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U.S. sanctions can prohibit a transaction, require property to be frozen, or require a financial institution to reject a payment. Which response applies depends on the sanctions program, the people and entities involved, any ownership interests in property, the payment route, and the relevant U.S. connection. A name-screening result alone does not resolve the legal question.
What activity can U.S. sanctions restrict?
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers sanctions programs. Depending on the program, restrictions may prohibit transactions with blocked persons or property, or target particular jurisdictions, sectors, or activities. The programs are not interchangeable: the rules, exemptions, and available authorizations vary.
For a specific transaction, the parties’ identities and ownership, the goods or services, property interests, payment route, and any relevant U.S. person or U.S.-controlled connection can all matter. OFAC’s FAQ index covers distinct programs and separate compliance materials; a general explanation cannot determine whether a particular shipment, service, payment, or contract is permitted. Check the current regulations and list status for the applicable program, and consult qualified sanctions counsel or the organization’s compliance team for a live matter.
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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteWhat does it mean when a transaction is blocked?
Blocking freezes property; it does not transfer ownership
OFAC describes blocking as freezing assets or other property. Title remains with the blocked person, but the holder cannot transfer or otherwise deal in the property, or exercise the usual ownership rights, without OFAC authorization. A business or financial institution holding property subject to a blocking requirement must keep it blocked rather than return it or continue processing it.
Report the block
OFAC FAQ 9, updated August 21, 2024, says blocked property must be reported within 10 business days of becoming blocked. Check the applicable regulations and current OFAC reporting procedures for the case, and maintain the records required for the organization’s obligations.
What is the difference between blocked and rejected?
Blocking and rejecting are different outcomes. A blocking rule requires the property to be frozen when a blocked person has an interest in it. A transaction may instead be prohibited without involving property that must be blocked; in that case, the institution may need to reject it so it does not proceed. The applicable program’s regulations determine the response.
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| Question | Blocked | Rejected |
|---|---|---|
| Is there property in which a blocked person has an interest? | Yes; the property must be frozen when the applicable rule requires blocking. | No blockable interest is present, though a sanctions prohibition may still apply. |
| What happens to the transaction or property? | Property stays frozen; it cannot be transferred or otherwise dealt with absent authorization. | The prohibited transaction does not proceed. |
| What should the organization check? | The relevant program’s blocking rule, any exemption or license, and reporting requirements. | The relevant program’s prohibition and any exemption or license; do not process the prohibited transaction. |
These are practical distinctions, not a universal decision rule for every program. OFAC’s compliance guidance directs organizations to check applicable exemptions and licenses and then determine whether blocking or rejection is required.
Does the 50 Percent Rule apply if a company is not on the SDN List?
It can. Under OFAC’s 50 Percent Rule, an entity is considered blocked if one or more blocked persons own, directly or indirectly, 50 percent or more of it in aggregate. The entity need not itself be named on the SDN List for the rule to apply. OFAC FAQ 4 explains the rule; ownership review is therefore important alongside name screening.
A blocked minority owner does not automatically block the whole company
If a blocked person’s interest is below the 50 percent threshold, the company is not necessarily blocked as a whole under the 50 Percent Rule. However, property in which that blocked person has an interest must still be blocked, and payments or distributions to that owner are prohibited absent authorization. Do not treat every minority ownership stake as automatically blocking the entire entity.
Why do payment intermediaries need to consider ownership?
A financial institution can have sanctions obligations even when it is not the customer-facing bank. OFAC FAQ 6 addresses wires involving entities blocked by ownership: a wire can involve blocked property if the entity has an interest in it and is 50 percent or more owned by blocked persons. A U.S. bank acting only as an intermediary may therefore need to consider the ownership rule even without a direct relationship with the entity.
Payment review should consider the parties, ownership, property interest, and route, rather than relying only on the names of the sender and recipient or the institution’s customer relationship.
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How should a business or financial institution assess a possible sanctions issue?
- Map the transaction. Identify the parties and their beneficial ownership, relevant property, goods or services, payment route, and any U.S. person or U.S.-controlled connection that may matter under the applicable rule.
- Screen and investigate potential matches. Use the organization’s sanctions compliance procedures to assess a possible match against list data and program requirements. A similar name by itself is not a final determination. OFAC advises organizations to follow their own procedures when investigating potential matches.
- Identify the applicable program. Check its current regulations, prohibitions, exemptions, and any general or specific license that could apply.
- Choose the required response. Determine whether the rule requires blocking property or rejecting a prohibited transaction without a blockable interest. Do not release, transfer, or continue processing property that must be blocked.
- Complete reporting and records steps. If property is blocked, follow the applicable reporting deadline and procedures, including OFAC’s 10-business-day reporting requirement described in FAQ 9.
Keep the organization’s procedures aligned with the particular program and transaction. Screening is one step in that process, not a substitute for assessing ownership, property interests, authorizations, or the applicable rule.
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When can a license allow an otherwise prohibited transaction?
General licenses
OFAC issues general licenses for certain transactions that would otherwise be prohibited under a particular program. A general license applies only when the activity meets its stated conditions; it is not blanket permission to transact. OFAC FAQ 7, updated August 21, 2024, describes their purpose.
Specific licenses
A person may apply to OFAC for a specific license authorizing an otherwise prohibited transaction. OFAC evaluates applications case by case. Submitting an application is not itself authorization to proceed: the transaction must remain within the applicable restrictions unless and until OFAC grants authorization.
What should I do if my bank blocks my funds?
OFAC says it does not itself seize or hold blocked funds; financial institutions block or freeze covered funds in their possession or control. If you believe your funds have been blocked, contact the financial institution first to ask it to confirm the basis. OFAC authorization is required before blocked funds can be released. You may consider applying for a specific license through OFAC’s process.
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