarized at the jurisdiction pages.

Related terms

• kyt — the monitoring that scores exposure
• aml — the wider program obligation
• chain analysis — how addresses get labeled
• mixer — a common source of flags
• travel rule — the paired transfer requirement
• suspicious activity report — what a match can trigger

Questions

Why was my deposit flagged when I did nothing wrong?

Because screening looks at the history of the coins, not just your conduct. Funds several hops from a listed address can score high enough for review even when your own transaction was ordinary.

Does this apply outside the United States?

Frequently yes. Venues with United States operations, dollar banking, or United States customers apply the screening broadly, and other jurisdictions maintain their own sanctions lists as well.

How do I keep a clean record?

Buy on regulated venues, keep the transaction records and dates, and withdraw to wallets you control. Documented provenance is the thing that resolves a review quickly.