By refusing or rejecting a transaction, isn’t the regulator copping out? After all, the transaction could be accomplished somewhere else – say, in China or Turkey

It’s a fair gut reaction, but it conflates two different questions: “does this stop the sanctioned party from ever getting the money” and “what happens to the specific transaction sitting in front of this specific firm.” Those aren’t the same question, and once you separate them, block doesn’t actually beat reject on the first one.

The workaround problem is real, but it’s not a reject-specific problem

If a UK bank refuses to send the payment, sure, the customer can try Beijing, Istanbul, or Dubai. But if a US bank blocks the payment instead, the designated person’s next attempt at financing can just as easily route through those same channels — blocking one wire doesn’t inoculate the rest of their commercial life. This is a well documented, general limitation of unilateral and even coordinated multilateral sanctions: research on sanctions evasion has tracked how Chinese and Russian arms have continued flowing to embargoed destinations for decades through non-dollar channels that sit outside any single regime’s reach. So “they’ll just go elsewhere” is a real critique of sanctions regimes in general — it applies to block just as much as reject. Neither mechanism solves global circumvention; both only capture what happens to already be within a given firm’s grasp at a given moment.

So is releasing that specific transaction really nothing?

Not quite. A rejected payment still comes with a mandatory report to the competent authority in every jurisdiction covered so far — so even though the money moves on, the attempt gets logged: who tried to pay whom, through which counterparties, on what pretext. That’s raw material for future listings, for identifying facilitators, and for building the kind of evidentiary record these regimes’ own courts increasingly demand. It’s a much thinner form of “action” than seizing the money, and it isn’t honest to pretend otherwise — but it isn’t nothing either.

The real reason isn’t laziness, it’s legal exposure

Here’s the part that actually answers the question. The EU, UK, Switzerland, Canada, and Australia are all legal systems where courts have been genuinely aggressive about policing sanctions listings on due-process and property-rights grounds — and the cleanest illustration is that the same person, Mr. Kadi, brought parallel challenges in EU and US courts over the same asset freeze, and the EU courts ruled the listing process lacked fundamental protections while the US courts rejected the equivalent constitutional claims. If that’s how exacting these courts are about freezing a person who has actually been designated, extending that seizure power further — to a non-designated customer’s own money, based solely on their stated intent to pay someone else — would be a considerably bigger and more legally exposed step, one these systems have chosen not to take. The US, operating under IEEPA’s far more executive-deferential tradition, doesn’t face the same internal constraint, which is a large part of why it’s comfortable blocking property whose ownership hasn’t fully vested yet.

There’s a structural reason layered on top of the legal one. The US can afford to cast that wide a net because so much of world trade has no way to avoid touching dollar clearing — roughly 88 percent of foreign-exchange transactions involve the dollar, and the correspondent banking system that actually moves the money concentrates through a small number of banks in New York and London. Blocking a dollar payment captures real marginal value precisely because rerouting around the dollar is genuinely hard. A rejected euro, pound, franc, Canadian, or Australian dollar payment is comparatively easy to complete elsewhere without touching that currency’s clearing system at all, so the deterrent value of seizing a non-designated customer’s funds is lower relative to the legal and political cost of doing it — this half of the explanation is an original synthesis of the two facts above, not something any regulator has stated as its rationale.

And this isn’t a “the EU goes soft” story — the freeze side still bites, hard

Worth remembering: none of this caution applies once a resource actually belongs to the designated party. The clearest proof is sitting in Belgium right now — roughly €210 billion of Russian Central Bank reserves are frozen in Europe, most of it at the Euroclear depository, and that’s a Scenario B freeze, not a reject outcome, because those securities already belonged to the CBR the moment it was designated. And the EU’s own hesitation about going one step further — from freezing that money to actually using it for a reparations loan — is itself a live demonstration of the exact caution just described: Belgium has resisted precisely on expropriation grounds, warning other reserve holders might flee European custody, and Russia’s central bank has already sued Euroclear for roughly $230 billion over the freeze itself. That’s not a regime being casual about property rights; if anything it’s the same instinct that keeps the reject rule in place for in-flight payments, now playing out at nation-state scale.

Self-check

• Kadi I/II outcomes and the EU/US divergence: confirmed across multiple sources including a direct comparison piece and the CJEU’s own case summary.
• Dollar/FX and correspondent-concentration figures: from a 2026 explainer drawing on the Farrell & Newman “weaponized interdependence” literature — solid secondary sourcing, not a primary BIS/Fed data pull.
• Euroclear/CBR figures (~€210bn, ~€193bn at Euroclear, Belgium’s objections, the Russian lawsuit): converging figures across CFR, CEPR, Squire Patton Boggs, and AP reporting from November 2025–January 2026 — figures move slightly by source and date, so treat the exact number as “roughly €200–210bn” rather than a fixed figure if publishing this.
• The causal argument connecting legal-rights culture and dollar centrality to the reject/block design choice is original synthesis — no regulator has published that rationale in those terms.