A payment firm operating across the United States and United Kingdom holds client accounts denominated in two currencies. Overnight, OFAC updates its SDN List (OFAC's list of Specially Designated Nationals and blocked persons). Three account holders appear. By morning, the firm's London team asks whether the OFSI regime requires the same immediate freeze, the same reporting window, and the same pathway to release funds. The answer to each question is different – and each difference carries a distinct legal consequence.
As of May 2026, frozen-account management under OFAC and under OFSI diverges on four decisive points: the legal mechanism for the freeze, the reporting deadline, the licensing route to authorise payments from a frozen account, and the treatment of interest and accruals. Both regimes prohibit dealings with designated persons, but the procedural architecture around that prohibition is not the same. Understanding where the regimes diverge is the first task for any cross-border business holding funds that may be affected.
This analysis works through each point of divergence in sequence, closing with the practical steps a compliance team should take when a freeze is triggered across both jurisdictions simultaneously.
What legal mechanism does each regime use to freeze an account?
Under OFAC, the freeze is automatic and self-executing the moment a person or entity appears on the SDN List: no court order, no regulatory notification, and no grace period is required before the obligation bites. The legal authority derives from the relevant executive order issued under IEEPA, and the obligation falls immediately on any US person or any person within US jurisdiction. The account holder need not have been served notice. The freeze is a fact from the moment of listing.
OFSI operates differently. The UK regime, grounded in the Sanctions and Anti-Money Laundering Act ("SAMLA") and the relevant thematic regulations, also requires an immediate freeze – but the implementing mechanism is the designation in the UK Consolidated List rather than an OFAC administrative act. A person appearing on the OFAC SDN List is not automatically designated under OFSI. UK designations must be made by the UK Treasury under domestic authority. A business holding accounts in London and New York may therefore face a period – sometimes measured in hours, sometimes longer – where OFAC has listed the account holder but OFSI has not yet acted. In that window, what the New York desk is required to freeze, the London desk may still be permitted to manage normally.
That temporal gap is not theoretical. In our experience advising payment firms on cross-regime exposure, the divergence between an OFAC listing and the corresponding UK designation is one of the most consistently misunderstood risks in cross-border account management. The compliance team that treats simultaneous OFAC/OFSI coverage as guaranteed will eventually be wrong.
How do the reporting deadlines compare?
OFAC requires that any US person who holds or controls property in which a blocked person has an interest must report that property to OFAC within 10 business days of the blocking event, with an annual report thereafter for as long as the property remains blocked. That 10-business-day window is set by OFAC's reporting requirements under the applicable regulations and is not discretionary. Missing it is itself a potential violation.
OFSI imposes a different obligation. A person who knows or has reasonable cause to suspect that another person is a designated person – and that they hold funds or economic resources belonging to, or for the benefit of, that person – must report that information to OFSI as soon as practicable. The UK standard is knowledge or reasonable suspicion rather than confirmed blocking. The timeline is "as soon as practicable" rather than a fixed number of business days. Both formulations impose real urgency, but the OFSI test is suspicion-based, which means it can bite before a designation is confirmed.
The practical consequence for a firm holding accounts in both jurisdictions is a two-track reporting obligation running on different legal triggers and different timelines. A compliance programme calibrated only to one regime will produce gaps. The firm that reports to OFAC within 10 business days but delays its OFSI notification because no formal designation has been issued may still have breached the UK obligation if it had reasonable cause to suspect the account holder was a designated person.
Is your compliance programme tracking both triggers, or only the one your primary regulator enforces?
What is the licensing route to authorise payments from a frozen account?
Under OFAC, authorisation to deal with blocked property comes through a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) or a general licence (a standing authorisation that permits a defined category of transactions without a separate application). For frozen account management, the most common routes are general licences covering payment of legal fees, maintenance of minimum balances, and certain humanitarian or ordinary-course transactions. Where no general licence applies, a specific licence application to OFAC is required. OFAC does not publish a fixed processing timeline for specific licences; the position should be verified for each application given the volume of the OFAC licensing queue at the relevant time.
OFSI also issues specific licences – referred to in the UK regime as specific licences authorising otherwise prohibited activity. The grounds available under OFSI differ from those available under OFAC. OFSI's licensing grounds are set out in the relevant thematic regulations and include purposes such as basic needs, legal proceedings, diplomatic activity, and extraordinary situations. The EU regime, where relevant, adds a further layer: EU regulations provide their own licensing grounds, which do not map exactly onto either the OFAC or the OFSI list.
In a multi-jurisdiction freeze, a firm may need to apply for separate licences from OFAC, OFSI, and the relevant EU competent authority. Each application requires its own supporting documentation, follows its own procedural rules, and is assessed against its own licensing grounds. A licence granted by OFAC for payments from a blocked account does not authorise the same payment under OFSI, and vice versa. The three regimes are not fungible.
In a recent matter, a trade-finance business held a blocked account across US and UK correspondent structures. We assessed eligibility under both the OFAC general-licence categories and the OFSI licensing grounds, prepared and submitted parallel applications, and managed the regulators' queries in sequence. The matter illustrated that the grounds most readily available under OFAC – ordinary-course maintenance transactions – did not align with the OFSI licensing categories, requiring a different framing of the UK application entirely.
How does each regime treat interest and accruals on a frozen account?
OFAC's position on interest accruing on blocked accounts is that such accruals are themselves blocked. The interest earned on a blocked deposit is blocked property in the same way the principal is. A bank holding a blocked account must not permit the account holder to withdraw or benefit from accrued interest without a licence, but it is also not prohibited from crediting that interest to the account – the interest simply remains frozen. This means blocked accounts can grow in notional value even while the principal is inaccessible.
OFSI does not take an identical position. The UK regulations require that a designated person's funds and economic resources be frozen, but the treatment of subsequently accruing interest depends on the terms of the specific thematic regulation in force and on OFSI guidance current at the relevant time. The position is not always identical to OFAC's, and in certain cases the UK position has been read as requiring separate authorisation before interest is even credited to a blocked account.
This divergence matters for financial institutions in practical terms. A bank complying with OFAC by crediting interest to a blocked account may need to seek OFSI guidance before taking the same step under the UK regime. Assuming equivalence between the two approaches to accruals is a documented source of technical non-compliance.
Which regime applies the broader ownership-and-control test?
The 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) applies mechanically under the US regime. If blocked persons own, in the aggregate, 50 percent or more of an entity – whether directly or through intermediate holding structures – that entity is itself treated as blocked, even if it does not appear on the SDN List. The test is purely arithmetical. Control is not the trigger; ownership is.
OFSI and the EU apply an ownership and control test (the UK and EU test for whether a non-listed entity is caught through a listed person). Both ownership and control can bring a non-listed entity within the prohibition. An entity that a designated person controls – through voting rights, board composition, contractual terms, or otherwise – may be caught even if the designated person holds less than 50 percent of its shares. This makes the UK and EU tests broader in concept, though harder to apply mechanically.
For a frozen account held by a corporate entity, the ownership analysis is not a one-time task. Corporate structures change. New share issues, reorganisations, and transfers of beneficial interests can alter whether a freeze is required or whether a previously frozen account should be released. In our cross-border practice, we recommend that any institution holding a corporate account subject to a freeze conduct an ownership-and-control refresh at every material change in the account holder's structure – not only at the point of initial designation.
The position above covers the standard case. Your facts – the counterparty, the currency, the jurisdiction of the holding institution, and the regime in play – change the analysis. For an assessment of your exposure under OFAC and OFSI, contact Calder & Vance at info@caldervance.com.
What are the enforcement postures of OFAC and OFSI on account-management failures?
OFAC enforces strict liability for most sanctions violations: intent is not required to establish a violation, though it bears on the penalty calculation. OFAC's civil penalty framework distinguishes egregious from non-egregious cases and gives significant weight to whether the subject made a VSD (voluntary self-disclosure to a regulator). A timely VSD can reduce the applicable penalty base by a meaningful proportion. Record-keeping requirements under OFAC require that records of blocked property be maintained for a period that practitioners should verify against the applicable regulation, but that extends well beyond the date of unblocking.
OFSI's enforcement posture has hardened since SAMLA gave it the power to impose civil monetary penalties without a criminal conviction. OFSI also operates a monetary penalty system that distinguishes cases where the person knew or had reasonable cause to suspect they were dealing with a designated person. Unlike OFAC, OFSI does not operate a formal VSD programme in the same sense, but OFSI's enforcement guidance makes clear that self-reporting, cooperation, and remediation are treated as mitigating factors in the penalty assessment. The two regimes share the principle of mitigating voluntary disclosure but implement it through different procedural mechanisms.
Where a breach of frozen-account requirements has occurred across both regimes simultaneously, the enforcement exposures compound. A business that failed to report to OFAC within the 10-business-day window and also failed to report to OFSI as soon as practicable faces two separate enforcement actions, each assessed on its own facts, by two regulators that do not coordinate their decisions. We regularly advise clients who have identified a cross-regime reporting failure on the sequencing of disclosure to each authority and the framing of each submission.
Common misconceptions and risk flags in cross-regime account management
The most persistent myth in this area is that OFAC compliance is sufficient when a firm's primary regulator is in the United States. For any firm with a UK branch, a UK correspondent, or any UK-routed payment, OFSI obligations run independently of OFAC status. OFAC compliance does not satisfy OFSI, and an OFAC general licence does not authorise UK-side activity.
A second risk flag arises from the timing of designation updates. Firms that run batch screening – end-of-day or weekly – rather than real-time or near-real-time screening against both the SDN List and the OFSI Consolidated List create windows in which a blocked account continues to operate normally. The longer the screening cycle, the longer the exposure period. This is not a theoretical concern: it is the single most common operational gap we identify when reviewing frozen-account management programmes.
A third risk is the delegation of frozen-account decisions to operational teams without clear escalation triggers. The decision to freeze, the decision to apply for a licence, and the decision to disclose a potential breach are each legal decisions that carry their own consequences. In our experience, the firms that manage cross-regime account freezes most effectively are those that have written escalation protocols tying each decision point to a named legal or compliance authority, with documented timelines.
If a transaction has already been flagged, or if an account has been held in an uncertain status, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com for a confidential review.
Related practices
- Frozen-account management – BIS/EAR service – export-control licence applications for accounts subject to BIS restrictions
- Frozen-account management: OFAC vs OFSI – further analysis – extended practitioner commentary on cross-regime licensing strategy
- Frozen-account management: OFSI vs EU – comparative analysis – how UK and EU approaches to blocked accounts diverge on licensing and enforcement