Unblocking Frozen Funds or Assets

A blocked transaction should not be treated as an ordinary banking delay. The correct response depends on why the property was blocked, who has an interest in it, which sanctions program applies, and whether the match is genuine.

OFAC administers U.S. economic and trade sanctions in support of national-security and foreign-policy objectives. Depending on the applicable program, sanctions may require U.S. persons and institutions to block property in which a designated or otherwise blocked person has an interest. Entities owned, directly or indirectly, 50% or more in the aggregate by one or more blocked persons may also be treated as blocked even when they are not separately named on the SDN List.

Blocking does not automatically mean confiscation by the U.S. government. Funds normally remain with the financial institution in a blocked, interest-bearing account, from which only OFAC-authorized debits may be made.

How OFAC Freezes Funds and Other Assets for Blocked and Targeted Entities

OFAC usually does not personally take funds from an account. Banks, payment processors, insurers, and other U.S. persons apply the relevant sanctions rules.

When an institution determines that property must be blocked, it must stop unauthorized dealings and submit a blocking report to OFAC within 10 business days. Blocking and rejecting are different legal actions: some transactions must be held as blocked property, while others must be rejected rather than retained.

The property may remain blocked until:

• OFAC issues a specific license authorizing release;
• an applicable general license permits the transaction;
• the institution confirms that the block resulted from mistaken identity or a similar error and completes the required reporting;
• the relevant person is removed from the SDN List and no other blockable interest remains;
• another regulatory authorization permits release.

A block prevents unauthorized dealings in the property. It does not by itself determine final ownership or constitute civil or criminal forfeiture.

How funds are blocked

OFAC maintains the Specially Designated Nationals and Blocked Persons List, commonly known as the SDN List. Sanctions screening, however, is not limited to a name search. A transaction may also be affected by country-based restrictions, ownership by blocked persons, or another sanctions program.

Financial institutions use Know Your Customer and sanctions-screening procedures to review customers, beneficiaries, counterparties, payment messages, and ownership structures. If a potential match is identified, the institution may suspend the transaction while conducting further review.

Where a genuine blockable interest exists, the institution must:

• prevent unauthorized access to or transfer of the property;
• place blocked funds in an appropriate account;
• report the block to OFAC within 10 business days;
• retain the required records;
• wait for authorization before release.

The account holder cannot lawfully instruct the institution to bypass the restriction. Concealing parties, rerouting funds, using intermediaries, or providing false information may increase enforcement exposure.

Businesses can reduce sanctions risks through risk-based screening, beneficial-ownership checks, contractual safeguards, escalation procedures, and accurate records.

Applying to OFAC for Unblocking of Frozen Funds or Other Assets

A specific license is written authorization from OFAC to engage in a transaction that would otherwise be prohibited, including the release of blocked funds. OFAC encourages applicants seeking the release of blocked funds to use its electronic licensing portal.

Before filing, it is necessary to determine whether a specific license is required. If a general license fully covers the transaction and all conditions are met, separate specific authorization may not be needed. OFAC generally does not grant a specific license for conduct already authorized by a general license.

Our lawyers analyze:

• the person or entity whose interest caused the block;
• the origin, destination, and purpose of the payment;
• the involvement of U.S. banks, persons, or services;
• the applicable regulations and executive orders;
• the ownership of all relevant entities;
• available general licenses, exemptions, and licensing policies;
• the evidence required to support release.

If a specific license is appropriate, we prepare an application explaining the transaction, parties, legal basis, source of funds, beneficial ownership, and requested authorization. Evidence may include contracts, invoices, bank notices, transfer instructions, bills of lading, corporate documents, passports, and compliance records.

OFAC does not publish a fixed processing deadline. Review time varies according to the complexity of the transaction, interagency consultation, and the volume of pending applications. Each request is reviewed individually.

A denial is final agency action, and OFAC regulations provide no formal administrative appeal. OFAC may reconsider a decision for good cause, including changed circumstances or relevant information that was not previously available.

For this reason, the initial submission should be complete, consistent, and supported by reliable evidence.

How Our Legal Team Can Help

Our role goes beyond completing an application form.

First, we determine why the property was blocked and whether the institution applied the correct rule. This may require analysis of the transaction chain, screening result, beneficial ownership, contractual documents, and the sanctions program cited by the bank.

Second, we select the appropriate legal route. Depending on the facts, this may involve:

• asking the bank to correct a false positive;
• relying on an applicable general license;
• requesting a Compliance Release where the blocking organization made a qualifying error;
• applying for a specific license;
• filing a separate petition for removal from an OFAC sanctions list;
• responding to an OFAC inquiry or enforcement matter.

Third, we prepare a factual and legal record that directly addresses the applicable licensing rules. We can communicate with the institution and OFAC, monitor the case status, respond to requests for additional information, and advise on related compliance risks.

Who can submit an application for unblocking to OFAC?

An individual or legal entity whose funds or other property have been blocked may seek authorization for release. The request may be made personally or through an authorized lawyer or representative.

Applicants may include:

• individuals whose personal or business funds were blocked;
• companies whose payments, accounts, goods, or contractual proceeds are restricted;
• beneficiaries, heirs, trustees, or others claiming a lawful interest in the property;
• non-profit or humanitarian organizations;
• directors, compliance officers, and authorized corporate representatives;
• lawyers acting on behalf of a client.

The first step is usually to obtain the blocking notice, transaction reference, amount, identified sanctions match, and requested documents from the financial institution.

The next step is to establish whether the case involves a genuine blocked interest, mistaken identity, an ownership issue, or a transaction covered by an existing authorization.

If property was blocked because of mistaken identity, a typographical error, or a similar false positive, the blocking institution may release it and file an unblocking report. The customer should normally engage directly with the institution, while a specific license may remain available where appropriate. OFAC’s Compliance Release procedure is available only to the organization that blocked the property.

Reasons for the Unblocking of Your Funds or Assets

Release requires a legally supportable basis. Financial hardship or commercial inconvenience alone may not establish that the property can lawfully be unblocked.

Potential grounds include:

1. Mistaken identity or screening error.
   Reliable evidence shows that the person, entity, or transaction was incorrectly matched to a sanctioned party.
2. Authorization under a general license.
   The transaction falls within an existing authorization and satisfies all conditions and reporting requirements.
3. Grounds for a specific license.
   The transaction is otherwise prohibited, but the regulations or published licensing policy allow case-specific authorization.
4. Removal from the SDN List.
   The designation responsible for the block has been removed and no other blocked interest remains.
5. Changed circumstances.
   Ownership or other relevant facts have changed. Property that was properly blocked, however, does not always become available automatically after an ownership change; OFAC authorization may still be required.
6. No sufficient connection to a blocked interest.
   Transaction records, beneficial-ownership evidence, and contractual documents demonstrate that the cited prohibition does not apply.

Establishing these grounds may require a detailed review of corporate structures, payment records, sanctions entries, source-of-funds evidence, and communications with the financial institution.

Contact an OFAC Lawyer About Frozen Funds or Assets

Frozen funds may remain inaccessible while the legal basis for release is reviewed. Incomplete applications, inconsistent documents, and unclear ownership information can increase delays.

Our lawyers can assess the block, prepare the evidence, and represent your interests throughout the OFAC licensing or compliance process.

Contact us for a confidential assessment if:

• a bank has blocked your payment or account because of OFAC sanctions;
• your name or company was matched to a sanctioned party;
• the transaction involves a sanctioned jurisdiction or high-risk counterparty;
• you need a specific license to release frozen funds;
• the block appears to be a false positive;
• OFAC or the financial institution has requested further information;
• the transaction may lead to an enforcement investigation.

No lawyer can guarantee that OFAC will issue a license or that a financial institution will release the property. A prompt, evidence-based legal strategy can improve the quality of the application and reduce avoidable delays.

Iryna Berenstein

Associate Partner

Mrs. Berenstein is a distinguished and outstanding lawyer with profound experience and exceptional legal knowledge in the field of International Private Law, Financial Law, Corporate Law, investment regulation, Compliance, Data Protection, and Reputation Management.

Phone:

+35796447475

Email:

[email protected]

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