OFAC Rejected vs Blocked Transaction

Rejected: transaction refused before processing. Blocked: funds frozen mid-transaction. Different reporting obligations apply.

TL;DR

TL;DR: A rejected transaction is refused before it is processed, while a blocked transaction means funds or property are frozen because they involve a sanctioned party. The two carry different reporting obligations.

Rejected transactions

A rejection happens at the front of the process. The counterparty fails screening, so the payment is simply refused and never moves. The funds stay with the sender, and no property belonging to a blocked party is taken into custody. Because nothing was transferred, the event is less severe from a custody standpoint, but it may still need to be recorded.

Blocked transactions

A block happens when funds are already in motion or in the institution's control and the counterparty turns out to be sanctioned. The funds are frozen and must not be returned to the blocked party or forwarded. The institution now holds blocked property, which triggers a specific filing obligation.

Reporting obligations

Blocked property must be reported to OFAC, typically within 10 business days, with details of the blocked party and the assets. Rejected transactions are reported through separate channels and timeframes. Getting the two confused can cause a filing to be missed or filed on the wrong form.

Why the distinction matters for agents

An agent that screens before it pays is designed to reject rather than block, because the check runs before any funds move. That is the safer path: a rejection keeps the sender whole, while a block creates custody and reporting work.