OFAC Reporting Requirements: Blocked and Rejected Transaction Reports

9/7/2026

Most OFAC training spends its time on screening: how to tune fuzzy matching, how to clear a false positive, when the 50 percent rule applies. That is the right emphasis, because screening is where sanctions programs succeed or fail. But a correct block or rejection is only half the obligation. The other half is the report, and the report runs on a short clock that starts the moment the transaction is stopped.

This guide covers OFAC reporting specifically: which reports a bank files, what triggers each one, what goes in them, how they are submitted, and how the annual blocked-property report works. For the wider sanctions program, including screening design and enforcement, see our OFAC compliance guide for banks.

The reporting rules live in OFAC's Reporting, Procedures and Penalties Regulations at 31 CFR Part 501, mainly sections 501.603 and 501.604. They apply across sanctions programs, and they were amended several times between 2019 and 2026, so a procedure written a few years ago may be out of date. Read the current text on eCFR before you rely on any summary, including this one.

The Four OFAC Reports a Bank Files

Report	Trigger	Deadline	How filed
Initial blocking report	Property becomes blocked	10 business days from the date of blocking	OFAC Reporting System
Rejected transaction report	Bank rejects a transaction that would violate sanctions but is not blockable	10 business days of the rejected transaction	OFAC Reporting System
Unblocking or transfer report	Blocked property is unblocked or transferred (with exceptions)	10 business days from the unblocking or transfer	OFAC Reporting System or email
Annual Report of Blocked Property	Holding any blocked property as of June 30	By September 30 each year	OFAC Reporting System

 

Two further obligations sit around these. OFAC can demand reports and records at any time under section 501.602, and anyone holding blocked property who becomes involved in litigation affecting it must notify OFAC under section 501.605. Those are less routine, but your procedures should name who handles them.

Blocking Versus Rejecting: Which Report Applies

The report you file depends on which action you took, and the action depends on whether a blocked person has an interest in property that came into your possession or control.

Blocking applies when property in which a blocked person has an interest comes into the bank's possession or control. The funds are frozen and held in a blocked, interest-bearing account. They cannot be returned, forwarded or released without OFAC authorization.

Rejecting applies when processing the transaction would violate sanctions, but there is no blockable property interest. A typical example is a payment that involves a comprehensively sanctioned jurisdiction but no blocked person. The bank declines to process it and, where applicable, returns it.

Getting the action wrong produces the wrong report, and often a violation on top of it. A rejection that should have been a block releases blocked property. A block that should have been a rejection holds funds without authority. When the analyst is unsure, the escalation path should reach someone who can decide before the clock is half spent, and in a genuinely unclear case OFAC's compliance hotline is the place to ask.

The Initial Blocking Report

Under section 501.603(b)(1), a blocking report is due within 10 business days from the date the property becomes blocked. Primary responsibility for filing rests with the holder of the property. Another bank in the payment chain filing a report does not excuse yours unless you have actual knowledge that it filed for the same property.

The required content is detailed. A complete initial report includes:

• The name and address of the bank holding the property, with a contact name, phone number and email address.
• A description of the associated transaction, including its type, the parties and their banks (originator, beneficiary, intermediary, correspondent and so on), their locations, and reference numbers and dates.
• The sanctions target whose property is blocked, its location if known, and a narrative of the target's interest if not evident.
• A description of the property and its location, including account numbers and types.
• The date the property was blocked.
• The actual or estimated value in U.S. dollars, with specific rules for negative-balance items, trade documents and foreign currency.
• The action taken, such as deposit into a labeled blocked, interest-bearing account.
• The legal authority for the block, meaning the sanctions program, CFR part, executive order or statute. OFAC is explicit that "SDN" alone is not a legal authority.
• A copy of the payment instructions or other documents received with the transaction.

The legal authority field causes more rework than any other. An analyst who knows the hit was on the SDN list may not know which program tag applies or which executive order sits behind it. Build that lookup into the procedure so the reporter is not researching it on day nine.

The Rejected Transaction Report

Section 501.604 requires a report from any U.S. person, including a bank, that rejects a transaction which is not blocked but would violate OFAC's regulations if processed. "Transaction" is broad: wire transfers, trade finance, securities, checks, foreign exchange and sales of goods or services are all named.

The report is due within 10 business days of the rejected transaction and is filed through the OFAC Reporting System. Its content mirrors the blocking report: the filer and contact, a description of the transaction and parties, the associated sanctions target if there is one, the rejection date, the value in U.S. dollars, the legal authority and copies of related documents. As amended, the rule asks for this information to the extent it is available to the bank at the time it rejects the transaction, which is helpful for thin payment messages but is not a license to skip fields the bank actually has.

Rejected transaction reports are the ones most often missed. A block feels like an event: money is frozen, a special account is opened, someone senior gets involved. A rejection can look like an ordinary returned payment. Make sure your wire and ACH return procedures ask, every time, whether the reason for the return was a sanctions prohibition.

Unblocking and Transfer Reports

When blocked property is later unblocked or transferred, section 501.603(b)(3) generally requires a report within 10 business days. The rule gives examples, such as release under a valid court or government order.

There are four exceptions. No report is required for:

1. Authorized debits to blocked accounts for normal service charges.
2. Authorized transfers between blocked accounts in the bank's own branches or offices.
3. Unblocking or transfer explicitly authorized by a specific or general license, unless the license itself requires a separate report.
4. Unblocking because OFAC removed the person from the SDN List.

The report includes the holder immediately before release, the target, a description of the property, the unblocking date, the value released, the legal authority (often a license), and a copy of the original blocking report with its OFAC Reporting System identification numbers where available. Unblocking reports can be submitted through the OFAC Reporting System or by email to the address the rule specifies.

The practical lesson: keep the original blocking report and its ORS reference with the blocked account record. An unblocking can happen years later, under a different analyst, and the report requires the original.

The Annual Report of Blocked Property

Every holder of blocked property files an annual report covering all blocked property held as of June 30. Under section 501.603(b)(2), it is due by September 30 of the same year. The reporting window effectively opens on July 1.

The annual report includes:

• The filer's name, address and contact details.
• The number of accounts or items reported.
• For each item, the associated sanctions target and its location, with a narrative of the target's interest if not evident.
• A description and location of the property, including account numbers and types.
• The date blocked.
• The value in U.S. dollars as of June 30, noting any other value date used.
• The legal authority for the block.

If blocked funds are held in an omnibus account, the annual report must disaggregate it and list each blocked asset separately.

The annual report is the OFAC deadline most likely to be forgotten, for an obvious reason: a community bank may hold one or two blocked items, blocked years ago, and the person who blocked them may have left. Put the annual report on the compliance calendar with a July start date, and reconcile the list of blocked accounts on your core system against the prior year's report every year, even if nothing has changed.

How to File: The OFAC Reporting System

OFAC now requires electronic filing through the OFAC Reporting System (ORS), accessed from OFAC's website, for initial blocking reports, rejected transaction reports and the Annual Report of Blocked Property. Unblocking and transfer reports may be submitted through ORS or by email to OFAC's reporting address. Paper or other alternative submission requires showing unique and extraordinary circumstances, such as lack of internet access; requests are presumed denied and granted only in writing.

A few operational points matter here:

• Set up access before you need it. Registering users is not something to do on day eight of a ten-day clock. Make sure at least two people at the bank can file.
• Keep copies. The rule requires submitters to retain a copy of what they file.
• Capture the report ID. The ORS identification number links the initial report to later unblocking reports.

Business Days, Not Calendar Days

Every OFAC report clock is counted in business days, which is different from the calendar-day clocks used for CTRs and SARs. It is a small difference that causes real errors when a team works across both regimes. Define in your procedure which days count as business days and how the bank treats a block made late on a Friday. Start counting from the date of blocking or rejection, not from when compliance learned of it. If operations staff block a wire on Monday and the sanctions officer hears about it Thursday, the bank has already used three of its ten days.

Recordkeeping: Now Ten Years

Under section 501.601, anyone engaging in a transaction subject to OFAC's regulations must keep a full and accurate record of it for at least 10 years after the transaction. For blocked property, records must be kept for as long as the property is blocked and for at least 10 years after it is unblocked. The period was extended from five years by a 2024 amendment, to align with a longer statute of limitations for sanctions violations.

That is longer than the general five-year retention period for BSA records, so a single blanket retention schedule for "BSA/OFAC records" may now be too short for the sanctions side. Check your retention policy.

OFAC Reports and SARs

A blocking report does not always end the analysis. FinCEN guidance treats a blocking report filed with OFAC as satisfying the SAR obligation for certain blocked transactions, notably those involving terrorism and narcotics-trafficking designations, but only for the fact of the match itself. If the surrounding activity would be reportable as suspicious even without the OFAC match, or the bank holds information not included in the blocking report, a separate SAR is required.

In practice, every block and every rejection should be routed to the BSA team for a SAR decision, and that decision should be documented either way. The guidance on when the blocking report suffices is narrower than many staff assume. See how to file a SAR for the SAR side of the process.

Building an OFAC Reporting Procedure

A workable procedure answers these questions in writing:

5. Who decides block versus reject, and how quickly must a potential match reach them?
6. Who files, and who is the backup?
7. How is the 10-business-day clock tracked, and from which date?
8. Where is the legal-authority lookup, so the reporter can complete that field accurately?
9. Where are copies and ORS IDs stored, and linked to the blocked account?
10. Who reconciles blocked accounts before the annual report, and when does that work start?
11. Who makes the SAR decision for each block or rejection, and where is it documented?
12. How are rejected payments identified within ordinary returns processing?

Test the procedure periodically by pulling a sample of blocks and rejections and checking report dates against the trigger dates. Independent testing of the sanctions program should include exactly this check, and examiners will often perform it themselves using the FFIEC BSA/AML Examination Manual's OFAC procedures.

Who Needs OFAC Reporting Training

Reporting training is not only for the sanctions officer.

• Wire, ACH and payments staff need to recognize a sanctions-based rejection and route it, because they are often the ones who stop the payment.
• Branch and deposit operations staff need to know that a block starts a clock and who to tell, immediately.
• BSA analysts need the report content requirements, the SAR interplay and the annual report process.
• Compliance management needs to know the obligations exist and that the procedure is tested.

The Office of Foreign Asset Control (OFAC) course is the starting point for staff who touch sanctions screening and reporting. For broader programs, see Bank Secrecy Act training and the Certificate in BSA and AML Compliance. Our BSA/AML examination procedures post explains how examiners approach testing.

Next Step

If your team blocks or rejects even a handful of transactions a year, make sure the people involved know the reports, the clocks and the annual cycle before the next one arrives. The Office of Foreign Asset Control (OFAC) course is built for bank staff who need that foundation.

Frequently Asked Questions

What is an OFAC report?

An OFAC report is a filing a U.S. person, including a bank, must submit to the Treasury Department's Office of Foreign Assets Control after taking a sanctions-related action. Banks file four main types: an initial report when property is blocked, a report when a prohibited transaction is rejected, a report when blocked property is later unblocked or transferred, and an annual report of all blocked property held as of June 30. The requirements are in 31 CFR Part 501. Most are filed electronically through the OFAC Reporting System on OFAC's website.

How long does a bank have to report a blocked transaction to OFAC?

An initial blocking report is due within 10 business days from the date the property becomes blocked, under 31 CFR 501.603(b)(1). The clock runs from the blocking date, not from when compliance staff learned about it, so routing delays inside the bank consume reporting time. The report must include detailed information about the transaction, parties, target, property, value and legal authority, plus copies of the payment instructions. Primary responsibility rests with the bank holding the property, even if another bank in the chain also reports.

Do banks have to report rejected transactions to OFAC?

Yes. Under 31 CFR 501.604, any U.S. person that rejects a transaction which is not blocked but would violate OFAC regulations if processed must report it within 10 business days of the rejection. That includes wires, trade finance, securities, checks and foreign exchange. The report is filed through the OFAC Reporting System and covers the transaction, parties, any associated sanctions target, value and legal authority, to the extent the information was available when the transaction was rejected. Rejections are the reports banks most often miss.

When is the OFAC annual report of blocked property due?

The Annual Report of Blocked Property covers all blocked property held as of June 30 and must be filed by September 30 of the same year, under 31 CFR 501.603(b)(2). It lists each blocked item with its target, description, location, blocking date, value as of June 30 and legal authority. Blocked funds held in an omnibus account must be broken out item by item. Any bank holding even one blocked account must file it, which is why it belongs on the compliance calendar every year.

What is the OFAC Reporting System?

The OFAC Reporting System (ORS) is OFAC's online portal for submitting required reports. Initial blocking reports, rejected transaction reports and the Annual Report of Blocked Property must be filed through it, and unblocking reports may be filed through it or by email. Alternative submission methods are allowed only with evidence of unique and extraordinary circumstances, and such requests are presumed denied. Banks should register more than one user ahead of time and keep the report identification numbers ORS assigns, because later unblocking reports refer back to them.

Does filing an OFAC blocking report replace a SAR?

Only partly. FinCEN guidance treats a blocking report as satisfying the SAR requirement for certain blocked transactions, such as those involving terrorism or narcotics-trafficking designations, but only for the match itself. If the activity would be suspicious even without the OFAC hit, or the bank has relevant information not in the blocking report, a separate SAR must be filed. Route every block and rejection to the BSA team for a documented SAR decision rather than assuming the OFAC filing covers it.