When OFAC Targets You, Your Assets Freeze
If the Office of Foreign Assets Control (OFAC) launches an investigation or officially designates you on the SDN List, one of the first and most devastating actions is the freezing of your assets. But what happens behind the scenes when this occurs? Where does your money go? What about property, investments, or business accounts?
The Legal Trigger: Blocking vs. Seizure
It’s important to distinguish between blocking (freezing) and seizing (confiscation):
- Blocking means that assets cannot be moved, transferred, withdrawn, or altered in any way. You still “own” them, but you have zero access.
- Seizure involves the legal forfeiture of assets by a government agency, typically following a criminal conviction or civil enforcement action.
OFAC primarily issues blocking orders, not seizures. So, during an investigation, most of what happens falls under the “blocked assets” category.
Assets Subject to Freeze
OFAC’s reach is broad. When an investigation begins, any asset that touches a U.S. person or institution may be frozen. This includes:
- Bank accounts in U.S. dollars, even if held abroad
- Real estate under U.S. jurisdiction
- Cryptocurrency wallets linked to U.S. exchanges or platforms
- Business shares or ownership stakes connected to U.S.-linked operations
- Contracts, invoices, and receivables involving U.S. entities
Even if your account is based in Dubai, Istanbul, or Singapore, if it holds U.S. dollars or interfaces with a U.S.-regulated platform, it’s fair game for an OFAC block.
The Mechanism: How Blocking Happens
Once OFAC begins investigating or designates you:
- Financial institutions receive notice via internal compliance alerts or OFAC bulletins.
- Banks automatically flag and freeze assets associated with your name, company, or known aliases.
- OFAC may issue a specific blocking order for complex cases.
- Entities you control (50% or more) are also subject to freezing — even if their names don’t appear on any list.
This process is often instantaneous. You may learn about the freeze when a payment is returned, a card stops working, or a client notifies you that their bank flagged your invoice.
During an OFAC investigation, early legal intervention can make the difference between prolonged asset lock and timely recovery. Lionel Iruk, Esq., Managing Partner and General Counsel at Empire Global Partners, regularly defends clients in pre- and post-sanctions investigations — helping protect assets, engage regulators, and structure responses that reduce exposure and restore access.
What Happens to the Blocked Assets?
When your assets are frozen:
- The funds are moved to a segregated account (usually non-interest-bearing) by the bank
- Property is noted as unavailable for sale or transfer in official records
- Banks are required to report blocked funds to OFAC within 10 days
- OFAC keeps a record but does not take possession — this is not seizure
You retain “ownership,” but you can’t touch, manage, or use the assets in any way — unless you receive a license.
Does OFAC Notify You?
Not always.
In fact, many people are not formally notified until they experience a problem accessing their funds. Banks often freeze accounts before OFAC even issues a public designation.
If you suspect you’ve been flagged, check the SDN List, and ask your bank in writing for documentation explaining the freeze.
What About Joint or Business Accounts?
If you hold a joint account or manage a company:
- The entire account may be frozen if your ownership exceeds 50%
- The non-sanctioned partner may apply for a partial release via a license
- Business operations may be halted unless restructured or isolated from you
Companies with sanctioned shareholders are often considered “blocked entities” and face the same restrictions unless ownership is reduced or governance is transferred.
How Long Do Assets Stay Frozen?
There is no automatic expiration. Assets stay frozen until:
- The designation is removed by OFAC
- You obtain a specific license to use or transfer them
- A court intervenes (rare)
- You pursue a settlement agreement with the U.S. government
Some accounts have remained frozen for 10+ years, particularly in high-profile or unresolved cases.
Can You Access Blocked Assets?
Only with permission.
OFAC can issue specific licenses allowing limited access to:
- Pay legal fees
- Cover basic living expenses
- Satisfy pre-existing contractual obligations
- Sell assets under U.S. supervision
This process requires a formal license application, supporting documentation, and legal justification. It can take weeks to months — but is often the only way to legally access critical funds.
What If You Disagree With the Freeze?
If you believe your assets were blocked unfairly or in error, you have several options:
- Submit a petition for delisting under 31 C.F.R. § 501.807
- Provide documentation disputing ownership or involvement
- Request a reassessment of mistaken identity (especially in common-name cases)
- Challenge the designation in U.S. federal court (rare, but possible)
The strongest cases include proof of clean ownership, compliance reform, and distance from any sanctioned activity or party.
Best Practices During an Investigation
- Don’t attempt to bypass the freeze through proxies or alternative accounts — this can lead to criminal charges
- Engage legal counsel immediately to guide communication and prepare license applications
- Isolate non-sanctioned assets early — use separate accounts, restructure ownership, and build legal firewalls
- Document everything — emails, ownership transfers, transaction logs — to use as evidence later
- Avoid public statements without legal review — they can and will be used against you
Final Thoughts
When OFAC investigates or designates you, the freeze on your assets can feel like a total collapse — but it’s not always the end. With the right legal guidance and strategic steps, you may be able to access necessary funds, correct errors, or even reverse the designation over time.
The key is early action, expert advice, and full transparency. A blocked account is a legal problem, and legal problems have solutions.
