What is the OFAC blocking process?
What is the OFAC blocking process?
When OFAC blocks a transaction, the funds are not confiscated by the US government — they are frozen in place and cannot be transferred, withdrawn, or used until OFAC authorizes release through a specific license or the counterparty is removed from the SDN list.
Blocked vs. seized
The distinction matters: "blocked" property remains yours or your customer's — you just cannot move it. "Seized" (or forfeited) property is taken by the government. OFAC blocking is the former; criminal forfeiture is the latter and requires a court order.
What triggers a block
A transaction is blocked when any party to the transaction — sender, recipient, intermediary, or the assets themselves — matches an entry on the SDN list or involves a comprehensively sanctioned jurisdiction. For crypto, the most common trigger is a wallet address appearing on the SDN list.
What happens next
- The transaction is frozen. The funds sit in the blocked account or wallet. No further transfers are permitted.
- You must report. Within 10 business days, the blocking party (your exchange, your wallet provider, or you) must file a blocked property report with OFAC.
- OFAC reviews. OFAC may investigate, request additional information, or issue guidance.
- Resolution options: Apply for a specific license to unblock, petition for delisting of the counterparty, or await the counterparty's removal from the SDN list.
Can blocked funds be recovered?
Yes, but it takes time. OFAC issues specific licenses for legitimate reasons — mistaken identity, pre-existing contracts, humanitarian exceptions. The process typically takes weeks to months. Having clean, timestamped screening logs from a tool like SanctionsAI significantly speeds up the "mistaken identity" case.