OFAC Updates FAQs on Blocking, Rejecting, and Reporting Transactions

On October 26, 2026, the Office of Foreign Assets Control (OFAC) amended 11 of its frequently asked questions on blocking and rejecting transactions and on filing reports with OFAC. The revised FAQs are numbers 10, 32 through 36, 41, 42, 49, 50, and 53. OFAC said the update is part of an ongoing review of its published guidance. It doesn’t create a new sanctions program, add designations, or change the underlying regulations.

The FAQs still matter, though. Examiners, auditors, and OFAC’s own enforcement staff look to them when deciding whether a bank or payment company handled a sanctions hit correctly. At financial institutions, a lot of sanctions problems don’t begin with a missed screening alert. They begin with an alert that was caught and then handled the wrong way. Funds get rejected when they should have been blocked, a blocked payment is reported late, or a report goes in without the paperwork OFAC expects.

Below, we walk through what the updated FAQs say about blocking, rejecting, and reporting, and what compliance teams should check in their own procedures. If your institution needs help reviewing its sanctions program, our OFAC compliance counseling page explains how we work with financial institutions.

Which OFAC FAQs Were Updated?

The amended FAQs fall under two of OFAC’s FAQ topics: Blocking and Rejecting Transactions and Filing Reports with OFAC. The full revised text is on OFAC’s recently updated FAQs page. In short:

• FAQ 10 covers which jurisdictions are subject to broad sanctions and notes that OFAC doesn’t keep a single list of countries U.S. persons can’t do business with.
• FAQs 32 through 34 cover how to block an account or transfer, the interest blocked funds must earn, and whether banks can deduct service charges from blocked accounts.
• FAQs 35 and 36 explain when a transaction should be rejected instead of blocked.
• FAQs 41 and 42 deal with telling a customer their property was blocked and with blocked persons who try to open accounts.
• FAQs 49, 50, and 53 cover reporting deadlines, annual reports of blocked property, and the difference between a customer’s question and a payment instruction.

Blocking vs. Rejecting a Transaction Under OFAC Rules

Most of the updated guidance turns on the difference between blocking and rejecting. Both stop a payment, but what happens to the money afterward is different, and getting it wrong in either direction causes trouble.

When Must You Block a Payment?

You block when a blocked person has an interest in the property. Blocked persons include anyone on the Specially Designated Nationals and Blocked Persons List (SDN List), entities owned 50 percent or more by blocked persons under OFAC’s 50 percent rule, and, under some programs, an entire government. FAQ 10 identifies the governments of Cuba, Iran, North Korea, and Venezuela as blocked.

Under FAQ 32, blocked funds go into a segregated, interest-bearing account on the institution’s books, and nothing comes out without OFAC authorization. An institution can keep a separate account for each blocked item or use a blocked omnibus account, as long as there’s a clear audit trail. FAQ 33 says the interest has to be paid at a commercially reasonable rate, which means what the institution pays other depositors on comparable amounts and terms. FAQ 34 confirms that most programs let institutions deduct their normal service charges.

When Should You Reject a Payment Instead?

You reject when the transaction is prohibited but no blocked person has an interest in it. FAQ 35 points out that not every sanctions program involves blocking. Some only prohibit certain kinds of dealings. In those cases the funds go back to the originator and aren’t processed forward to the beneficiary.

FAQ 36 gives examples. A payment to a bank wholly owned by the Government of Iran has to be blocked, because the Iranian government is a blocked party. A payment to a Tehran company that isn’t blocked has to be rejected. Processing it would mean facilitating trade with Iran, but there’s no blocked interest to freeze. A payment that would export a service to the Crimea region of Ukraine is rejected for the same reason.

Don’t treat “reject” as the default just because it’s simpler. If a blocked person has an interest in the funds and you send them back, you’ve returned property to someone OFAC wants frozen. That’s a violation on its own.

A Customer’s Question Isn’t a Transaction

FAQ 53 draws a line that front-line staff sometimes miss. If a customer asks whether they can send money to Cuba, the bank can answer the question or refer the customer to OFAC’s Compliance Hotline. There’s nothing to block or reject, and nothing to report. If the customer actually instructs the bank to send funds to a non-blocked person in Iran, the bank has to reject the transfer and report it. If the instruction is to pay a blocked person, the funds get blocked and reported.

The obligation comes from the instruction, and an inquiry by itself doesn’t trigger one. Branch and call center procedures should spell this out. Otherwise staff end up filing reports nobody needs or, worse, treating a real payment instruction as a mere question.

OFAC Reporting Requirements for Blocked and Rejected Transactions

The 10-Business-Day Deadline

Under 31 C.F.R. § 501.603 for blocked property and § 501.604 for rejected transactions, reports are due within 10 business days of the block or rejection. FAQ 49 confirms that they’re filed through the OFAC Reporting System. None of this is new. OFAC’s 2019 amendments to its reporting regulations set the current deadlines and document requirements, and the updated FAQs restate them.

What Supporting Documents to Include

FAQ 49 lists the kinds of documents OFAC expects with a report: payment or transfer instructions, checks, letters of credit, bills of lading, invoices, and any other relevant records. If a report names the parties and the amount but leaves out the underlying instruction, expect a follow-up request.

Annual Reports of Blocked Property

FAQ 50 restates the annual report requirement. Anyone holding blocked property as of June 30 must file a report on that property by September 30 of the same year, through the OFAC Reporting System. FAQ 32 adds that institutions using an omnibus account have to list each blocked item separately in the annual report.

Telling Customers Their Funds Were Blocked

FAQ 41 confirms that an institution may tell a customer that their property has been blocked and identify the sanctions program involved. The customer can then apply to OFAC for a license to release the funds under 31 C.F.R. § 501.801. Our post on what to do when OFAC blocks your funds and our unblocking application page cover that process from the customer’s side.

What Compliance Teams Should Review Now

Now is a good time to test your procedures against the guidance. We would start here:

• Decision rules for block vs. reject. Staff who clear alerts should have a written decision path. It should ask whether a blocked person has an interest, including through 50 percent ownership, before anyone decides what to do with the funds.
• Inquiry handling. Customer-facing teams should know that a question about a sanctioned destination doesn’t trigger anything, while an actual payment instruction does.
• Deadline tracking. The 10-business-day clock starts at the block or rejection. It doesn’t wait for compliance to finish its review. Build the deadline into case management.
• Report packages. Attach the payment instruction and any commercial documents to every report.
• Annual reporting. Reconcile blocked accounts as of June 30 every year, and itemize omnibus accounts.
• Recordkeeping. OFAC’s recordkeeping rule at 31 C.F.R. § 501.601 now requires records to be kept for 10 years, which matches the extended statute of limitations for sanctions violations.

What If You’ve Already Missed a Report or Mishandled a Payment?

Failing to file a required report is a violation of OFAC’s Reporting, Procedures and Penalties Regulations, separate from any underlying sanctions violation. Rejecting a payment that should have been blocked can be a substantive violation too.

Say an internal review turns up a late or missing report, or a payment that was returned when it should have been frozen. The institution then has to decide whether to disclose. A voluntary self-disclosure generally cuts the base penalty in half under OFAC’s Enforcement Guidelines, but only if OFAC hasn’t already learned of the issue from another source. If OFAC has already reached out, our OFAC enforcement and investigation team handles responses to cautionary letters, subpoenas, and penalty notices.

Frequently Asked Questions

What is the difference between blocking and rejecting a transaction? You block a transaction when a blocked person has an interest in the property. The funds are frozen in a segregated, interest-bearing account and reported to OFAC. You reject a transaction when it’s prohibited but no blocked person has an interest. The funds go back to the originator, and the rejection is reported to OFAC.

How long do you have to report a blocked or rejected transaction to OFAC? Ten business days from the date of the block or rejection. Reports go through the OFAC Reporting System, with supporting documents such as the payment instruction and any invoices or letters of credit.

Does a bank have to report a customer’s question about a sanctioned country? No. Under FAQ 53, a customer’s question about whether a payment is allowed isn’t a transaction, so there’s nothing to block, reject, or report. A reporting obligation arises only when the customer gives an actual payment instruction.

Get Help With OFAC Blocking and Reporting Obligations

The updated FAQs don’t change the rules, but they do state them plainly. If a blocked person has an interest, you block. If the transaction is prohibited and no blocked person has an interest, you reject. Either way, you report within 10 business days and include the documents to back it up. An institution that can’t show it follows these steps consistently is exposed when an examiner or OFAC looks closely.

Sanctions Law Center is a Washington, DC firm that specializes in OFAC matters. We help financial institutions and payment companies build and test sanctions compliance programs. We also review past reporting gaps and advise on whether to file a voluntary self-disclosure.

Contact us for a free consultation.