A company receives a letter. Its accounts are frozen. Its name appears on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons). Counterparties stop returning calls. The question that arrives in our inbox, sometimes within hours, is always the same: can this designation be challenged in court?
Yes – a designated party can seek judicial review of an OFAC designation in a United States federal court. The reviewing court assesses whether OFAC acted within its statutory authority under IEEPA (the International Emergency Economic Powers Act) or the relevant programme authority, and whether the designation was arbitrary, capricious, or otherwise contrary to law. As of early 2026, the standard of review applied by federal courts remains deferential to the executive, but that deference is not unlimited, and successful challenges have turned on procedural deficiencies and insufficient evidentiary bases.
This briefing sets out who administers the process, what the legal standard requires, how the OFAC administrative record functions, where the regime diverges from its UK and EU counterparts, what risk flags practitioners should watch, and when a designated party should involve specialist counsel.
Who administers judicial review of an OFAC designation?
Judicial review of an OFAC designation is administered by the federal courts of the United States, not by OFAC itself. OFAC – the Office of Foreign Assets Control, a bureau of the United States Department of the Treasury – makes the initial designation decision. A party seeking to overturn that decision must bring a claim in federal district court.
OFAC operates under a broad delegation of authority. IEEPA grants the President sweeping powers to regulate transactions in response to a declared national emergency, and those powers have been delegated to the Secretary of the Treasury and, in practice, to OFAC. The specific sanctions programme – there are more than thirty active OFAC programmes – determines which executive order and which set of regulations governs the designation. Understanding the precise programme authority matters because it defines the evidence standard the agency applied and what a court will scrutinise.
The Department of Justice typically represents OFAC in federal litigation. The designated party and its counsel litigate against the government's position, often with significant asymmetries: OFAC may rely on classified information that the petitioner cannot directly access or contest. That asymmetry is one of the defining features of OFAC designation litigation and distinguishes it sharply from ordinary administrative proceedings.
In our cross-border practice, we regularly see designated parties underestimate the institutional weight of that asymmetry. The government's reliance on sensitive sources is explicitly recognised by the courts; a reviewing court may review classified evidence in camera without disclosing it to the petitioner.
What is the legal standard a federal court applies?
A federal court reviewing an OFAC designation applies the Administrative Procedure Act (APA) standard: it will set aside agency action that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, or that violates constitutional rights. The court does not conduct a fresh assessment of the merits; it reviews the administrative record OFAC compiled.
The arbitrary-and-capricious standard is highly deferential. The court asks whether OFAC examined the relevant factors, considered the evidence before it, and arrived at a conclusion that a reasonable agency could reach. A court will not substitute its own judgment for OFAC's on a question of sanctions policy. Where a petitioner can show that OFAC relied on factual error, overlooked probative counter-evidence, or applied the wrong legal test, the chances of a successful challenge improve meaningfully.
Constitutional arguments – most commonly due process claims under the Fifth Amendment – add a second layer to the analysis. A designated party has a cognisable property interest in its blocked assets. OFAC's regulations provide limited administrative-review procedures, including the right to submit a petition for administrative reconsideration. Courts have held that the combination of the administrative review process and the availability of judicial review satisfies due process, but the adequacy of that process remains contested in cases where access to the evidence is severely constrained.
Does the deference standard insulate designations entirely from judicial intervention? No. In our experience, the most viable grounds for challenge are: factual error (the designated person is not, in fact, the entity described in the administrative record), reliance on stale or contradicted intelligence, failure to consider material exculpatory evidence submitted during administrative reconsideration, and – less commonly – constitutional procedural failures.
How does the administrative record shape the litigation?
The administrative record is the evidentiary universe of the case. Federal courts review the record OFAC had when it made the designation; new evidence introduced by the petitioner at the litigation stage is generally not considered, though courts have discretion in limited circumstances. Building the strongest possible record begins before litigation – during administrative reconsideration.
OFAC's administrative-reconsideration process allows a designated party to submit evidence and legal argument to OFAC requesting that the designation be rescinded or amended. That submission becomes part of the administrative record. A thorough, well-evidenced reconsideration petition serves two functions: it gives OFAC a genuine opportunity to correct error, and it loads the administrative record with the counter-evidence a court will later evaluate.
The position above covers the standard procedural pathway. Your facts – the programme authority, the nature of the evidence against you, the identity of the designated entity, and whether related parties are also listed – change the analysis and the sequencing of steps. For a confidential review of a potential challenge, contact Calder & Vance at info@caldervance.com.
Classified or law-enforcement sensitive information presents the hardest problem. OFAC regulations expressly contemplate that the agency may decline to disclose classified information even during administrative reconsideration. The court may then conduct in camera review of that material. Petitioners must develop arguments on the public record that challenge the reliability, staleness, and sufficiency of whatever information OFAC has disclosed, using inference and available public evidence to contest the factual predicate of the designation.
How does OFAC judicial review compare with the UK and EU designation challenge routes?
The OFAC judicial-review route, the UK OFSI designation challenge mechanism, and the EU General Court annulment action share the same fundamental goal – overturning an unjustified designation – but differ in legal architecture, evidentiary access, and remedy.
Under SAMLA (the Sanctions and Anti-Money Laundering Act 2018), a designated person in the United Kingdom may apply to the High Court for judicial review of OFSI's decision to designate. The UK route also permits an application to the Secretary of State for a ministerial review before litigation. One notable difference: the UK courts have applied a somewhat more structured approach to the adequacy of the disclosure given to the designated party, drawing on principles developed in the context of asset-freezing proceedings. For a detailed comparison, see our briefing on judicial review of a designation under OFSI.
In the European Union, a designated person challenges a listing by bringing an annulment action before the EU General Court under the Treaty on the Functioning of the European Union. The EU General Court has developed a substantial body of case-law on the evidentiary standard for designations: it applies a substantive review of whether the facts cited by the Council are established, and it has annulled designations where the Council's evidence was insufficient, factually incorrect, or procedurally flawed. The EU approach is, on balance, less deferential to the designating authority than the US standard. Our extended analysis of the EU route is available at our related EU designation challenge briefing.
For a business designated simultaneously under OFAC, OFSI, and EU Council regulations – a common pattern following coordinated sanctions packages – the three challenge routes must be pursued in parallel or in a carefully sequenced strategy. Evidence obtained in one jurisdiction can sometimes inform the arguments in another. The divergent evidentiary standards mean the EU route may offer a more accessible first result, which can then be deployed diplomatically in the US administrative-reconsideration process.
A second cross-regime consideration concerns secondary sanctions. Even where a designated party succeeds in obtaining an EU or UK delisting, US secondary-sanctions risk persists until OFAC itself removes the listing. Third-country counterparties with US-dollar clearing or US-person employees will continue to treat the party as high-risk. The US delisting therefore often carries the highest practical value, even where it is the hardest to obtain judicially.
What are the common procedural risk flags for a designated party?
Several procedural failure points recur in designation challenges. Identifying them early determines whether a challenge has a viable legal theory or must rely solely on factual rebuttal.
The first is notice adequacy. OFAC is required to notify a designated party of the action and to provide some statement of the reason for designation. Where the notice is so skeletal that the designated party cannot meaningfully respond, there is a due process argument, though courts have set a low threshold for what counts as adequate notice in the national-security context.
The second is stale intelligence. An administrative record built on information that is several years old, and that the petitioner can show has been overtaken by events, gives a court grounds to find that the evidentiary basis is insufficient to sustain the designation as of the date of review. OFAC is expected to maintain designations on current, reliable grounds.
The third is failure to engage with exculpatory evidence. If a petitioner submitted a reconsideration petition with documentary evidence directly contradicting the factual predicate, and OFAC's decision letter does not acknowledge or address that evidence, a court may find the agency's reasoning deficient under the APA. This is one of the more productive avenues in practice.
The fourth is misidentification. OFAC's SDN List is maintained by reference to identifiers – name variants, date of birth, nationality, address. Where a business or individual can demonstrate that the listed identifier does not correspond to them – a classic false-positive scenario – judicial review (or, more commonly, rapid administrative reconsideration) is the correct response. OFAC maintains a process for resolving misidentification, and federal courts expect that administrative avenue to be exhausted first.
If a transaction has already been blocked, accounts have been frozen, or a correspondent bank has severed the relationship, early specialist review preserves options that close quickly. Contact Calder & Vance at info@caldervance.com for a confidential initial assessment.
What is the relationship between administrative reconsideration and judicial review?
OFAC's administrative-reconsideration process is, in practice, a necessary precursor to judicial review. Courts apply the doctrine of exhaustion of administrative remedies: a petitioner who bypasses the agency's own reconsideration procedure may find a court unwilling to entertain the challenge on the merits. Submitting a well-constructed reconsideration petition is therefore a litigation step, not merely a regulatory formality.
The reconsideration petition should set out the factual grounds for challenging the designation in detail, attach supporting documentary evidence, address each element of the programme-specific designation criteria, and engage with any publicly stated basis for the listing. It is the petitioner's most direct opportunity to shape the administrative record before a court sees it.
OFAC is not subject to a statutory deadline for responding to a reconsideration petition. In practice, responses can take a considerable period. That delay can be significant: blocked assets remain frozen, business operations are disrupted, and reputational damage compounds. Where the delay is unreasonable, a petitioner may argue to a federal court that the agency has effectively denied the petition, opening the judicial-review avenue.
In a recent matter, a financial-services business designated under one of the programme authorities faced frozen correspondent banking relationships. We prepared the administrative-reconsideration petition, addressing the specific factual predicates identified in OFAC's notice, and submitted contemporaneous documentary evidence to contradict the stated basis. The petition was accepted for substantive review, and OFAC engaged with the counter-evidence. Outcomes of reconsideration proceedings vary and cannot be guaranteed; the goal is to construct the strongest possible record.
What does a viable challenge actually require, and when should counsel be involved?
A viable OFAC designation challenge requires a clear theory of how OFAC erred – factually, legally, or procedurally – supported by evidence that is either already in the public administrative record or can be generated by the designated party itself.
Counsel should be involved at the earliest possible stage. The window between designation and the exhaustion of meaningful administrative options is short. A petition submitted without proper legal architecture – failing to address the programme-specific criteria, lacking supporting evidence, or structured as a general denial rather than a targeted rebuttal – does not improve the administrative record; it may entrench a weak position.
The practical steps in a well-managed challenge are sequential. First, analyse the designation notice and the publicly available information to identify the likely evidentiary basis. Second, map the designation criteria under the relevant programme to assess which elements are most vulnerable. Third, gather and authenticate documentary evidence that addresses those elements directly. Fourth, prepare and submit the reconsideration petition. Fifth, if reconsideration is denied or unreasonably delayed, assess the federal-court filing. Sixth, if parallel listings exist under OFSI or EU Council regulations, co-ordinate the challenge strategy across regimes.
A common misconception among businesses facing designation is that judicial review is the first step. It is not. Courts expect the administrative process to have been pursued fully. The administrative record built during reconsideration is the foundation of the litigation; arriving at federal court without that record, or with a thin one, significantly diminishes the prospects of the challenge.
We regularly advise clients at each of these stages – from the first designation notice through to federal court filings and co-ordinated multi-regime challenge strategies. Our work is limited to lawful challenge and compliance; we do not advise on avoiding or bypassing the sanctions regime.
For more detail on assembling the evidence package in a related jurisdiction, see our service on the delisting evidence package for Australia.
Related practices
- Delisting evidence package (Australia) – building the evidence record for a designation challenge under the Australian autonomous-sanctions regime.
- Judicial review of a designation under OFSI – the UK High Court route, ministerial review, and SAMLA procedural requirements.
- EU designation challenge briefing – annulment actions before the EU General Court and the Council's evidentiary standard.