HomeOFAC Release of Blocked Funds
When a U.S. bank finds that a payment involves a sanctioned person or country, it must block the funds in a separate blocked account or reject the transaction. OFAC Sanctions Programs are directed against individuals and entities engaged in activities that contradict the foreign policy or national security of the USA. Financial organizations are generally required to block such entities’ assets and transfer funds from them to a special frozen account until receiving instructions from OFAC.
Are you faced with asset freezing due to OFAC or sanctions regulations?
Our company is ready to offer comprehensive solutions to protect your interests and unblock funds. The complex US sanctions policy requires a deep understanding of legal norms and competent interaction with regulators and financial organizations — we have the necessary experience and expertise to assist you in this challenging process. Our team can help in preparing appeals to OFAC, clarifying the legality of transactions and the origin of funds, processing special licenses and permits, representing you in legal proceedings where needed, and negotiating with banks, brokers, and government agencies.
- OFAC Release of Blocked Funds
- What Is an OFAC Hold on a Bank Account?
- Your Money Is Frozen. Here’s What Happens Next
- Is Your Situation Urgent?
- Why Funds Get Blocked: The Four Most Common Causes
- Three Legal Routes to Release Blocked Funds
- What We Do: The Release Process Step by Step
- How to Apply for an OFAC License to Release Blocked Funds
- Mistaken Identity: Compliance Release Under § 501.806
- What Affects How Long a Release Takes
- Who Can Apply for Release
- Blocked Funds vs. Rejected Transaction: Know the Difference
- Speak With an OFAC Attorney Today
- FAQ
What Is an OFAC Hold on a Bank Account?
An OFAC hold means the bank has to freeze your funds because a transaction looks connected to someone or something on a U.S. sanctions list. Your money isn’t taken away — it just can’t move until the bank confirms there’s no sanctions risk or gets permission to release it. Often it happens because of a name match or a link to a restricted country.
Your Money Is Frozen. Here’s What Happens Next
When a bank blocks your transaction or freezes your account under OFAC sanctions, the funds cannot be transferred, withdrawn or used until OFAC authorizes their release.
We are OFAC sanctions attorneys. We represent individuals, businesses, and financial institutions whose assets have been blocked under U.S. sanctions programs. Our team handles the full process — from identifying why your funds were frozen to securing their release through OFAC licensing or a formal unblocking petition.
Is Your Situation Urgent?
Tell us what happened:
- A bank froze your incoming wire transfer;
- Your account was blocked after an OFAC name-match alert;
- A correspondent bank rejected a cross-border payment;
- Your broker or payment processor suspended your account;
- You received a Blocking Notice and don’t know what to do next.
There is no deadline for the owner, but the bank must report the blocking to OFAC within 10 business days, and acting early lets you build the file while the facts are fresh.
Why Funds Get Blocked: The Four Most Common Causes
Understanding the reason behind the freeze determines the strategy for releasing your funds. In our experience, most cases fall into one of these categories:
- SDN List Match (Direct or False Positive) Your name, company name, or a counterparty’s details matched — exactly or partially — an entry on OFAC’s Specially Designated Nationals (SDN) List. Banks must block property once a match is confirmed, and many hold the funds while they investigate a potential match. Many of these are false positives caused by similar names or shared identifiers.
- Sanctions Program Violation The transaction involved a country, entity, or individual subject to a comprehensive or targeted U.S. sanctions program — such as Iran, Russia, Cuba, or Venezuela.
- Bank Compliance Hold (De-risking) The bank’s automated screening system flagged the transaction as high-risk, even without a direct sanctions violation. This is increasingly common with transfers involving certain jurisdictions, currencies, or counterparty profiles. The funds are not necessarily blocked by OFAC — but the bank has placed them on hold pending review.
- No Valid OFAC License The transaction required a specific or general license under OFAC regulations, and none was in place. Without authorization, the bank must reject the payment or, if a blocked person has an interest in it, block it. See our OFAC license page.
Three Legal Routes to Release Blocked Funds
The right route depends on why the funds were blocked:
- A specific license for the release of blocked funds. The standard route when the block is valid — the payment involved a blocked person, a blocked person’s interest or a sanctioned jurisdiction. OFAC authorizes the release case by case.
- A compliance release for mistaken identity (31 C.F.R. § 501.806). When the property was blocked because of a false name match or a typographical error, the institution that blocked and reported it can ask OFAC to release it without a license application.
- Removal from the SDN List. When the owner is itself designated, a license can free particular funds, but only removal from the SDN List lifts the block on everything.
A bank’s own compliance hold is different again: no OFAC authorization is needed, and it is usually resolved by giving the bank the documents it asks for.
What We Do: The Release Process Step by Step
We don’t just advise — we handle the process from start to finish.
Step 1 — Emergency Assessment (24–48 hours) We review your Blocking Notice, transaction history and the sanctions program involved, and determine whether this is a false positive, a genuine sanctions issue or a bank compliance hold — each requires a different approach.
Step 2 — Strategy We choose the route: a bank-level clarification, a compliance release request under 31 C.F.R. § 501.806, an application for a specific license, or a combination, and explain the options and what affects timing in your case.
Step 3 — Document Preparation We compile and review contracts, invoices, proof of the origin of funds, beneficial ownership documents and KYC records, and draft the application. Incomplete submissions lead to requests for more information and delay.
Step 4 — Submission and OFAC Liaison We file through OFAC’s online License Application Page and handle all follow-up, answering OFAC’s requests for information promptly and completely.
Step 5 — Bank Coordination In parallel, we work with your bank’s compliance team so the blocking is properly reported under 31 C.F.R. § 501.603 and the release is executed as soon as OFAC authorizes it.
Step 6 — Release and Follow-up When OFAC authorizes the release, we make sure the bank acts on it and advise on measures that prevent the same block from recurring.
How to Apply for an OFAC License to Release Blocked Funds
An application for the release of blocked funds is a request for a specific license, which OFAC decides case by case under 31 C.F.R. § 501.801. The steps:
- 1. Check the general licenses first. Each sanctions program publishes general licenses, and OFAC’s policy is not to grant a specific license for a transaction that a general license already authorizes. If one fits, no application is needed.
- 2. Get the facts from the bank. The blocking date, the amount, the reference numbers and the sanctions program the bank relied on. The bank reports the blocking to OFAC within 10 business days, and that report is the starting point of your file. Ask for the OFAC Reporting System (ORS) transaction and submission numbers — § 501.801 encourages including them in the application.
- 3. File online. Applications go through OFAC’s License Application Page; if that option is unavailable, an unblocking request can be made on Form TD-F 90-22.54, “Application for the Release of Blocked Funds” (31 C.F.R. § 501.801(b)(2)). The application must be signed, and only one copy should be submitted — duplicates may delay processing.
- 4. Disclose everything. Name all parties concerned with or interested in the transaction; an agent filing for a client must name the principal. Attach the contracts, invoices, payment messages and ownership documents, and explain why releasing the funds is consistent with the sanctions program — for example, that the money belongs to a party that is not blocked.
- 5. Answer requests for information. OFAC often asks follow-up questions. Track the case by its Case ID and reply fully and on time.
- 6. If the application is denied. Reconsideration can be requested at any time on the basis of new facts or changed circumstances, and a new application can be filed.
Mistaken Identity: Compliance Release Under § 501.806
Where funds were blocked only because of a false name match or a typographical error, the person that blocked and reported the property can request a compliance release by email to [email protected], with “31 CFR 501.806—Request for a Compliance Release” in the subject line. The request gives the requester’s contact details and, where known, the property holder, the value and date of the blocking, the OFAC Reporting System numbers, a description of the transaction, identification of the person whose property was wrongly blocked and an explanation of why the blocking was an error. The account owner usually supplies identity documents through the bank. OFAC may ask for more information and, if it agrees, directs the release.
What Affects How Long a Release Takes
OFAC does not publish a deadline for license decisions. Timing depends on the route — a compliance release for mistaken identity is narrower than a license application — on how complete the documents are, how many parties and jurisdictions are involved, the policy sensitivity of the sanctions program, and how many rounds of questions OFAC asks. Bank compliance holds that involve no OFAC block are usually the quickest to resolve.
Who Can Apply for Release
Under § 501.801, any person having an interest in a transaction or proposed transaction may apply for a license — typically the owner of the blocked funds or the intended recipient. An attorney or other agent can file on their behalf but must disclose the principal’s name. Filing through counsel helps the application address the sanctions basis directly and anticipate OFAC’s questions.
Blocked Funds vs. Rejected Transaction: Know the Difference
This distinction affects your legal position significantly.
A rejected transaction means the bank refused to process the payment and returned the funds to the sender. No assets are seized. The money goes back, minus any fees. This is faster to resolve but still requires legal documentation to avoid repeat rejections.
A blocked transaction means the funds have been physically transferred into a federally mandated interest-bearing blocked account. The owner retains legal title but loses all ability to access or use the funds until OFAC issues a release authorization. Release requires an OFAC license or, for mistaken identity, a compliance release requested by the bank.
If you are unsure which situation applies, ask your bank for its written blocking or rejection notice. We can interpret it for you during a consultation.
Which action the bank must take depends on the sanctions program and the parties involved; our guide on when OFAC requires blocking or rejection explains the rules.
Speak With an OFAC Attorney Today
If your funds have been blocked, do not wait for the bank to resolve it on their own. Banks are not authorized to release blocked assets without OFAC instruction — and they will not advocate for you.
We will review your situation, tell you exactly what you are facing, and give you a clear action plan.
FAQ
What is the legal basis for blocking funds under OFAC?
OFAC administers economic sanctions under authority granted by the International Emergency Economic Powers Act (IEEPA), the Trading with the Enemy Act (TWEA), and various executive orders. When a transaction or asset falls within the scope of a sanctions program, financial institutions are legally required to block it and report the action to OFAC within 10 business days under 31 CFR § 501.603.
What happens to blocked funds — where do they go?
The institution holds the funds in a blocked, interest-bearing account in the owner’s name. Title stays with the owner, and the funds can be released only with OFAC authorization.
What is the SDN List?
The Specially Designated Nationals and Blocked Persons List names the individuals, companies and vessels whose property U.S. persons must block. See our guide to the SDN List.
What is the 50% Rule?
Entities owned 50% or more, in aggregate, by blocked persons are blocked too, even if they are not listed themselves — see the OFAC 50 Percent Rule.
What is the difference between SDN and SSI (Sectoral Sanctions)?
An SDN designation means full blocking and a ban on dealings; an SSI listing restricts only certain dealings in new debt or equity. See the types of OFAC sanctions.
What are secondary sanctions and why do they affect non-U.S. banks?
Under some programs, notably the Iran- and Russia-related sanctions (including E.O. 14114), a foreign bank that facilitates significant transactions for blocked persons can lose its U.S. correspondent accounts or have them strictly conditioned (the CAPTA List). That is why banks in third countries often refuse such payments. See secondary sanctions.
Can OFAC license the release of blocked funds?
Yes. OFAC can issue a specific license authorizing the release of blocked funds — for example, where the funds belong to a party that is not blocked, or for purposes such as paying legal fees. Some general licenses also authorize particular releases without an individual application, and OFAC will not issue a specific license where a general license already applies.
What reports must a bank file after blocking funds?
Under 31 CFR § 501.603, the holder of blocked property must report it to OFAC within 10 business days of the blocking and file an annual report on all blocked property held as of June 30 by September 30. Rejected transactions are reported within 10 business days under § 501.604. See our overview of OFAC reporting requirements.
Can additional deposits be made into a blocked account?
Yes. Credits to a blocked account are allowed, and the bank may debit its normal service charges, but no withdrawals or transfers out are permitted without OFAC authorization.
What is the difference between blocking and rejecting a transaction under OFAC?
Blocking means seizing the funds and holding them in a frozen account — the money stays with the institution. Rejecting means refusing to process the transaction and returning the funds to the originator — the money leaves. Both actions must be reported to OFAC, but they have very different legal and practical consequences for the asset owner. If you are unsure which action your bank took, contact us — we can review your bank’s blocking or rejection notice.
How long does OFAC take to release blocked funds?
OFAC does not commit to a deadline. Timing depends on the route (a compliance release for mistaken identity or a specific license), the completeness of the documents, the parties and program involved and the number of requests for additional information.
Can I apply to OFAC by email?
License applications are filed through OFAC’s online License Application Page; mail is used only if the online system is unavailable. Email is used for certain reports and for compliance release requests under 31 CFR § 501.806, which go to [email protected].
What if OFAC denies my application?
A denial does not end the matter. Under 31 CFR § 501.801, you can ask OFAC to reconsider at any time on the basis of new facts or changed circumstances, or file a new application. Simply resubmitting the same application rarely helps.
