OFAC Sanctions Lawyer: Designations, Blocked Property, Licensing and Delisting

Before asking for release, identify the U.S. connection and the exact prohibition

A payment passing through a U.S. intermediary, property held by a U.S. bank, an American person handling a transaction abroad, or a U.S. company providing services may create a legally relevant connection. The fact that two non-U.S. companies contract in another country does not by itself resolve OFAC exposure: some programs include secondary-sanctions risks or other rules affecting non-U.S. actors. Conversely, using U.S. dollars does not by itself prove that OFAC has blocked money. Counsel needs the transaction route, each intermediary's location, the persons involved and the applicable program before reaching a conclusion.

Start with the actual notice. Is it a bank's internal compliance hold, a formal notice of blocked property, a rejected transfer, or an entry on OFAC's Specially Designated Nationals and Blocked Persons List (SDN List)? Ask for the bank's stated legal basis and whether it filed a report with OFAC. If the bank will not disclose everything, record precisely what it has confirmed rather than treating silence as proof of a designation. The restrictions and authorizations differ among programs; review the program's current regulations, executive orders and applicable general licenses as of the proposed transaction date.

Sanctions event classifier: which authority, evidence and limit apply?

This classifier is a decision aid, not a license to transact while a match is being resolved. Pause action that may be prohibited; preserve the original evidence; and secure advice from U.S.-qualified sanctions counsel on any ambiguous blocking obligation. A compliance decision should specify the applicable prohibition and the person responsible for implementing it, not just use the word “sanctions.”

A screening alert is not yet proof that a person is sanctioned

OFAC's search tool uses fuzzy matching, so a close name, transliteration or alias can create a hit without establishing that two individuals are the same. OFAC FAQ 5 directs reviewers to examine the actual list and compare available descriptors such as birth date, nationality, identifying numbers, addresses and registration records. The question is not whether a commercial screen found a similar string; it is whether the actual counterparty is the listed person, an entity blocked through ownership, or otherwise subject to a relevant restriction.

A practical identity memorandum preserves the searched list version, date, possible match, distinguishing documents and reasons for resolving or escalating the alert. The bank remains responsible for its own regulatory duties and risk controls. If an unlisted customer has simply been confused with an SDN, request a documented review through the bank's sanctions team and use OFAC's compliance inquiry route if necessary. Asking OFAC to remove the unlisted customer from a list on which they never appeared is the wrong remedy.

How the OFAC 50 Percent Rule changes the ownership analysis

Under OFAC's published guidance, an entity is treated as blocked if one or more blocked persons own, directly or through qualifying intermediate entities, 50 percent or more of it in the aggregate, even when the entity's own name is absent from the SDN List. For example, separate 25 percent holdings of two blocked persons can meet the threshold. Different OFAC sanctions programs' blocked owners are aggregated for that calculation. The review therefore needs a dated, documented ownership chart, not only a certificate asserting that no shareholder individually holds 50 percent.

Ownership and control are not interchangeable. OFAC FAQ 398 says control without the required ownership is not itself an automatic block under this particular rule, although a controlled entity can be separately designated and transactions may trigger other prohibitions. Indirect holdings require following ownership through the chain according to OFAC FAQ 401. Share registers, voting or nominee arrangements, ultimate-beneficial-owner evidence and ownership dates must be reconciled carefully; an unsupported declaration of beneficial ownership is not enough.

Later changes require a second analysis. Under FAQ 402, qualifying divestment may end automatic blocking for future transactions when aggregate blocked ownership falls below 50 percent only if the divestment occurs entirely outside U.S. jurisdiction and does not involve U.S. persons. But property properly blocked earlier does not simply become spendable: OFAC does not recognize unlicensed transfers of that already-blocked property. A purported restructuring may itself raise sanctions concerns. Counsel should distinguish prospective status, existing frozen assets and whether a lawful authorization is needed; this page does not propose ways to move assets around sanctions.

Blocked property is frozen, not confiscated: what the holder must do

Blocking generally prevents dealing in a blocked person's property or interests in property within U.S. jurisdiction or in the possession or control of a U.S. person. Legal title ordinarily remains with its owner; OFAC does not seize and store a customer's blocked balance. A U.S. financial institution normally keeps blocked funds in a qualifying segregated, interest-bearing account. It may use an omnibus blocked account with an auditable record of each asset. These consequences differ from criminal forfeiture, a civil judgment or a bank's discretionary hold.

As clarified in OFAC FAQs updated October 26, 2026, reports of blocked property and rejected transactions generally must be submitted through the OFAC Reporting System (ORS) within 10 business days of the blocking or rejection, under 31 CFR §§ 501.603 and 501.604. A U.S. person holding blocked property as of June 30 ordinarily submits the annual blocked-property report by September 30 of that year. These are reporting obligations of the person subject to the rules, not a ten-day deadline for an affected customer to win a release. Counsel should identify who made the report and obtain the relevant ORS identifiers where possible.

If a bank rejected a transfer because a service or destination was prohibited but no blocked interest existed, the bank did not necessarily freeze the sender's property. An inquiry to the bank is not always an executed payment instruction. OFAC FAQ 53 distinguishes a mere question about a prospective transaction from an instruction that actually triggers blocking or rejection. The person requesting advice should not infer a blocked account from the refusal to carry out a single payment.

Licensing: an existing authorization comes before a new application

A general license is a published authorization covering a defined class of activities when its conditions are met. It is self-executing: no individual letter from OFAC is required. A specific license is an OFAC authorization issued for specified persons or transactions after an application. Before filing, examine exemptions, general licenses, amendments, expiration or wind-down terms, program-specific restrictions, and any applicable reporting conditions. Under § 501.801, OFAC's policy is not to grant a specific license for a transaction already covered by a general license.

If no exemption or general license fits, a person with an interest in the proposed transaction may apply electronically under § 501.801. An effective file identifies all parties, banks, ownership interests, location and nature of property, the exact activity requested and how it interacts with each prohibition. For blocked funds, explain the holder's action and provide transfer records and ORS references if available. An application is not permission to perform the transaction while the request is pending; OFAC may seek additional evidence or issue a license with narrow conditions.

A denial of a specific license is not the same as denial of a delisting petition. Section 501.801(b)(5) permits a new application or reconsideration of a license denial based on new facts or changed circumstances; OFAC FAQ 76 describes submitting a new application referencing the earlier denial. There is no assured approval date or outcome. If the activity needs commercial execution after a grant, the bank may still require the license, identification documents and its own compliance review before processing.

When an error-release request under § 501.806 is better than a license

Section 501.806 supplies a particular administrative process for property blocked and reported in error because of mistaken identity, a typographical mistake or a comparable error. It permits the person who blocked and reported the property to seek an OFAC compliance release, with the designated subject phrase and the relevant evidence. The packet should identify the holder, blocking date, value, initial ORS references where known, identity documents, the transaction and why the blocking was erroneous. OFAC determines whether to direct release. This mechanism is not an appeal to erase a valid SDN designation and should not be confused with a discretionary specific license for otherwise prohibited dealings.

Delisting requires evidence against every actual designation ground

For a person or property that is genuinely sanctioned, § 501.807 provides a petition for administrative reconsideration. OFAC's current delisting portal distinguishes two arguments: the designation lacked sufficient basis when made, or material circumstances have changed so that the designation criteria no longer apply. These are different factual propositions. A pre-designation resignation, for example, may support a claim of insufficient original basis; a later genuine change in activity may support changed circumstances. An unsupported promise of future reform cannot replace evidence of a qualifying change.

A usable petition identifies the exact entry, program tags, designation date, each operative statute or executive order and each separate criterion relied upon. Assemble corporate records, verified dates, financial and operating records, relationship history and evidence bearing on the underlying allegation. OFAC requests identifying information and, for a representative, proof of authority. A petitioner may request the unclassified, nonprivileged evidentiary information through OFAC's courtesy-document process; redactions may remain for protected information. A FOIA request is a separate records route, not an automatic entitlement to all classified material.

OFAC endeavors to review a petition initially for completeness within 7–10 business days, but describes this as an administrative target, not a binding deadline for a final delisting decision. Substantive reinvestigation can be lengthy, involve questionnaires and interagency consultation, and has no promised completion date. Delisting does not follow simply from financial hardship. A listed person should not assume that pending reconsideration authorizes payments, transfers or services, and legal-fee authorizations must be checked under the particular program.

The official portal also notes that where multiple legal authorities or criteria sustain a listing, all must be answered. Importantly, some entries are designated by the U.S. Department of State and are displayed on OFAC-administered lists. The decision-making agency and its delegation must then be checked rather than assuming that every initial designation and later adjudication belongs exclusively to OFAC.

Where a federal court fits—and what the precedents actually limit

Administrative licensing and reconsideration are decided by OFAC under the applicable rules; they are not first-instance applications to a judge. Judicial challenges to final agency action may arise under the Administrative Procedure Act, 5 U.S.C. §§ 701–706, or other applicable law, depending on the particular designation, program, record, available remedy and jurisdiction. The appropriate U.S. district court, standing, finality, exhaustion arguments and filing deadlines require case-specific analysis. A federal judge does not automatically issue a license or substitute their policy judgment for OFAC's.

In Fares v. Smith, 901 F.3d 315 (D.C. Cir. 2018), the U.S. Court of Appeals for the D.C. Circuit addressed notice and the opportunity to respond in a Kingpin Act designation. Its holding cannot be repackaged as a universal right to receive every classified exhibit. The later binding D.C. Circuit decision Lopez Bello v. Gacki, No. 23-5036 (March 12, 2024), upheld the specific Kingpin Act designation and found that the redacted record, unclassified summary and other disclosures supplied sufficient post-deprivation notice in that case. It also rejected the argument that certain related narcotics-trafficker designations could never be simultaneous. The implication is practical: assess the actual unclassified record, statutory criteria and opportunity to rebut, rather than promising success from the absence of advance warning.

A later district-court decision, 3Nod Digital (Hong Kong) Ltd. v. U.S. Department of State , No. 25-cv-968 (D.D.C. March 18, 2026), set aside a State Department office's delisting denial because the deciding office lacked demonstrated authority, while leaving the initial designation in place and remanding for proper consideration. This is district-court authority, not a binding D.C. Circuit rule , and it does not mean that OFAC alone can decide all State-origin designations. It shows why counsel must identify both the entity that issued the sanction and the official who decided reconsideration.

Also consider the D.C. Circuit’s July 14, 2026 decision in Diegelmann v. Bessent, No. 24-5277. The court affirmed OFAC’s designation on the record before it and described review under the Administrative Procedure Act as deferential—and “extremely deferential” for national-security matters. It held that acquiring finished precious metals could fall within “procuring geological materials” under the specific Russia metals-and-mining sector determination; the challengers’ alternative refined-versus-raw-material argument was forfeited because it had not been raised below. This is binding D.C. Circuit authority on the issues it decided, but it does not resolve every sanctions program or factual challenge. Where a case may be brought in that circuit, counsel must address the deference and preservation lessons rather than assume a court will reweigh OFAC’s factual assessment.

Different federal circuits may apply different precedents. Before filing, check the decisions binding on the court that would actually hear the case, their scope, any later restrictions, and the rules governing finality, reviewability and timing.

Another recent D.D.C. decision directly involving OFAC, Martinez Morales v. U.S. Department of the Treasury, No. 24-2519 (July 24, 2026), granted summary judgment to the government on an APA challenge to continued designation under Executive Order 13818. The plaintiff had also asked for mandamus compelling delisting, but the court expressly did not reach the government's alternative objections to the type of relief sought after rejecting the substantive challenge. The court applied highly deferential review and found that public and unclassified information gave adequate notice; it did not require disclosure of classified, law-enforcement-sensitive or privileged material. This is a district-court decision, not binding circuit precedent, and its result is tied to the record and program in that case. It reinforces that filing a petition or lawsuit does not itself compel removal, and that an APA merits challenge, a procedural-notice claim and mandamus are distinct theories with different requirements.

What to preserve now, and what useful legal work can produce

• For a stopped transfer: retain bank messages and payment references, each intermediary, the date funds were held or returned, account holder and beneficial owners, and the bank's explanation of whether it blocked or rejected.
• For an ownership question: collect dated ownership chains, registries, share records and reliable identification of every direct and indirect blocked owner; distinguish present structure from structure when the property was frozen.
• For a designation: keep the complete current SDN entry, program tags, designation notice, statements of reasons if available, corporate history, documents supporting the counter-narrative, and any previous OFAC correspondence.
• For a license: provide a narrowly specified proposed transaction, all affected parties, the applicable general-license analysis, bank details, supporting agreements and evidence that a license is necessary.
• For litigation screening: preserve the administrative decision, service or notification date, petition and responses, agency record requests, and evidence of harm; counsel must verify jurisdiction and timing before filing.

A sound initial legal deliverable is a written classification memorandum setting out the current program and U.S. nexus, matching or ownership analysis, identified prohibitions, available exemptions, the correct OFAC administrative pathway, responsible decision-maker, evidence gaps and lawful next steps. Further work may include a complete specific-license application, an evidence-led reconsideration petition or coordination with U.S.-admitted litigation counsel. None of these is a promise that a bank, OFAC or court will release funds.

Where the dispute is only about a bank's general account restriction, see bank account freezes; where competing owners seek civil recovery across borders, see cross-border asset recovery. Those questions do not turn every bank hold or recovery claim into an OFAC delisting case. Counsel also must verify whether the proposed legal services and the source and method of paying legal fees are authorized under the relevant sanctions program. No U.S. office, admission, or particular representation arrangement is assumed here.

For a preliminary classification of a concrete sanctions event and the documents needed for a lawful next step, request a consultation. This information is not individualized U.S. legal advice.