Two Types of OFAC Licenses
The Office of Foreign Assets Control of the US Department of the Treasury (OFAC) is the primary US government agency responsible for controlling the implementation of US economic sanctions policy. OFAC’s authority is extensive, including issuing regulatory directives called “Determinations,” tracking sanctions violators, imposing penalties such as fines and inclusion on US sanctions lists (OFAC SDN List), and issuing licenses that provide exemptions from general rules for certain companies or individuals.
There are two types of licenses: general and specific OFAC licenses. They have different scope, application and issuance procedures. However, their functional purpose is the same: to permit actions that would otherwise be prohibited under existing US sanctions if not for issuing the respective general or specific OFAC license.
OFAC General License
The OFAC General License is an authorization of a specific type of transaction defined by industry or by a group of individuals and/or legal entities. The General License is issued at the initiative of OFAC, often in connection with imposed sanctions. It aims to offer a temporary opportunity for individuals and/or legal entities involved in business dealings with companies listed under US sanctions to finalize their transactions and retrieve their assets.
For example, when the St. Petersburg Stock Exchange (SPB) was sanctioned by the US on November 2, 2023, OFAC issued General License No. 76A, allowing all transactions related to the SPB Exchange necessary to wind down relationships with this organization until January 31, 2024.
OFAC Specific License
The OFAC Specific License is a tailored authorization directed towards a specific individual or legal entity. It is granted upon OFAC’s affirmative decision on the written request submitted by the concerned individual or entity. In contrast to the general license, the impetus entirely rests with the applicant, and the OFAC Specific License issuance hinges upon their application.
An OFAC Specific License might become necessary if your money transfer is frozen by a US intermediary bank during a dollar payment due to circumstances linked to US sanctions. For instance, a company made a payment to its business partner in China. Due to internal compliance considerations, the Chinese bank declined to accept the payment and returned it. Meanwhile, the bank through which you initiated the payment, such as Sberbank or Alfa Bank, became subject to US sanctions. As the transaction was conducted in US dollars, the funds were frozen at the intermediary US bank during the return process.
Another scenario pertains to the previously mentioned SPB Exchange. Suppose you had an account opened through a broker on the SPB Exchange. Subsequently, upon the SPB Exchange’s inclusion in the OFAC SDN List, your dollar account was blocked. If, for any reason, you cannot use General License No. 76A in a timely manner to conclude your dealings with the SPB Exchange and retrieve your funds by January 31, 2024, you will need to obtain an OFAC Specific License to unfreeze your dollar assets.
How Can You Get an OFAC License
When seeking an OFAC Specific License, you have two options to tackle the matter. Firstly, you can independently assemble the complete set, including the application for the specific license and all accompanying documents and materials, and submit them directly to OFAC. Alternatively, you can enlist the support of an OFAC lawyer to assist you in this process.
If you require an OFAC Specific License, you can reach out to us, and we will provide further details on how we can assist you.
