INTERNATIONAL TRADE LAW
Blocked Assets and the SDN List: What to Do
If a transaction involves a Specially Designated National (SDN), you must freeze the property, report it to OFAC within 10 business days, and never release it without authorization — returning it can itself be a violation. Blocked assets and the SDN List are where sanctions stop being abstract and become a concrete set of obligations with hard deadlines. Here is what the terms mean and exactly what to do when one comes up.
What “blocked assets” and “SDNs” mean
A Specially Designated National (SDN) is a person, company, or vessel that OFAC has named as sanctioned. SDNs appear on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List), and U.S. persons are generally prohibited from dealing with them.
Blocked assets (also called frozen property) are funds or property in which a sanctioned party has an interest, located in the United States or in the possession or control of a U.S. person. When property is blocked, it cannot be transferred, paid, withdrawn, exported, or otherwise dealt with — it is frozen in place until OFAC authorizes its release. The point is to deny the sanctioned party the use of the asset, not to confiscate it.
The 50% Rule: blocked even when not listed
You cannot rely on the name alone. Under OFAC’s 50 Percent Rule, any entity owned 50% or more — directly or indirectly, by one blocked person or several in combination — is itself blocked, even though its name never appears on the SDN List. A clean-looking company can be blocked because of who sits behind it. This is the single most common way businesses miss an SDN exposure, and it is why screening has to consider beneficial ownership, not just the counterparty on the invoice. For the broader picture, see our overview of what OFAC is and how it affects your business.
Block vs. reject: two different actions
When a transaction trips a sanctions flag, you take one of two actions — and confusing them is a compliance failure:
| Action | When it applies | What you do | Reporting |
|---|---|---|---|
| Block (freeze) | Property in which an SDN/blocked person has an interest | Place it in a blocked, interest-bearing account; do not return it | Report to OFAC within 10 business days |
| Reject | A prohibited transaction where no blockable property is actually held | Decline to process; return to sender | Report the rejected transaction to OFAC (generally within 10 business days) |
The instinct to “just send the money back” is exactly wrong when the property is blockable — returning it to the sanctioned party defeats the freeze and creates liability.
What to do when you identify an SDN match
- Stop the transaction. Do not process, release, or return anything until you have resolved whether the party is truly a match.
- Confirm it’s a true match, not a false positive. Compare full name, date of birth, address, and identifiers. Many alerts are coincidental name hits; resolve them before acting, and document how you cleared or confirmed each one.
- Block the property if there is a genuine SDN interest — move it into a segregated, blocked, interest-bearing account.
- Report to OFAC within 10 business days of blocking, with the required transaction details.
- File the annual report of all blocked property you hold, due by September 30 each year.
- Keep records. Retain your screening results and supporting documents — plan for a 10-year horizon given the 2024 extension of the statute of limitations for sanctions violations.
Releasing blocked property
Blocked funds stay blocked until OFAC says otherwise. To unfreeze and use or return property, you typically need an OFAC license — either a general license that authorizes a category of transactions, or a specific license you apply for. Acting on your own judgment that “the sanction probably doesn’t apply” is not a substitute for authorization.
Reducing the risk before it happens
The most effective defense is screening that runs at onboarding and continues over the life of the relationship, because a counterparty clean today can be designated tomorrow. Pair that with beneficial-ownership diligence to catch the 50% Rule, and document what you checked. Related reading: why sanctions screening protects exporters and types of sanctions and how they affect your business.
Frequently asked questions
Can I just return a payment connected to an SDN? No — if the property is blockable, returning it to the sanctioned party undermines the freeze and can be a violation. Block it, place it in a segregated account, and report to OFAC.
How fast do I have to report blocked property? Within 10 business days of the property becoming blocked. You must also file an annual report of blocked property held, due September 30.
What if the SDN match turns out to be a false positive? Resolve it before acting. Compare identifying details, document your analysis, and proceed only once you have confirmed the party is not the listed person. Keep the record either way.
How do I unblock funds I’m holding? You generally need an OFAC license — a general license covering the transaction type, or a specific license you request. Do not release blocked property without authorization.
Hit a blocked party or a frozen payment? Reidel Law Firm’s flat-fee import/export compliance memo walks you through screening, blocking, and reporting before a mistake becomes a penalty — in plain English, with direct attorney access. Get an import/export compliance memo →
