The term blocked account has a few different meanings and definitions, but fewer still, when we are considering only trade and finance.
Breaking Down Blocked Account
Very broadly, a blocked account refers to an account that does not allow for the indiscriminate withdrawal but instead has certain restrictions or limitations on when, how much, and by who, capital can be withdrawn.
Different Types of Blocked Accounts
A blocked account can be an account that is subject to foreign exchange controls in a country that restricts the amount of its currency that can be transferred to other countries or exchanged into other currencies.
In Germany, blocked accounts work something like this, for foreign students not from EU member states. As a foreign student, you must provide proof that you have the financial means to pay for your course of studies, and for supporting yourself during your studies. And, to prove adequate means often requires a blocked account. This account is not freely accessible to the account holder. Students have to pay a minimum of 720 euros for each month they plan to be in Germany, and may not withdraw funds until they arrive in the country, nor can they withdraw more than 720 euros per month, unless they have paid more than the minimum amount.
A blocked account can sometimes refer to a Deposit Account Control Agreement (DACA), which is an agreement between a borrower (or debtor), the secured lender, and a bank maintaining a deposit account. Control under the DACA is established when the bank agrees to comply with directives from the secured lender, without needing the express consent of the borrower.
It can also refer to accounts that are frozen, either by the U.S. government for political reasons, or for other reasons (such as the death of the account holder.) A blocked account is typically more serious than a frozen account, and the implication of the term is that it is long term in nature. Once an account in the U.S. is blocked by government mandate (such as during a time of war or distress), no funds in the account can be accessed without a specific release from the U.S. Treasury.