so, let’s assume my customer A is neither listed nor implicated by ownership and control sanctions. It’s my understanding, therefore, if he instructs me to transfer some funds to a sanctioned part, in the EU, I can refuse the instruction. However, in the US, I am obligated to take the funds and freeze them. Am I mistaken?

You’re not mistaken about the pattern, but the accurate version of it hinges on which US list the counterparty is on, so let’s walk through both sides properly.

EU: refuse, don’t freeze A’s funds

This is the “making available” half of the earlier discussion. Customer A isn’t designated and the money is still A’s property, so it never meets Article 2(1)’s trigger (belonging to, owned, held, or controlled by a designated person). Executing A’s instruction would be the firm making resources available to the designated person, which Article 2(2) flatly prohibits absent a derogation. So the firm declines to execute, and A’s account is untouched, not frozen. There is one obligation people miss here: the Council’s Best Practices guidance is explicit that firms must report attempted transactions, including customer attempts to make funds or economic resources available to a designated person without authorization, to their national competent authority. So “refuse” is the transaction-level answer, but it comes bundled with a reporting duty, not a freeze.

US: block, don’t reject, don’t return to A

This is where the mechanics genuinely diverge, and the reason is definitional. OFAC’s blocking obligation attaches to property or interests in property that are within the United States or come within the possession or control of a U.S. person, and “interest” is defined expansively as an interest of any nature whatsoever, direct or indirect, present, future, or contingent. A designated person named as the intended beneficiary of a payment has exactly that kind of interest in the funds the moment the firm, a U.S. person, has possession or control of them for the purpose of completing the transfer, even though the money started out as A’s and A was never designated. OFAC’s own FAQ on this is unambiguous: once property is blocked, title remains with the blocked person, and the exercise of ownership powers is suspended absent OFAC authorization; the funds must be frozen, not seized, and reported. And the obligation to block, rather than reject, applies regardless of whether the designated person is the originator or the intended recipient of the funds. So the firm takes custody of A’s payment, places it in a blocked, interest-bearing account, files the initial blocked-property report within 10 business days under 31 CFR 501.603, and then includes it in the comprehensive Annual Report of Blocked Property due every September 30 for anything still blocked as of the prior June 30. The money does not go back to A.

The contrast, side by side

Where this framing needs a caveat

This only holds for a US counterparty that’s a blocked person, meaning someone on the SDN list or otherwise subject to OFAC’s blocking authority (including via the 50 percent rule). If the “sanctioned party” is instead someone subject only to OFAC’s narrower sectoral-style restrictions, such as the Sectoral Sanctions Identifications List under the Russia/Ukraine directives, there’s no blockable interest at all: OFAC’s own FAQ 36 example is exactly this case, an underlying dealing that’s prohibited but has no SDN or blocked-government interest in it, and the answer there is reject, or don’t process and return to the originator, reported under the separate rejected-transaction regime at 31 CFR 501.604. So the real dividing line isn’t “EU versus US” as such, it’s whether the applicable regime treats the counterparty as subject to a full asset freeze/blocking designation (EU Annex listing, OFAC SDN) or a narrower restriction on specific dealings (OFAC SSI, and arguably the EU’s own sectoral trade and financial restrictions on Russia that don’t run through personal designation). Matched apples to apples, both EU and OFAC would tell you to reject; it’s specifically the blocked-person case where OFAC’s answer flips to block while the EU’s stays at refuse.

Self-check

• OFAC FAQ 9 (blocking definition, title/possession language) and FAQ 36 (reject vs. block, with the Iran third-country example) pulled directly from ofac.treasury.gov.
• 31 CFR 501.603 (blocked-property reports, 10-business-day initial report, September 30 annual report) and 501.604 (rejected-transaction reports) confirmed against Cornell/GovInfo CFR text and a recent OFAC annual-report reminder.
• The “regardless of originator or recipient” framing and the broad “interest of any nature whatsoever” phrasing came from secondary sources (a law-firm compliance blog and a client alert) rather than a direct CFR pull of that exact clause — both are standard, uncontroversial restatements of OFAC’s general definitions section, but if citing the definition itself for publication, pull the exact text from the specific program’s CFR part (the phrasing is boilerplate but repeated part by part, e.g. 31 CFR 594.311, 515.312, etc., rather than centralized in one place).
• The claim that a blocked person’s title is treated as attaching to an unexecuted, in-process payment is a synthesis of FAQ 9’s title language plus the broad interest definition, not something one source states in that combined form — flagged as inference, not a verified single-source claim.