Many people facing U.S. sanctions for the first time ask whether they can challenge an OFAC decision. The answer depends on what “challenging” means in context and what type of decision the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) has issued. There is no administrative body to which a complaint against OFAC can be made. That said, the situation is not without a remedy: depending on the circumstances, either a reconsideration petition filed with OFAC or a lawsuit in U.S. federal court may be available, and the latter often proves to be the more effective route.

Why an OFAC Decision Cannot Be Appealed to a Higher Authority

All of OFAC’s principal actions – SDN list designations, asset freezes, license denials, and denials of delisting petitions – are taken in the exercise of its administrative authority. Within that administrative framework, OFAC has no supervisory body to which a complaint can be submitted. In that sense, all matters involving the SDN list and sanctions licensing begin with OFAC and end with OFAC, unless a federal court is brought into the picture.

This is precisely why the conventional model of administrative appeal does not apply here. The available paths are either a reconsideration petition submitted to the same agency or judicial review in federal court.

SDN List Designation: What to Do After a Denial

When OFAC denies a petition to remove a person from the SDN list, the initial reaction among clients is often one of urgency and disbelief, the feeling that “there must be some mistake” and that something must be done immediately. That reaction is understandable: an SDN designation means frozen assets, severed access to international payments, and a range of other severe consequences.

A reconsideration petition for removal from the SDN list may be filed on the following grounds: a factual or legal error in the original determination, material circumstances that were not considered or did not exist at the time of the original submission, or a genuine change in the conduct of the designated person or entity.

Those same grounds – factual or legal error, unconsidered circumstances – may equally support a lawsuit in federal court if the administrative path has been exhausted or is unlikely to succeed from the outset: for instance, where OFAC has already denied a reconsideration petition, where the OFAC decision conflicts with applicable law, or where established procedures were not followed.

Asset Freeze and OFAC License Denial

Assets are frequently frozen without any sanctions violation on the client’s part. The most common scenario involves a client’s broker, exchange, or settlement depository falling under U.S. sanctions, and causing all assets down the chain, including the client’s account, to become blocked. In such cases, a specific license application must be filed with OFAC.

In practice, virtually all financial institutions in this situation decline to unblock assets even where a valid OFAC general license exists, out of concern about regulatory exposure. This means that without a specific license, unblocking through a bank is generally not feasible.

Although an OFAC license application is processed through an administrative procedure, there is no appellate body within the agency to which a denial can be appealed. OFAC simply has no higher administrative authority on these matters. A denial of a specific license application is administratively final.

That said, this does not mean the denial is the end of the road. Two paths remain available. The first is a reconsideration petition filed with OFAC, on strictly limited grounds: a legal or factual error in the original review, material circumstances that were not considered, or new circumstances that did not exist at the time of the original filing. The second is a federal court lawsuit.

Federal Court Lawsuit: When It Is a Real Option

Filing suit in federal court is not a last resort after all other options have been exhausted. It is a distinct and fully viable instrument that, in certain situations, is the only one that works. A lawsuit against OFAC is brought under the Administrative Procedure Act (APA), which authorizes judicial review of federal agency action that is arbitrary, capricious, contrary to law, procedurally defective, or unsupported by the factual record.

An OFAC decision may be challenged in court in three principal situations.

First: denial of SDN list removal. If OFAC denies a delisting petition and that denial is arbitrary, inconsistent, or issued without adequate consideration of the evidence submitted, it may be challenged under the APA. This is the route typically chosen by clients who have gone through the administrative process and found it unproductive.

Second: denial of an OFAC license or refusal to unblock assets. Where a specific license denial lacks adequate legal support, or where OFAC failed to follow its own procedures in reviewing the application, that denial is likewise subject to judicial challenge.

Third: unreasonable delay in issuing a decision. The APA expressly provides for judicial action to compel a federal agency to act where it has unreasonably delayed resolution of a petition, whether a delisting petition or a license application. A delay of more than a year with no discernible justification can be challenged in court, with a request that OFAC be ordered to render a decision within a reasonable time.

Both U.S. and foreign nationals and entities have standing to bring suit against OFAC in federal court. Such cases are typically heard in the U.S. District Court for the District of Columbia (D.D.C.) – the court that has developed the most substantial body of sanctions case law.

Conclusion

Challenging an OFAC decision before a higher administrative authority is not possible. No such authority exists. That does not mean, however, that a denial is irreversible. A reconsideration petition remains available where the required grounds are present. A federal court lawsuit, where legal grounds for challenge exist, is a fully legitimate instrument of protection, and in many cases, a more effective one than continued administrative engagement.

Wherever you are in the process – initial petition, a denial from OFAC, or a prolonged absence of any response – an accurate assessment of the situation and a sound strategic choice made at an early stage can materially affect the outcome. We invite you to contact a U.S. sanctions attorney who can evaluate your options, prepare the necessary materials, and, where needed, represent your interests in court.