A restricted banking list is a government-maintained roster of people, companies, and sometimes entire countries that U.S. financial institutions are forbidden from doing business with. The lists exist to enforce economic sanctions, anti-money-laundering rules, and counter-terrorism financing laws. If a name on one of these lists shows up in a transaction, the bank has to freeze the money, refuse the payment, or cut off the account, and then report what it did to the federal government.
The rules apply to more than big banks. Any person or business subject to U.S. jurisdiction is on the hook, which is why a small exporter, a remittance sender, or an individual with a common name can end up caught in the same machinery built for sanctioned oligarchs.
What Happens When a Name Is on the List
Two things can happen to money that touches a listed party: it gets blocked, or the transaction gets rejected.
Blocking means the funds are frozen in place. If a bank is holding property in which a designated person has an interest, it must move those funds into a blocked, interest-bearing account and file a report with the Office of Foreign Assets Control (OFAC) within ten business days.1eCFR. 31 CFR 501.603 – Reports on Blocked and Unblocked Property The listed party cannot touch the money. Neither can anyone else, unless OFAC issues a license authorizing release.
Rejection is different. If a transaction is prohibited but doesn’t involve blockable property of a sanctioned party, the bank simply refuses to process it and returns the funds to the sender. Rejected transactions also have to be reported to OFAC within ten business days.2eCFR. 31 CFR 501.604 – Reports of Rejected Transactions
The reach of these prohibitions extends beyond U.S. borders. Primary sanctions bind U.S. persons and institutions. Secondary sanctions threaten foreign companies and banks that deal with sanctioned targets, even without any U.S. presence, because a foreign bank that processes payments for a designated party can be cut off from the American financial system entirely. The dollar’s role in global trade is what gives U.S. lists this extraterritorial pull.
The Main U.S. Lists
The SDN List
The Specially Designated Nationals and Blocked Persons List, maintained by OFAC within the Treasury Department, is the most consequential restricted banking list. It names individuals and companies tied to targeted countries, terrorists, narcotics traffickers, and others designated under specific sanctions programs. U.S. persons cannot engage in any transactions with SDNs and must block any property they hold in which an SDN has an interest.3Office of Foreign Assets Control. Specially Designated Nationals (SDNs) and the SDN List
FinCEN Section 311 Designations
The Financial Crimes Enforcement Network uses a different tool. Under Section 311 of the USA PATRIOT Act, FinCEN can designate an entire foreign jurisdiction or financial institution as a primary money laundering concern.4Financial Crimes Enforcement Network. USA PATRIOT Act That triggers special measures ranging from extra due diligence requirements to an outright ban on U.S. banks holding accounts for the designated foreign institution.5U.S. Department of the Treasury. Fact Sheet – Overview of Section 311 of the USA PATRIOT Act Where the SDN List targets specific names, Section 311 can sever a whole foreign bank from the U.S. system.
The BIS Entity List
The Bureau of Industry and Security at the Commerce Department maintains the Entity List, which restricts exports rather than banking directly but carries real financial consequences. Parties on the list are foreign individuals and organizations whose activities the U.S. government considers contrary to national security or foreign policy interests.6Bureau of Industry and Security. Entity List Shipping most controlled items to a listed party requires a BIS license, and those applications are generally reviewed with a presumption of denial.
The Consolidated Screening List
Because separate agencies maintain separate lists, the International Trade Administration publishes the Consolidated Screening List (CSL), which combines export screening lists from Commerce, State, and Treasury into one searchable tool that updates daily.7International Trade Administration. Consolidated Screening List A match on the CSL doesn’t automatically mean the transaction is prohibited, but it does mean more due diligence is required before proceeding.
United Nations Security Council sanctions sit outside U.S. law but overlap with it: OFAC folds many UN designations into its own programs, so UN-sanctioned parties typically appear on the SDN List as well.8United Nations. United Nations Security Council Sanctions Information
The 50 Percent Rule: Why Checking Names Isn’t Enough
You don’t have to deal with a named SDN directly to violate sanctions. Under OFAC’s 50 Percent Rule, any entity owned 50 percent or more, in the aggregate, by one or more blocked persons is itself blocked, even if that entity’s name never appears on the SDN List.9Office of Foreign Assets Control. Entities Owned by Blocked Persons (50% Rule)
Ownership adds up across owners. If Blocked Person X owns 25 percent of a company and Blocked Person Y owns another 25 percent, the company is blocked because aggregate ownership by blocked persons reaches 50 percent. Aggregation applies across different sanctions programs, so it doesn’t matter whether the two blocked owners were designated under the same authority.9Office of Foreign Assets Control. Entities Owned by Blocked Persons (50% Rule)
The rule addresses ownership, not control. An entity controlled by a blocked person but not 50-percent-owned by blocked persons is not automatically blocked, though OFAC can separately designate it, and any transaction that directly or indirectly involves a blocked person remains prohibited regardless of ownership percentages.9Office of Foreign Assets Control. Entities Owned by Blocked Persons (50% Rule) The practical takeaway is that a clean name check is not the same thing as a clean counterparty. You need to know who owns the entity you’re doing business with.
If Your Own Transaction Gets Flagged
Automated screening produces false positives constantly. If your name is similar to someone on the SDN List, you may see wire transfers delayed, an account frozen, or a payment declined while the bank investigates. Resolving these hits can take days or weeks, and there is no shortcut around the bank’s compliance process.
If funds are actually blocked because of a legitimate match or a 50 Percent Rule connection, releasing them requires authorization from OFAC. There are two paths. General licenses are blanket authorizations already written into OFAC’s regulations; if your transaction fits the stated conditions, you’re covered automatically and don’t need to apply. Common examples include personal remittances to certain sanctioned countries and wind-downs of existing contracts after a new sanctions program begins.10Office of Foreign Assets Control. OFAC Specific Licenses and Interpretive Guidance
Where no general license applies, you can request a specific license through OFAC’s online application portal. A specific license is a written authorization for a particular transaction, issued at OFAC’s discretion after case-by-case review.10Office of Foreign Assets Control. OFAC Specific Licenses and Interpretive Guidance People commonly need these to release blocked funds, settle litigation involving an SDN, or divest from a sanctioned business. The review involves interagency coordination and can take months.
Small businesses selling internationally face particular exposure. Selling software, services, or physical goods to a buyer in a sanctioned country, or to a party connected to an SDN through the 50 Percent Rule, can trigger a violation. OFAC applies a “reason to know” standard: liability can attach without actual knowledge if the circumstances suggested a problem and you failed to investigate. Common traps include online sales without screening foreign buyers, acquiring a company that carried past sanctions violations, and failing to look through a foreign partner’s ownership.
Penalties
Under the International Emergency Economic Powers Act (IEEPA), the statutory maximum civil penalty is the greater of $250,000 or twice the value of the underlying transaction.11Office of the Law Revision Counsel. 50 USC 1705 – Penalties After inflation adjustments, the per-violation cap stands at $377,700 as of January 2025.12Federal Register. Inflation Adjustment of Civil Monetary Penalties The cap is per violation, and a single compliance failure can involve hundreds or thousands of individual transactions, each counted separately. OFAC enforcement settlements routinely run into the millions, and the largest cases have exceeded a billion dollars.
Willful violations of IEEPA are criminal. Individuals face fines of up to $1,000,000 and up to 20 years in federal prison.11Office of the Law Revision Counsel. 50 USC 1705 – Penalties “Willful” means the person knew they were violating sanctions or deliberately avoided finding out. Criminal prosecution is reserved for the most serious cases, but OFAC and the Department of Justice have shown increasing willingness to pursue individuals, not only institutions.
Getting Off the List
Being added to a restricted list is an administrative decision, and removal is an administrative process. Under 31 C.F.R. ยง 501.807, a designated person can submit a petition for reconsideration to OFAC asking to be removed from the SDN List or any other OFAC sanctions list.13eCFR. 31 CFR 501.807 – Procedures Governing Delisting from the Specially Designated Nationals and Blocked Persons List
The petition must explain why the designation was unwarranted or why the underlying circumstances no longer apply. Common arguments include mistaken identity, evidence that the sanctioned activity has ceased, and corrective steps like corporate restructuring or removing sanctioned individuals from leadership. The petition is submitted by email to OFAC’s reconsideration address, and there is no filing fee.13eCFR. 31 CFR 501.807 – Procedures Governing Delisting from the Specially Designated Nationals and Blocked Persons List
OFAC reviews each petition individually. The process usually takes several months to well over a year, with no guaranteed timeline. A denial can be challenged in federal court, but judicial review of sanctions designations is narrow and courts give significant deference to executive branch national security determinations. For most listed parties, the realistic path back runs through OFAC.