A Canadian company discovers that its US dollar correspondent bank has frozen its accounts. The reason: an OFAC designation that arrived without advance notice and that the company's lawyers received only after the wire was refused. Meanwhile, the company's advisers in Ottawa are looking at a parallel Canadian designation under the applicable country regime – one that carries its own administrative and judicial-review route. Two designations, two countries, two quite different review mechanisms. Which route do you use? In which order? And what does the business miss when it treats the two designations as interchangeable problems?
Judicial review of a designation under OFAC follows a pathway that is fundamentally different from the Canadian equivalent. Before US courts, the core challenge is constitutional and evidentiary: the designated party contests whether the executive acted within statutory authority and whether the administrative record supports the designation. In Canada, the review is a creature of administrative law, with a reasonableness standard applied by the Federal Court to the minister's exercise of discretion. The procedural rules, the evidentiary access, the timelines, and the realistic prospects of success diverge sharply between the two.
This analysis compares the US and Canadian routes side by side, examines where businesses make avoidable errors, and sets out when to involve counsel before a designation lands rather than after.
The legal architecture: what authorises a designation in each regime?
The authority to designate in the United States flows from IEEPA and, in older programmes, from TWEA; the President's national-emergency declaration is the trigger, and OFAC executes the resulting orders. The statutory grants are broad. Courts reviewing OFAC designations have consistently acknowledged that the executive enjoys wide latitude in national-security matters, which constrains the effective scope of judicial supervision.
In Canada, designations under the applicable country regime are made by the Governor in Council on the recommendation of the relevant minister, acting under SEMA or the relevant enabling legislation. The minister's discretion is structured differently from OFAC's. It is still broad, but it operates within a statutory and administrative-law architecture that Canadian courts are accustomed to reviewing. The Federal Court and the Federal Court of Appeal apply the standard developed in domestic administrative jurisprudence: broadly, whether the decision was reasonable, procedurally fair, and within the decision-maker's authority.
What this means for a cross-border business is that the legal theories of attack differ fundamentally. In the United States, counsel looks first to the administrative record, to due-process arguments, and to the outer limits of statutory authority. In Canada, counsel looks at the minister's reasoning, the fairness of the process, and whether the designation was supported by an adequate evidentiary basis by domestic administrative-law standards. The doctrinal vocabulary is different; so is the practical likelihood of obtaining judicial relief.
How does the review procedure work under each regime?
Under the US system, a designated party's first practical step is typically to submit an administrative petition to OFAC seeking reconsideration or delisting, rather than going directly to court. This administrative stage is not formally required before judicial review, but it is almost universally the initial route. OFAC reviews the record and may respond; if the agency declines to delist, the designated party may seek review in federal district court.
Federal court review of an OFAC designation proceeds on the administrative record. The court does not hold a trial or hear live witnesses. It examines whether OFAC's decision was arbitrary and capricious, exceeded statutory authority, or violated constitutional requirements. The constitutional arguments most often advanced concern due process: the designated party argues that it was not given adequate notice, that the record is based on classified evidence it cannot see, or that it has no meaningful opportunity to contest the basis for the designation.
The classified-evidence problem is acute. OFAC frequently relies on intelligence material that does not appear in the unclassified administrative record provided to the designee. Courts have developed mechanisms for handling this – including in-camera review – but the designated party's counsel does not see the classified portions. This asymmetry is one of the defining features of US designation litigation and one that Canadian businesses, accustomed to a different disclosure standard, consistently underestimate.
In Canada, a designated party may apply to the Federal Court for judicial review of the designation. The Federal Court reviews the minister's decision on a reasonableness standard. Unlike OFAC's administrative record review, the Canadian proceeding involves procedural fairness obligations: the decision-maker must have given the applicant a meaningful opportunity to know the case and respond. In practice, the use of classified or confidential information in Canadian designation proceedings also creates tension with the right to know and meet the case – but the statutory and procedural architecture for handling sensitive information differs from the US approach.
A realistic assessment: judicial review in both regimes is genuinely difficult. Relief is not promised and should not be assumed. But the difficulty presents differently. In the United States, the challenge is the breadth of executive authority and the classified-evidence asymmetry. In Canada, the challenge is the wide margin of reasonableness that courts allow the executive on national-security matters, combined with the limited procedural protections in designation proceedings.
Where do the evidentiary standards diverge most sharply?
Evidentiary access is the single sharpest point of divergence between the two regimes. In US litigation, the designated party receives an unclassified administrative record – but that record may be heavily redacted or may consist largely of public-source material that tells only part of the story. The intelligence underpinning the designation is not disclosed to the designee or its counsel absent a security clearance, which outside counsel may not hold.
Canada's administrative law tradition requires, as a baseline, that persons affected by an administrative decision know the case against them and have an opportunity to respond. Designation proceedings create tension with this principle because the evidentiary basis often includes national-security information. The applicable country regime has addressed this tension through mechanisms that allow a judge to review the classified record while restricting what the applicant sees – but the judge can at least assess whether the classified material actually supports the designation. That judicial check on the full record is structurally different from the US approach.
The practical consequence for a cross-border business facing parallel designations is this: the strategic approach to each proceeding must differ. In the US proceeding, counsel's effort often focuses on the unclassified record – demonstrating that OFAC's stated reasons are not supported even by the public evidence, and raising due-process arguments about the procedural adequacy of the process. In the Canadian proceeding, there is more scope to press for procedural fairness and for the court to assess whether the minister's decision was reasonable on the full record. These are different arguments, requiring different evidence packages and different timelines.
We regularly advise clients who have received parallel designations that conflating the two review pathways is a costly error. An evidence package appropriate for an OFAC administrative petition is not the same as an application record for Canadian Federal Court proceedings. Timing is also different. The OFAC administrative process has no hard statutory deadline for OFAC to respond; the Canadian judicial review must be brought within a limited period after the designation decision. Missing that window can foreclose the Canadian route entirely.
What do businesses typically miss about the cross-border dimension?
The most common error we see in our practice is a failure to treat the two designations as legally distinct problems requiring distinct strategies. A business designated by both OFAC and the Canadian authority instinctively focuses its resources on the OFAC designation – because OFAC's reach, through the US dollar clearing system and secondary-sanctions exposure, creates the more immediate operational crisis. Bank accounts are frozen. Counterparties invoke force majeure. Supply chains stop.
But allowing the Canadian designation to run uncontested while resources are directed to the OFAC process carries real risk. A Canadian designation can affect the business's ability to operate in Canada, to receive goods or services from Canadian counterparties, and to access the Canadian financial system. If the statutory window for judicial review in Canada expires, the business has lost that procedural option. It must then rely on administrative reconsideration – which is at the minister's discretion – or on an eventual delisting petition, which is a different and slower route.
A second error is underestimating secondary-sanctions risk. An OFAC designation triggers not only US-person prohibitions but also the risk that non-US businesses terminate their relationships with the designated party to avoid secondary exposure. Canadian counterparties with US-dollar transactions or US-nexus business will frequently terminate dealings with an OFAC-designated party even when there is no Canadian designation. The two designations thus interact: even a successful Canadian judicial review may not restore the business's access to counterparties who have de-risked against the OFAC designation.
A third error is failing to consider the UN Consolidated List dimension. If the designation is connected to a UN Security Council listing, the delisting route runs through the Security Council's Ombudsperson mechanism (for the ISIL/Al-Qaida regime) or the Focal Point process – and both OFAC and the Canadian designation may effectively track the UN listing. In that scenario, the judicial review routes in both countries run against designations that the respective governments may be obliged to maintain as a matter of UN Charter obligations. Knowing whether a UN listing is in play changes the strategic priority entirely.
How does the timeline compare, and when must counsel be involved?
In the United States, there is no statutory deadline for OFAC to act on an administrative petition. The process can take many months. If the petition is denied and the designated party proceeds to federal court, the litigation timeline extends further – typically into years when the full appellate sequence is considered. This is not a route to rapid relief. Businesses that need to restore banking access quickly must consider interim measures, including specific licence applications for certain activities to continue while the designation is contested.
In Canada, the window for seeking judicial review of an administrative decision is significantly shorter. The applicable domestic rules set a defined period after the decision within which an application must be filed. Missing that period is generally fatal to the judicial review application, absent exceptional circumstances. This means that a business designated in Canada must instruct counsel and assess its judicial review options promptly – while it is simultaneously dealing with the operational crisis caused by the OFAC designation.
The interaction between the two timelines creates a sequencing problem. The OFAC administrative process is open-ended and does not impose pressure on the designated party to act by a specific date. The Canadian judicial review window is fixed and short. A business that focuses its counsel resources on OFAC in the first weeks after a dual designation may find that it has allowed the Canadian judicial review window to close before it has filed. In our experience, this is one of the most preventable errors in dual-designation situations and one of the most consequential.
What should a business do in the first days after learning of a parallel designation? The answer is to instruct counsel in both jurisdictions immediately – not sequentially. The OFAC administrative petition can be prepared in parallel with the Canadian judicial review application. The evidence packages are different, but the factual narrative underlying both is the same. Separating the two instructions by even a few weeks can eliminate one of the available routes.
In a recent matter, a trading company in the logistics sector faced simultaneous designations under two regimes. We prepared the OFAC administrative petition, coordinated with local counsel in the relevant jurisdiction on the judicial review application, and structured the evidence around the specific evidentiary requirements of each proceeding. Neither process concluded quickly, but preserving both routes early in the engagement kept the full range of options open. The matter illustrated that the operational and strategic decisions in the first 30 days after a designation often determine the realistic scope of eventual relief.
Common misconceptions a designated party brings to counsel
Several misconceptions recur in initial instructions from businesses facing a designation. Addressing them early prevents wasted resource and unrealistic expectations.
The first misconception is that a successful judicial review automatically removes the designation. In both the US and Canadian systems, courts reviewing a designation typically have the power to set aside the decision – but the practical effect depends on the remedy granted. A court may quash the designation outright, or it may remit the matter to the decision-maker for reconsideration with reasons. A remittal does not guarantee delisting; the authority may reach the same decision again, on a better-reasoned basis. In the US system, the court's power to grant affirmative relief to a designated party is constrained by the deference owed to the executive on national-security matters.
The second misconception is that winning the judicial review in Canada will affect the OFAC designation. It will not, automatically. OFAC maintains its own designation and acts on its own administrative record. A Canadian court quashing a Canadian designation does not bind OFAC. The two proceedings are entirely separate. That said, a successful Canadian outcome can form part of the evidence package submitted in the OFAC administrative petition, and it can be useful in persuading OFAC that the underlying basis for the designation has been judicially assessed and found deficient. The value of that cross-regime use of a favourable outcome is real but indirect.
A third misconception – one we encounter often – is that a company with no US operations or US-person employees has nothing to fear from an OFAC designation. This is incorrect. OFAC's reach operates through the US financial system and through secondary-sanctions exposure. Non-US counterparties that process US dollar transactions through US correspondent banks are exposed. An OFAC designation of a foreign company can effectively cut it off from US dollar clearing, from US-person business relationships, and from counterparties that choose to de-risk rather than face secondary exposure. The absence of a US presence does not limit OFAC's reach in practice.
Related practices
- Delisting evidence package – Australia – how to build a compliant evidentiary record for the Australian designation-challenge process
- Judicial review of a designation: OFAC vs OFSI – a side-by-side analysis of the US and UK routes and where they diverge
- Judicial review of a designation: OFSI vs EU – comparing UK and EU designation-challenge procedures and evidentiary requirements