Claude explains the new Sanctions Penalties Regulations, and compares them to what existed beforehand:

OFAC published a new regulation this week: 31 CFR Part 505, the Sanctions Penalties Regulations. It’s the kind of rule that sounds like a bigger deal in the announcement than it turns out to be once you’re actually inside it, which is exactly the sort of question this series exists to chase down. This post has two parts. The first walks through what the new rule actually says, since a straight read of a Federal Register final rule isn’t most people’s idea of a good time. The second, and more interesting, part is how Part 505 sits next to everything else OFAC already had on the books: what it consolidates, what it leaves completely alone, and one citation in the rule’s own text that doesn’t hold up.

What OFAC Just Did, in Plain Terms

Start with what actually changed. OFAC created a new, freestanding regulation gathering the enforcement procedures and penalty amounts for the two legal authorities behind the overwhelming majority of active US sanctions programs, the International Emergency Economic Powers Act (IEEPA) and the UN Participation Act (UNPA). It took effect the moment it published, September 25, 2026, with no notice-and-comment period, because Treasury treats this as a housekeeping rule about procedure rather than a change to what conduct actually gets penalized.

Five pieces make up the new part:

• General provisions, including a codified promise that OFAC will keep publishing civil penalty and settlement outcomes at least monthly (entity name, program, violation description, self-disclosure status, and amount; individuals appear only in aggregate, never by name).
• Definitions, just IEEPA and OFAC itself. Everything else still comes from each program’s own regulation.
• A reserved subpart, presumably held for future use.
• The actual IEEPA penalty process: a Pre-Penalty Notice, a 30-day window to respond, a Penalty Notice if OFAC still finds a violation, referral to Justice if the person doesn’t pay, and the alternative “Finding of Violation” track OFAC uses when it wants a formal record without a fine attached.
• UNPA penalties, which turn out to be much thinner than IEEPA’s. This part is criminal only: willful violations draw up to $1 million and 20 years, with no separate civil penalty structure of its own.

The dollar figures that matter: IEEPA’s civil cap sits at $377,700 per violation, or twice the transaction value if that’s larger, and willful criminal violations top out at $1 million and 20 years. Voluntary self-disclosure earns a real discount, though how much depends on whether OFAC classifies the case as egregious or not. That distinction is worth getting right rather than compressing into a rule of thumb, so it’s covered properly in the next section.

None of this is new law. OFAC says explicitly that no penalty amounts or enforcement standards changed, only where the rules describing them live. The practical effect on a compliance program today is close to nothing. Where it will eventually show up is in the individual program regulations, Russia’s, Iran’s, Syria’s, and so on, each of which currently carries its own near-identical penalty subpart. OFAC’s announcement says publication of Part 505 sets up the deletion of over 100 of those subparts as the individual programs get replaced with a one-line pointer to this new part instead.

Where It Sits Next to Everything Else

The useful way to think about Part 505 is as one layer of a stack that already had several other pieces, and it only touches one of them.

The substance stays exactly where it was. Part 505 governs timing and paperwork. The actual judgment calls, the general factors OFAC weighs, and the base-penalty math still live in the Economic Sanctions Enforcement Guidelines at Appendix A to Part 501, which Part 505 cross-references rather than replacing (see 505.402(d)). This is also where the self-disclosure discount from the previous section actually gets worked out, and it’s more specific than a flat “cut in half.”

For egregious cases, self-disclosure does cut the base penalty cleanly in half, from the full statutory maximum down to 50 percent of it. Non-egregious cases, which cover the majority of matters OFAC actually pursues, work differently. Without a self-disclosure, the base amount comes from a stepped schedule tied to transaction-value bands (under $1,000 gets a $1,000 base, $1,000 to $10,000 gets $10,000, and so on up through $200,000 and beyond, where it caps at the statutory maximum). With a self-disclosure, the base switches entirely to one-half of the actual transaction value, capped at $188,850. Those are two different quantities, not one number and its half. A $5,000 transaction with no self-disclosure lands a $10,000 schedule-based base; the same transaction disclosed voluntarily gets $2,500, a 75 percent reduction, not 50. In most of the schedule’s bands the gap is even wider, because the schedule rounds up to the next tier rather than tracking the real transaction value. Cuba is the one exception: it still runs on its own 2003 Cuba Penalty Schedule, where OFAC’s guidelines do describe the self-disclosure discount as a literal 50 percent reduction.

TWEA-based programs run on an entirely separate, older track. Cuba, and whatever residual North Korea matters still reach back to the Trading with the Enemy Act rather than IEEPA, and that track is untouched by this rule. It lives in Part 501, Subpart D, and it differs from the new part in two ways worth knowing. The civil cap is lower, at $111,308 against IEEPA’s $377,700. And TWEA is the only one of OFAC’s penalty tracks that gives a respondent an in-house hearing before an administrative law judge, running roughly from Section 501.710 through Section 501.761, before a case becomes final agency action. Part 505 skips that step entirely: a Penalty Notice is final agency action, full stop, and the only recourse is federal district court.

A few statutes never ran through IEEPA at all, and Part 505 leaves them alone too. The Foreign Narcotics Kingpin Designation Act (Part 598) carries the highest civil cap of any OFAC authority, $1,876,699 per violation. The material-support statute behind the Foreign Terrorist Organizations program (Part 597) caps at the greater of $99,703 or twice the blocked funds a financial institution failed to retain, and it runs on its own statute, 8 U.S.C. 1189, not IEEPA at all. Both keep their own dedicated procedures.

Authority	CFR home	Civil cap per violation	Distinctive feature
IEEPA / UNPA (new)	Part 505	$377,700, or twice the transaction value if greater	No in-house hearing; a Penalty Notice is final agency action
TWEA (Cuba today)	Part 501, Subpart D	$111,308	The only track with an in-house hearing before an administrative law judge
Kingpin Act	Part 598, Subpart G	$1,876,699	Highest cap of any OFAC authority
FTO / AEDPA (18 U.S.C. 2339B)	Part 597, Subpart G	Greater of $99,703 or twice blocked funds not retained	Runs on its own statute, not IEEPA
Clean Diamond Trade Act	Part 592, Subpart F	$17,062	Lowest cap of the five; see the note below

One citation in Part 505’s own background section doesn’t hold up. It lists the Clean Diamond Trade Act’s penalties as sitting in “appendix A to 31 CFR part 501.” That’s not quite right. Appendix A does reference the CDTA’s $17,062 maximum, alongside the other four statutes, because all five share the same general factors and vocabulary that Appendix A defines. But the CDTA’s actual penalty regulations, the pre-penalty notice, response, and penalty imposition procedures, are codified separately at 31 CFR Part 592, Subpart F, the Rough Diamonds Control Regulations. It reads as though whoever drafted that background paragraph conflated “Appendix A mentions this number” with “Appendix A is where this regulation lives.”

One more thing worth knowing, for what it’s worth: this isn’t the first tenant at address 505. The number previously housed the Transaction Control Regulations, covering certain offshore trade in strategic goods with the former Soviet Bloc, until OFAC removed it in 2011 after the underlying Trading with the Enemy Act authority over North Korea lapsed. It sat vacant for fifteen years before this rule moved back in.

A Note on Sources

Every dollar figure above comes from the current text of Appendix A to Part 501, cross-checked against OFAC’s January 2025 inflation-adjustment rule, the last one that actually changed anything. There was no 2026 adjustment: the October 2025 CPI-U data needed to calculate it was never produced because of the government shutdown, and OMB formally canceled the 2026 adjustment in Memorandum M-26-11. Every number in this post, including the ones written into Part 505 itself, is the same figure that has been in effect since January 2025.

So, did OFAC change how sanctions penalties work, or just where they live? Mostly the latter. The dollar amounts, the general factors, and the self-disclosure math didn’t move. What moved is the address, and the promise that OFAC will eventually clean up a rulebook that currently says the same thing in more than a hundred places. Whether that promise gets kept on any particular timeline is, itself, a pretty good burning question for a future post.