Prohibitions in Practice: Blocking, Rejecting, Facilitation, Licenses

You've learned who can be sanctioned and how to find them on a list. Now the other half: what you must actually do. This is where exam scenarios live, because picking the wrong action is itself a violation.

If you should have blocked a payment but instead returned it, you may have breached the rules; if you froze funds you were only required to reject, you've created a different problem. So we'll define four actions precisely, blocking, rejecting, facilitation, and licensing, and you'll learn to choose between them by regime and by the reason the transaction is prohibited.

Blocking, also called freezing, means you stop the transaction and hold the funds, you do not send them onward and you do not give them back. The blocked funds typically go into a segregated, interest-bearing blocked account, and you're prohibited from dealing with them without authorization. You block when a designated, blocked person, or an entity blocked under the 50 Percent Rule, has an interest in the transaction or property.

Under U.S. rules, you must report a blocking to OFAC, generally within ten business days, and on an annual basis thereafter.

The mental model is custody: the money is frozen in place, not in motion. Blocking is the action for S-D-N-type targets.

Rejecting is different: you refuse to process the transaction and return the funds to where they came from, rather than freezing them. You reject when the transaction is prohibited but there's no blockable interest of a blocked person, for instance, a payment that touches a comprehensively sanctioned jurisdiction or violates a narrower prohibition, without a blocked party owning the funds. The classic exam trap is confusing the two: block means hold, reject means return.

Choosing wrong matters, returning funds in which a blocked person has an interest could itself be a prohibited dealing. And note that under U.S.

rules, rejected transactions are also reportable to OFAC. So always ask: is there a blocked person's interest here, or is this simply a prohibited route?

Facilitation is the trap people don't see coming. It means assisting, supporting, or enabling a transaction that you yourself are prohibited from doing, even if you never touch the money. For U.

S. persons, you cannot facilitate a deal that you couldn't lawfully do directly, so referring the business to a non-U.S.

affiliate, approving it, financing it, or providing advice or services to make it happen can all be prohibited facilitation. Picture a U.S.

employee who steps back from a sanctioned deal but quietly hands it to an overseas colleague and helps arrange it, that's facilitation, and it's a breach. The exam plants facilitation in scenarios where someone tries to be clever about staying one step removed. If the structure exists to get around a prohibition, suspect facilitation.

Sometimes a prohibited transaction can be done lawfully, but only with a license. A general license is issued by the regulator, OFAC, OFSI, or an E.U.

competent authority, to pre-authorize a whole category of activity for everyone who qualifies, for example, certain humanitarian or wind-down transactions; you don't apply, you just meet its conditions. A specific license is a case-by-case written authorization you must apply for and receive before acting. The key exam point: a license is the only legitimate route through a prohibition, and you must stay strictly within its scope and conditions.

Exceeding the license is a breach.

Let's tie the four actions into one decision the exam tests over and over. When a transaction trips a prohibition, ask first whether a blocked person, or an entity blocked under the 50 Percent Rule, has an interest in the funds. If yes, you block, freeze and hold, and report; you do not send the money on, and you do not return it.

If the transaction is prohibited but no blocked party has a blockable interest, you reject, refusing and returning it. Throughout, you must not help the deal happen indirectly, because that's facilitation. And the only lawful way through a prohibition is a valid license, used strictly within its terms.

So the chain is: blocked-party interest decides block versus reject, never facilitate around the rule, and license is the sole legitimate exception. Next, we look at what happens when controls fail: enforcement, penalties, and strict liability.