On 26 October 2026, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) published amended versions of 11 frequently asked questions (FAQs 10, 32 to 36, 41, 42, 49, 50 and 53) on blocking and rejecting transactions and filing reports. The amendments form part of an ongoing review of OFAC's guidance, and their material changes concern two areas. First, the distinction between blocked and rejected transactions, and second, the submission of blocking and reject reports through the OFAC Reporting System (ORS) within 10 business days.

What is the difference between blocking and rejecting a payment?

Blocking

A transaction must be blocked where a blocked person has an interest in it. Blocked persons include those listed on the Specially Designated Nationals and Blocked Persons List (SDN List) and those blocked by operation of law, such as blocked governments and entities owned 50 percent or more by blocked persons. 

Blocked funds must be held in a “segregated, interest-bearing account” from which only OFAC-authorised debits may be made, and are released only under an OFAC licence. (FAQ 41)

Rejecting

A transaction must be rejected where the underlying activity is prohibited but no blockable interest is present, typically under jurisdiction-based programmes. A nexus to a sanctioned jurisdiction does not of itself render a payment blockable, and some programmes impose no blocking requirements. (FAQ 35)

Amended FAQ 36 states that such a transaction “should be rejected and returned to the originator” and “must not be processed forward to the beneficiary”. The obligation for blocking and rejecting arises on receipt of a payment instruction. (FAQ 53)

Both actions stop the payment, but rejected funds go back to the sender, while blocked funds stay frozen, subject to annual reporting, until OFAC authorises their release.

How does OFAC illustrate the difference?

Amended FAQ 36 sets out three scenarios:

1. Blocking required. A payment must be blocked where any party involved is blocked, even if the payee is not. Iranian financial institutions owned by the Government of Iran are blocked whether or not they are listed. A payment to a company's account at a bank in Iran “wholly-owned by the Government of Iran” must therefore be blocked in full.

2. Rejection required: prohibited activity, no blocked party. The absence of a blocked party does not make a payment permissible. For example: a payment to a Tehran company that is not a blocked party, even where the payment is held at “a non-blocked bank in a third country” (a detail added in the update), must still be rejected, as processing it counts as “facilitating trade with Iran, exporting a service to Iran”.

3. Rejection required: prohibited activity beyond Iran (new example). The principle extends to other jurisdictions under broad sanctions. A wire transfer to a non-blocked individual in the Crimea region of Ukraine must be rejected, as processing it would mean “exporting a service to the Crimea region of Ukraine”.

How should blocked and rejected payments be reported?

Both must be reported to OFAC within “10 business days of the date of the action”. Amended FAQs 36, 49 and 53 specify submission through ORS, with supporting documents such as payment instructions, letters of credit and invoices; earlier versions also referred to optional forms and email. Holders of blocked property as of 30 June must also file an Annual Report of Blocked Property through ORS by 30 September. (FAQ 50)

What does this mean for compliance teams?

Misclassification carries risk in both directions. Rejecting a payment that should have been blocked releases blocked property, itself a potential violation, while blocking one that should have been rejected freezes funds without legal basis. Teams should therefore ensure that:

• Screening covers every party in the payment chain, including intermediary and beneficiary banks, and identifies persons blocked through ownership as well as listing.

• Address and location data are sufficient to identify payments involving sanctioned regions such as Crimea.

• Alert decisions record why a payment was blocked or rejected, with the documents a report requires.

• Reporting procedures referencing email or paper forms are updated to ORS.