A restricted banking list is a government-maintained roster of people, companies, or entire countries that financial institutions are legally required to block, reject, or scrutinize when their names come up in a transaction. In the United States, these lists are the enforcement backbone of economic sanctions, anti-money-laundering rules, and counter-terrorism financing. If a name on one of these lists shows up in a wire, an account application, or an ownership record, the bank has to freeze the money, refuse the transaction, or investigate before proceeding. The obligation applies to anyone subject to U.S. jurisdiction, not just large banks.
Two layers of reach make U.S. lists especially powerful. Primary sanctions bind U.S. persons and institutions directly. Secondary sanctions threaten penalties against foreign banks and companies that deal with sanctioned targets, because a foreign bank cut off from the U.S. dollar loses access to global trade.
The Main U.S. Lists
The SDN List
The most consequential list is the Specially Designated Nationals and Blocked Persons List, maintained by the Office of Foreign Assets Control (OFAC) at the Treasury Department. It names individuals and companies tied to targeted countries, along with 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 in their possession or control in which an SDN has an interest.1Office of Foreign Assets Control. Specially Designated Nationals (SDNs) and the SDN List
Blocking is literal. If a bank holds funds belonging to a designated person, those funds are frozen in place, deposited into a blocked interest-bearing account, and reported to OFAC within ten business days.2eCFR. 31 CFR 501.603 – Reports on Blocked and Unblocked Property The blocked party cannot touch the money unless OFAC issues a license authorizing its release.
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.3Financial Crimes Enforcement Network. USA PATRIOT Act A designation triggers “special measures” ranging from extra due diligence to an outright ban on U.S. banks opening or maintaining accounts for the designated foreign institution.4U.S. Department of the Treasury. Fact Sheet – Overview of Section 311 of the USA PATRIOT Act Where the SDN List targets individual names, Section 311 can sever a whole foreign bank from the U.S. financial 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 has significant financial consequences. Parties on the Entity List are foreign individuals and organizations involved in activities contrary to U.S. national security or foreign policy interests.5Bureau of Industry and Security. Entity List Exporting most items subject to U.S. export regulations to anyone on this list requires a BIS license, and applications are generally reviewed with a presumption of denial.
The 50 Percent Rule
You do not have to deal directly with a named SDN to violate the rules. Under OFAC’s 50 Percent Rule, any entity owned 50 percent or more in the aggregate by one or more blocked persons is itself considered blocked, even if the entity’s name never appears on the SDN List.6Office of Foreign Assets Control. Entities Owned by Blocked Persons (50% Rule)
Ownership percentages add up across sanctioned individuals. If Blocked Person X owns 25 percent of a company and Blocked Person Y owns another 25 percent, that company is blocked. The aggregation works across different sanctions programs too, so it does not matter whether the two blocked owners were designated under the same authority.6Office of Foreign Assets Control. Entities Owned by Blocked Persons (50% Rule)
The rule applies only to ownership, not control. An entity controlled but not 50 percent owned by a blocked person is not automatically blocked. OFAC can still designate such an entity separately, and any transaction that directly or indirectly involves a blocked person remains prohibited regardless of ownership percentages.6Office of Foreign Assets Control. Entities Owned by Blocked Persons (50% Rule) Checking a name against the SDN List is not enough. You need to know who owns the entity you are dealing with.
What Happens When Your Bank Flags a Match
Banks screen against restricted lists at two points: when a customer opens an account and every time a transaction moves through the system. When a name hits, the bank has to decide whether to block or reject.
Blocking applies when the bank holds property belonging to a sanctioned person. The funds go into an interest-bearing account, the sanctioned party cannot access them, and the bank reports the action to OFAC within ten business days.7Office of Foreign Assets Control. Filing Reports with OFAC Rejection applies when the transaction is prohibited but no blockable property interest of a sanctioned party is involved. The bank refuses to process the payment and returns the funds to the sender, and it also must report the rejection to OFAC within ten business days.8eCFR. 31 CFR 501.604 – Reports of Rejected Transactions If the flagged activity looks like money laundering or sanctions evasion, the bank also files a Suspicious Activity Report with FinCEN.
False positives are common. If your name is similar to someone on the SDN List, you may see delayed wires, held deposits, or declined transactions while the bank investigates. These holds can last days or weeks. If the match is legitimate and your funds are actually blocked, the money stays frozen until OFAC issues a license authorizing its release.
Small Businesses and the Reason-to-Know Standard
Selling software, consulting services, or physical goods to a buyer in a sanctioned country, or to a party connected to an SDN, can trigger a violation. The “reason to know” standard means you can be held liable without actual knowledge if the circumstances suggested a problem and you failed to investigate. Common pitfalls include online sales without screening foreign buyers, acquiring a company that carried past sanctions violations, and skipping the 50 Percent Rule check on a foreign partner’s ownership.
Penalties for Violations
Under the International Emergency Economic Powers Act, the statutory maximum civil penalty is the greater of $250,000 or twice the value of the underlying transaction.9Office of the Law Revision Counsel. 50 USC 1705 – Penalties After inflation adjustments, the per-violation cap stood at $377,700 as of January 2025.10Federal Register. Inflation Adjustment of Civil Monetary Penalties That is per violation, and one compliance failure can span hundreds of individual transactions, each counted separately. OFAC settlements routinely reach into the millions, and the largest have exceeded a billion dollars.
Recordkeeping failures carry their own penalties. Failing to report blocked property to OFAC can cost up to $29,150 per instance, rising to $72,876 when OFAC believes the underlying transaction exceeds $500,000.10Federal Register. Inflation Adjustment of Civil Monetary Penalties
Willful violations are criminal. They carry fines of up to $1,000,000 and up to 20 years in federal prison for individuals.9Office of the Law Revision Counsel. 50 USC 1705 – Penalties “Willful” means the person knew they were violating the sanctions or deliberately avoided learning. Criminal cases are reserved for the most serious conduct, but OFAC and the Justice Department have shown increasing willingness to pursue individuals alongside institutions.
Getting Funds Released or Getting Off the List
Not every transaction involving a sanctioned party is permanently off-limits. OFAC issues general licenses that authorize whole categories of activity automatically if the transaction meets the stated conditions. Common examples cover personal remittances to certain sanctioned countries and the wind-down of existing contracts after a new program takes effect.11Office of Foreign Assets Control. OFAC Specific Licenses and Interpretive Guidance
When no general license applies, you can request a specific license through OFAC’s online application portal. A specific license is a written authorization tied to one transaction, issued at OFAC’s discretion after case-by-case review.11Office of Foreign Assets Control. OFAC Specific Licenses and Interpretive Guidance People commonly need one to release blocked funds, settle litigation involving an SDN, or execute a divestiture from a sanctioned business. Review involves interagency coordination and can take months.
Being added to a restricted list is an administrative decision, and so is removal. Under 31 C.F.R. ยง 501.807, a designated person can submit a petition for reconsideration asking OFAC to remove them from the SDN List or any other OFAC sanctions list.12eCFR. 31 CFR 501.807 – Procedures Governing Delisting from the Specially Designated Nationals and Blocked Persons List
The petition explains why the designation was unwarranted or why the circumstances that led to it no longer apply. Common arguments include mistaken identity, evidence that the sanctioned activity has ceased, or proposed corrective steps like corporate restructuring or removing sanctioned individuals from leadership. The petition is submitted by email to OFAC’s reconsideration address, with no filing fee.12eCFR. 31 CFR 501.807 – Procedures Governing Delisting from the Specially Designated Nationals and Blocked Persons List OFAC reviews each petition individually, and the process realistically takes anywhere from several months to well over a year, with no guaranteed timeline. If OFAC denies the petition, the designated party can challenge the decision in federal court, but judicial review is narrow and courts give significant deference to the executive branch on national security. For most listed parties, the practical route runs through OFAC.