OFAC Blocking — U.S. Sanctions Action and the Gem Trade
OFAC Blocking — U.S. Sanctions Action and the Gem Trade
How the U.S. Treasury's sanctions enforcement affects Burmese rubies, Russian diamonds, and conflict-financing concerns
OFAC blocking refers to enforcement action by the U.S. Treasury's Office of Foreign Assets Control prohibiting transactions with designated individuals, entities, or countries under economic sanctions programmes. In the gem and jewellery trade, OFAC sanctions have targeted Burmese rubies and jade (with prohibitions in force from 2008 to 2016 and again from 2020), Russian diamonds and other luxury goods (since 2022 following the invasion of Ukraine), and entities linked to specific conflict-financing investigations. Violations carry severe civil and criminal penalties, and importers, dealers, and manufacturers must screen suppliers against the OFAC Specially Designated Nationals (SDN) list and maintain due-diligence records.
How OFAC sanctions work
OFAC implements economic sanctions programmes authorised by the U.S. President or Congress under various legal authorities including the International Emergency Economic Powers Act (IEEPA), the Trading with the Enemy Act, and specific country-focused legislation. The agency maintains the SDN list — a roster of individuals, entities, vessels, and other parties with whom U.S. persons are prohibited from transacting — along with sectoral, country-specific, and product-specific sanctions programmes.
For gem and jewellery businesses, the principal compliance obligations include: screening counterparties against the SDN list before transactions; maintaining records of due-diligence checks for at least five years (the OFAC retention requirement); reporting blocked or rejected transactions to OFAC; and implementing internal compliance programmes appropriate to the risk profile of the business.
Burmese rubies and jade
The Burmese gem trade has been the subject of multiple sanctions phases. The Tom Lantos Block Burmese JADE Act of 2008 prohibited the U.S. import of jadeite and rubies that originated in or transited through Burma, regardless of further processing in third countries. The sanctions were lifted in 2016 following political reforms in Myanmar but reinstated in 2020 and expanded in 2021 following the military coup, with new restrictions applying to specific entities and to gemstones broadly. Current sanctions affect ruby and jadeite of Burmese origin and continue to evolve.
For dealers and importers, Burmese-origin gemstones present an active compliance risk. The combination of historic stockpiles (predating sanctions), processing in third countries (which can mask origin), and the continued importance of Burmese material to the global ruby and jade markets creates a complex compliance environment. Buyers should verify origin through laboratory testing and supply-chain documentation, with particular attention to country-of-origin and chain-of-custody records.
Russian diamonds and luxury goods
Following Russia's invasion of Ukraine in February 2022, the U.S. and allied jurisdictions imposed sanctions on Russian diamonds and luxury goods. OFAC sanctions on Russian diamonds were strengthened progressively through 2022 and 2023, with executive orders prohibiting the import of non-industrial diamonds of Russian origin, regardless of further processing in third countries. The G7 nations announced coordinated traceability and sanctions measures in 2023 and 2024, with progressive implementation of country-of-origin tracking and certification requirements.
Compliance for diamond importers has become substantially more complex. ALROSA — the principal Russian diamond producer — and various entities in the Russian diamond chain have been added to OFAC SDN lists. Importers must demonstrate the non-Russian origin of polished diamonds through supply-chain documentation, with progressive carat-weight thresholds for documentation requirements established under the G7 framework.
Other relevant sanctions
OFAC programmes affecting the gem and jewellery trade also include the Democratic Republic of Congo sanctions (related to conflict minerals and specific entities), Iran sanctions (which affect Iranian turquoise and some pearl supply), Venezuela sanctions (affecting specific gold and gem supply chains), and various country-specific or entity-specific designations targeting conflict financing or human-rights abuses.
The Specially Designated Global Terrorist (SDGT) and Foreign Terrorist Organization (FTO) designations apply across all sectors, including gems, where individuals or entities have been linked to terrorist financing through gemstone trafficking — historically a documented concern in certain regional contexts.
Penalties and enforcement
OFAC violations carry severe penalties. Civil fines can reach the greater of approximately $300,000 per violation or twice the value of the underlying transaction. Criminal penalties for willful violations include fines up to $1 million per violation and prison sentences up to 20 years. Enforcement actions in recent years have included substantial settlements with major financial institutions and luxury goods companies for sanctions violations.
The OFAC enforcement framework rewards good-faith compliance programmes, with reduced penalties available for companies that have implemented robust due-diligence systems, maintained appropriate records, and self-disclosed violations promptly. The cost of building and maintaining a compliance programme is substantial but generally far lower than the cost of a single significant enforcement action.
Practical compliance for jewellers
For gem dealers and jewellers, OFAC compliance involves several layers. The first is screening against the SDN list, achievable through commercial compliance software or, for smaller operations, manual checking against the OFAC website lists. The second is country-of-origin verification for relevant gems, requiring laboratory documentation, supplier certifications, and chain-of-custody records. The third is internal recordkeeping sufficient to demonstrate due diligence in the event of inquiry.
Industry organisations including the NYDDC, JVC (Jewelers Vigilance Committee), and the Jewelers of America provide compliance guidance and training. Subscription-based screening services and supply-chain certification programmes (RJC, RMI, and others) provide additional layers of compliance verification appropriate to mid-sized and larger operations.