What Happens to Frozen Dollars under Long-Term Sanctions

When the U.S. Office of Foreign Assets Control (OFAC) freezes dollar assets, it does not physically seize them. It imposes a ban on any transactions involving them. For the owner—whether an individual, a company, or the central bank of an entire country—this action initiates a lengthy and uncertain process, a legal limbo. The question of what happens to frozen U.S. dollars in long-term sanction scenarios has no simple answer. The assets do not disappear. They enter a suspended state where their fate is determined at the intersection of international law, U.S. national policy, and endless legal battles.

This process often lasts for decades. Money blocked today may become the subject of political bargaining or legal proceedings for the next generation. The history of sanctions against Iran, Afghanistan, and recent measures against Russia shows that the final outcome rarely comes down to a simple return of funds after a thaw.

To understand the long-term fate of assets, it is first necessary to draw a clear line between two terms that are often confused: blocking and seizure/forfeiture. The overwhelming majority of OFAC sanctions imply precisely blocking.

This fundamental difference determines all subsequent legal processes. Blocked assets are property that is prohibited from being used; confiscated assets are property taken away permanently.

The legislation of the USA, in particular the International Emergency Economic Powers Act (IEEPA), grants the president broad authority to block assets in response to national security threats. A financial institution in the USA (for example, a correspondent bank) that discovers funds belonging to a person from the SDN (Specially Designated Nationals) list is obligated to:

From this moment, the bank acts only as a custodian of these funds. Ownership does not legally transfer to the U.S. government. It still belongs to the sanctioned individual. However, all rights, powers, and privileges associated with this property are annulled.

Confiscation, on the contrary, is the transfer of ownership rights to the U.S. government or another person. It is a much more complex legal procedure. It cannot be carried out by a simple administrative decision of OFAC. Confiscation usually requires a judicial process during which the government must prove that these assets are connected to specific criminal activity (e.g., money laundering, terrorism financing, corruption) or are its proceeds.

What happens to the dollars lying in these blocked interest-bearing accounts for years or even decades? They become the main target.

Erosion of value: Although by law the funds must be kept in an interest-bearing account, the income received is rarely significant. At the same time, banks have the right to charge a reasonable fee for servicing these blocked accounts. Over 20-30 years, inflation and fees can significantly erode the real value of the frozen capital.

Attacks by creditors: The most important thing is that frozen assets become a sitting duck for claimants. Anyone with a court decision against a sanctioned individual (for example, a U.S. court ruling on compensation) can attempt to enforce collection on these blocked funds.

Here begins a multi-year legal battle. The plaintiff (for example, a victim of a state-sponsored terrorist attack) must prove in court their right to this specific money. The sanctioned owner (if they have legal representation permitted by an OFAC license) will contest this. The U.S. government (represented by the Department of Justice) is also involved in the process, defending its control over the blocking.

These funds can be tied up in legal disputes for decades before a final decision is made on who will receive them — the original owner, if the sanctions are lifted, or the creditor who won the lawsuit.

Theoretically, if sanctions are lifted, assets should be returned. In practice, this happens rarely and is never simple.

Example 1: Lifting of sanctions (Delisting) If an individual or legal entity has successfully challenged their inclusion in the SDN list or the political situation has drastically changed (for example, a regime change in the country), OFAC may remove them from the list (delist).

After that, OFAC issues a license allowing the custodian bank to unblock the account and return the funds to the owner (including accrued interest minus fees).

However, this happy ending is often complicated. By the time the sanctions are lifted, numerous judicial liens from various creditors may already be imposed on these assets. The owner will have to spend several more years in court proving their right to the money, even after the political thaw.

Example 2: Licensing for specific purposes A more common option — OFAC does not completely unfreeze assets but issues specific licenses for their use. For example, frozen funds may be permitted for use for:

In this case, the funds are not returned to the owner but are purposefully spent under the strict supervision of OFAC.

Real cases show how different long-term scenarios can be.

Long-term sanctions turn frozen dollars from an asset into a legal problem. For individuals and companies, this means decades of uncertainty, a decrease in the real value of assets, and a constant threat of lawsuits from creditors. The return of funds is possible but requires complex legal work to lift sanctions (delisting) and subsequently clear the assets of legal claims.

For sovereign states, the stakes are even higher. As the example of Russia shows, the principle of sovereign immunity is no longer an inviolable guarantee. Long-term freezing creates a political window for adopting new laws that legalize what was previously considered impossible — direct confiscation.

Freezing of assets is not passive waiting but the beginning of active legal struggle. If you or your company have faced an OFAC asset freeze, time is not on your side. Assets need to be protected not only from the freeze itself but also from third-party claims.

Contact our experts in sanctions law. We will help assess your situation, explore the possibilities of filing an appeal for removal from the SDN list, request the necessary OFAC licenses, and develop a strategy to protect your assets in American and international courts.