What are Sanctions?
Sanctions are legal restrictions imposed by governments — most notably the U.S. Treasury’s Office of Foreign Assets Control (OFAC) — that prohibit individuals and businesses from transacting with designated parties. In the crypto context, sanctions lists include specific blockchain addresses associated with terrorism, narcotics trafficking, weapons proliferation, ransomware, or other illicit activities.
OFAC and the SDN List
The Specially Designated Nationals and Blocked Persons (SDN) List is OFAC’s primary sanctions tool. It includes:
- Named individuals (e.g., hackers, drug lords, terrorist financiers)
- Legal entities (e.g., front companies, exchanges operating in sanctioned jurisdictions)
- Blockchain addresses (ETH, BTC, TRON, and other chain addresses) added since 2018
As of 2025, the SDN list contains hundreds of crypto addresses. U.S. persons are prohibited from transacting with any SDN-listed address, and penalties for violations can include fines up to $300,000 per violation and criminal prosecution.
Sanctions Screening in Crypto
Most regulated crypto businesses screen transactions against sanctions lists in real time:
- Inbound screening: Check the sender address when receiving funds — reject deposits from sanctioned addresses
- Outbound screening: Check the recipient address before sending funds — block withdrawals to sanctioned addresses
- Hop analysis: Some tools trace funds back multiple hops to detect indirect exposure (e.g., funds that passed through a Tornado Cash pool)
Risk API Integration
The Onchain Diary Risk API includes sanctions screening as part of address risk scoring. Addresses that appear on OFAC or community-maintained blacklists receive an immediate critical risk classification, with signal weights of 50-60 points depending on the source.