A payment arrives in a US correspondent bank. The automated screening system matches a name on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) and the funds are frozen. Your client – a legitimate trading company – has done nothing wrong. The money is sitting in a blocked account, and every day it stays there costs real commercial damage. What happens next?
Release of blocked funds under OFAC requires either a specific licence authorising the unblocking, a determination that no blockable interest was ever present, or the application of a relevant general licence. As of June 2026, OFAC administers this process under its authority derived from IEEPA and related statutes. There is no automatic release: a business must make an affirmative filing and demonstrate that the statutory conditions for release are met.
This guide walks through the procedure step by step – from the initial block through to the licence application, the common pitfalls that delay or defeat release, and how the OFAC process compares with the approaches taken by OFSI in the United Kingdom and the EU sanctions regime.
Step 1: Understanding what blocking means and why it triggers
Blocking under OFAC means that a US person – including a US financial institution acting as correspondent – must freeze any property or interest in property of a designated person and hold it in a segregated, interest-bearing blocked account. The obligation arises the moment a US person identifies, or has reason to believe it holds, property in which a blocked person has an interest.
The trigger is broader than it looks. OFAC's 50 percent rule (the rule treating entities owned 50 percent or more in the aggregate by one or more blocked persons as themselves blocked) means that a corporate counterparty can be blocked even though it does not appear on any list. Screening tools that check only the SDN List and ignore beneficial ownership miss precisely this class of case. In our experience, this is the single most common reason a funds release proves more complicated than the client expected.
Two questions must be answered at the outset. First: does the blocked interest actually exist, or was the freeze triggered by a false positive – a name match that does not correspond to a designated person? Second: if the interest is real, does a general licence already authorise the unblocking? If the answer to either question favours the applicant, the path to release is materially shorter. Have you verified the basis of the freeze before committing to a full licence application?
Step 2: Confirming a false positive or no-blockable-interest determination
Where a financial institution has frozen funds on the basis of a name match that turns out not to involve a designated person, the correct route is not a licence application but a no-blockable-interest or false-positive determination. OFAC's procedures allow a US person holding funds to seek written guidance confirming that no blockable interest is present, which allows release without a specific licence.
The evidence required is factual: identity documents, corporate records, ownership charts, transaction records, and any other material that distinguishes the account holder from the designated party. Preparing a clean, well-organised submission accelerates OFAC's review. Submissions that arrive in disorder, omit key identity information, or fail to address the specific matching criterion slow the process considerably.
A practical point: the financial institution holding the blocked account has its own regulatory exposure. It will not release funds on the basis of the customer's assertion alone. It needs either OFAC's written confirmation or a specific licence it can produce to its own examiners. Understanding this dynamic – and managing both the regulator and the institution simultaneously – is a core part of the work.
Where a general licence potentially applies, the analysis must verify that each condition of the licence is satisfied. General licences are frequently drafted with conditions that are not obvious from the plain text, and OFAC has issued interpretive guidance that qualifies their scope. Acting without checking the conditions is a compliance risk in itself.
Step 3: Preparing and filing the specific licence application
Where no general licence applies and the blocked interest is genuine, the path to release runs through a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction, including the unblocking and return of funds). OFAC receives specific licence applications through its online licensing portal, and a complete submission must address the legal and factual basis for the authorisation requested.
A strong application contains several elements. First, a clear legal theory: the applicant must identify the policy basis on which OFAC would be justified in granting the licence – humanitarian need, winding down a legitimate transaction, US person interests, or another recognised ground. Second, a factual record: the application should tell the story of the transaction, identify all parties and their ownership structures, explain the purpose of the payment, and document why the funds are held. Third, supporting exhibits: corporate records, contracts, payment instructions, ownership charts certified to a competent standard, and any prior correspondence with OFAC or the holding institution.
OFAC is not required to follow a fixed timeline. In our experience, review periods vary significantly depending on the programme, the complexity of the facts, and OFAC's current caseload. Applicants who submit incomplete files, then correct them through a series of supplemental letters, extend the review materially. Submitting a complete, coherent file on the first attempt is the most effective way to manage the timeline.
The position above covers the standard case. Your facts – the counterparty, the programme in play, the ownership chain, the nature of the funds – change the analysis. For an assessment of your exposure and the most appropriate route to release, contact Calder & Vance at info@caldervance.com.
Step 4: Managing the process after submission
After submission, OFAC may issue a request for additional information. A prompt, complete response is critical: delays in responding extend the overall review period, and an unanswered request can result in the application being treated as abandoned.
The holding institution must be kept informed. Banks, payment firms, and brokers have their own compliance obligations, and they will not hold blocked funds indefinitely without updates. In practice, a funds release matter runs on two parallel tracks: the regulatory submission to OFAC and the relationship management with the financial institution. Losing control of either track creates risk.
If a licence is granted, it will specify the exact steps that must be taken to effect the release. The licence is not self-executing. The holder must follow the specified steps within any time limits stated in the licence, retain records of the transaction, and ensure that no prohibited steps are taken in connection with the release. OFAC licences regularly impose conditions – reporting requirements, end-use restrictions, ongoing obligations – and failure to comply with those conditions is itself a potential violation.
Record-keeping matters throughout. Businesses involved in OFAC-regulated activity are required to keep records relating to blocked property and OFAC-authorised transactions for a defined period. In our cross-border practice, we consistently see clients underestimate the importance of contemporaneous documentation at every stage of the release process.
Step 5: Cross-border angle – how does OFAC compare with OFSI and the EU?
For any business with operations or banking relationships outside the United States, a blocked-funds situation under OFAC is rarely isolated. A payment route that passes through a US correspondent bank may also involve a UK clearing bank or an EU counterparty, triggering parallel obligations under OFSI and the EU sanctions regime.
The differences in approach are material. Under OFAC, the 50 percent rule is mechanical: ownership is the test. Under OFSI – the Office of Financial Sanctions Implementation, which administers financial sanctions in the United Kingdom under the Sanctions and Anti-Money Laundering Act – the test covers both ownership and control. An entity that a designated person controls but does not own at 50 percent or more may be caught in the UK but not in the US. The EU position is similar to OFSI's: both ownership and control are relevant. These divergences are not academic. A business operating a release strategy across jurisdictions must map the test in each regime and cannot assume that obtaining an OFAC licence resolves the UK or EU position.
Licensing procedures also differ. OFSI licences are issued under a statutory licensing ground; there is no exact equivalent to OFAC's policy-based specific-licence process. The EU operates through national competent authorities, which creates an additional layer of variation depending on which member state's authority is engaged. In a recent matter, a financial services business holding funds under obligations triggered in both the US and the EU required coordinated submissions to OFAC and a national competent authority – with different evidence standards and different review timelines. Managing those two tracks requires close attention to the sequencing of submissions and to confidentiality obligations in each jurisdiction.
If a transaction has already been flagged under multiple regimes, or a filing has been refused in one jurisdiction, an early review across all affected regimes can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss a multi-regime release strategy.
Step 6: Common pitfalls that defeat or delay release
Most release applications that fail do so for one of a small number of reasons. Identifying them in advance is the most reliable way to avoid them.
- Incomplete ownership analysis. Applicants frequently submit ownership charts that are incomplete or that reflect the legal structure rather than the economic reality. OFAC examines beneficial ownership, not just the registered holder. If the chart does not reflect indirect holdings and the 50 percent aggregation analysis, the submission is vulnerable.
- Weak legal theory. An application that requests a licence without articulating why OFAC's policy criteria support the grant is unlikely to succeed. OFAC does not grant licences as a default: the applicant must make the case.
- Mismatch between the licence request and the institution's requirements. A licence authorising the unblocking of funds is not always sufficient for the holding institution's compliance team. Where the institution requires specific language or a particular form of authorisation, that requirement must be identified before – not after – the application is filed.
- Failure to address secondary sanctions risk. Where the blocked counterparty or the underlying transaction has a connection to a secondary-sanctions-sensitive jurisdiction, OFAC will consider that dimension. Ignoring it in the application leaves a gap that reviewers will identify.
- Delay in engaging counsel. Clients who attempt to manage a blocked-funds situation without specialist advice, then engage counsel after the situation has become entrenched, start from a weaker position. Early involvement allows the evidentiary record to be built correctly from the start.
We regularly advise clients who have received a denial or a request for additional information following an initial unassisted submission. Recovering a poorly prepared file is always harder than filing correctly at the outset. The myth that a straightforward letter to OFAC is sufficient for a release deserves direct correction: OFAC's licensing decisions are substantive and require substantive engagement.
Step 7: When to involve specialist sanctions counsel
Blocked funds are not a compliance-reporting exercise. They are an active legal matter with a regulator that can grant, condition, or decline relief. The threshold for engaging specialist counsel should be low.
Several indicators point to immediate engagement: the blocked amount is material; the ownership analysis is layered or uncertain; there is a secondary-sanctions dimension; the holding institution is creating pressure to resolve the position quickly; or there is any possibility that the underlying transaction involves an activity that requires disclosure. In any of these situations, acting without specialist advice increases the risk of a worse outcome.
We also advise on voluntary self-disclosure (VSD – a self-initiated report to OFAC of a potential violation, made before OFAC initiates its own inquiry). Where a blocked-funds situation has arisen in circumstances that may constitute a violation – for instance, where the block should have been applied earlier but was not – the VSD question must be assessed alongside the licence question. The two are not mutually exclusive, and the sequencing matters.
Compliance counsel advising on export controls or broader trade-compliance programmes will often identify blocked-funds exposure as part of a wider review. For businesses managing goods subject to the EAR alongside financial sanctions, the interplay between BIS controls and OFAC obligations is a separate but related risk that deserves attention in the same engagement.
Related practices
- Frozen account management under BIS and the EAR – managing export-control holds on accounts and shipments alongside OFAC blocks
- Release of blocked funds under OFSI – the UK licensing procedure, OFSI enforcement posture, and how to coordinate with an OFAC release
- OFSI blocked funds: advanced guide – ownership and control analysis, condition compliance, and multi-regime coordination