OFAC Release of Blocked Funds
If financial organizations identify potential OFAC sanctions violations, they may freeze funds or account for funds released to entities otherwise in non-compliance with sanctions. 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.
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, every day matters. Funds sitting in a blocked account cannot be transferred, withdrawn, or used — and the clock starts ticking the moment the freeze is applied.
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.
Whatever the trigger, the first 72 hours are critical. Acting quickly limits the damage and gives us more options to work with.
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 are legally required to freeze assets immediately upon any 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 proper authorization, the bank had no legal basis to process the payment. See our page on OFAC compliance for more on licensing requirements.
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 specific sanctions program involved. We determine whether this is a false positive, a genuine sanctions issue, or a bank compliance hold — because each requires a different approach.
Step 2 — Strategy and Legal Qualification Based on the assessment, we identify the fastest available path: a bank-level clarification, a petition for release under 31 CFR § 501.806, an application for a Specific License, or a combination. We explain your options clearly, including realistic timelines and success probabilities.
Step 3 — Document Preparation We compile and review all required materials: contracts, invoices, proof of funds origin, beneficial ownership documentation, KYC/AML compliance records, and the formal petition or license application. A poorly prepared submission is the single most common reason OFAC delays or denies release.
Step 4 — Submission and OFAC Liaison We submit the petition or license application directly to OFAC’s Office of Foreign Assets Control and handle all follow-up correspondence. When OFAC requests additional information — and they usually do — we respond promptly and precisely.
Step 5 — Bank Coordination In parallel, we communicate with your bank’s compliance department to prevent the freeze from escalating, ensure proper reporting under 31 CFR § 501.603, and accelerate release once OFAC issues its authorization.
Step 6 — Release and Follow-up When OFAC authorizes the release, we ensure the bank acts immediately. We also advise on compliance measures to prevent the same situation from recurring.
Realistic Timelines
There is no universal answer — but here is what our cases typically look like:
| Situation | Typical Resolution Time |
| False positive / name mismatch | 5–15 business days |
| Bank compliance hold (no SDN match) | 2–4 weeks |
| No valid license — license application | 1–4 months |
| SDN match — release petition | 2–6 months |
| SDN match — delisting required | 4–12 months |
If someone promises you faster results without reviewing your specific case, be skeptical. We give you honest timelines based on real case experience.
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. This requires a formal petition or license — it cannot be resolved through the bank alone.
If you are unsure which situation applies to you, request the official SWIFT rejection code or Blocking Notice from your bank. We can interpret it for you during a consultation.
Who Can Apply for Release
Under 31 CFR § 501.801(b), the following parties may submit an unblocking petition to OFAC:
- The owner of the blocked assets — the individual or entity whose funds or property are frozen;
- An authorized legal representative — an attorney holding power of attorney to act on the owner’s behalf.
In practice, submitting through legal counsel significantly improves outcomes. OFAC receives thousands of petitions annually. A well-structured submission that directly addresses the sanctions basis, provides complete documentation, and anticipates OFAC’s likely questions moves faster and succeeds more often.
What a Release Petition Must Include
A petition under 31 CFR § 501.806 must contain:
- Full identification of the petitioner and the blocked assets (account details, amounts, institution);
- Reference to the specific sanctions program and legal basis for the block;
- A detailed factual narrative explaining the transaction and why it does not constitute a sanctions violation;
- Complete supporting documentation: contracts, invoices, fund origin evidence, corporate ownership structure, KYC records;
- A clear legal argument for why release is warranted;
- If applicable: evidence of remedial steps taken (removal of sanctioned individuals from management, structural changes, license obtained).
Omissions or inconsistencies in a petition are the most common cause of OFAC delays and denials. We review every document before submission.
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?
Blocked funds are transferred to a dedicated interest-bearing account held at the financial institution. The owner retains legal title to the funds but cannot access, transfer, or use them. The institution holds the funds on behalf of OFAC until a release authorization is issued.
What is the SDN List?
The Specially Designated Nationals and Blocked Persons List is maintained by OFAC and identifies individuals, companies, and entities whose assets must be blocked and with whom U.S. persons are generally prohibited from doing business. Any property within U.S. jurisdiction — or passing through U.S. correspondent banking accounts — belonging to an SDN is subject to immediate blocking.
What is the 50% Rule?
Under OFAC’s 50% Rule, any entity owned 50% or more in aggregate by one or more SDN-listed persons is treated as blocked by operation of law — even if that entity does not itself appear on the SDN List. This rule frequently catches businesses that have indirect or historical ties to sanctioned individuals.
What is the difference between SDN and SSI (Sectoral Sanctions)?
SDN designations result in full blocking of all assets and a total prohibition on dealings. SSI (Sectoral Sanctions Identifications) listings under the Ukraine/Russia-related sanctions programs restrict only specific types of transactions — typically certain debt instruments or equity — rather than imposing a comprehensive block.
What are secondary sanctions and why do they affect non-U.S. banks?
Secondary sanctions target foreign financial institutions (FFIs) that facilitate significant transactions for SDN-listed parties. An FFI that processes such transactions risks losing access to the U.S. financial system entirely. This is why banks in third countries — not subject to U.S. primary sanctions — often preemptively freeze transactions that carry even a marginal sanctions risk.
Can OFAC license the release of blocked funds?
Yes. OFAC’s Office of Licensing can issue a Specific License authorizing the release of blocked funds in cases where the transaction or activity is not per se prohibited, or where policy considerations justify an exception. A General License may also cover the release in certain predefined categories of transactions without requiring an individual application.
What is the 90-day reporting requirement?
Under 31 CFR § 501.603, financial institutions must file an annual report with OFAC for every blocked account they hold. The initial report must be filed within 10 business days of the blocking. Failure to report is itself a sanctions violation.
Can additional deposits be made into a blocked account?
Yes. Under OFAC regulations, a blocked account may continue to receive deposits — including interest accrual. However, no withdrawals or transfers out of the account 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 Blocking Notice or SWIFT rejection code.
