OFAC’s Formal Requirements: Few Rules, But No Reason to Relax

The Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) does not impose rigid procedural requirements on the form of an OFAC specific license application. The regulatory framework, primarily 31 C.F.R. § 501.801, provides only general guidance: describe the nature of the request, identify the parties involved, and attach supporting documentation. No mandatory form, no strict procedural standards.

At first glance, this may seem straightforward. In practice, OFAC license application mistakes are more common than applicants realize, and the minimal formal bar is precisely what makes them easy to overlook.

OFAC processes thousands of applications each year under chronic resource constraints. Denying an application requires very little: it is enough to find that the applicant has not established sufficient grounds for a favorable decision. Issuing a license, on the other hand, requires the reviewing officer to have a basis (legal, factual, and policy-based) that will satisfy supervisors that granting the license as an exception to the general rule is justified.

It is worth keeping in mind that the general rule is the sanctions regime itself, under which U.S. banks and other financial institutions are required to block all assets and transactions directly or indirectly involving sanctioned persons, as well as all other suspicious transactions. An OFAC specific license is an exception to that rule. For that exception to be made in your case, your application must contain (beyond all required documentation) sufficiently compelling grounds and conclusions.

There should be no illusions about this. OFAC officers will not search for those grounds on your behalf, analyze the applicable regulatory framework, or construct the case for why a license should be issued. If you do not do this yourself, there is a substantial likelihood that you will receive a denial.

What an OFAC Specific License Application Must Actually Contain

An OFAC specific license application is not a cover letter accompanying a package of documents. It is a legal document, structured as a formal submission to a government agency.

When we prepare an OFAC specific license application for our clients, we proceed from the understanding that, beyond the factual section describing the transaction, the parties, the nature of the blocked assets, and related matters, the application must include:

– a legal analysis of the applicable sanctions programs, with references to Congressional statutes, Executive Orders, relevant OFAC general licenses (where applicable to the matter at hand), and OFAC regulatory guidance;

– an analysis of OFAC’s policy and practice with respect to comparable situations, drawing on published decisions, FAQs, and OFAC’s enforcement record;

– a clearly articulated conclusion, grounded in the foregoing analysis: why, in this specific case, issuing the license is consistent with the objectives of the sanctions regime, does not conflict with U.S. national security interests, and is consistent with existing OFAC practice.

Preparing such a document requires genuine experience working with OFAC and an understanding of which arguments the agency finds persuasive and which it disregards.

Common OFAC License Application Mistakes

The OFAC license application mistakes described below are not hypothetical. They appear regularly in submissions prepared without legal assistance and, in each case, they reduce the likelihood of a favorable outcome.

Mistake 1. Treating the Application as a Minor Formality

The most common mistake is assuming that an OFAC specific license application reduces to a set of documents and a simple cover letter along the lines of “we have done nothing wrong, please unblock.” This approach gives OFAC no basis for a favorable decision. The agency is not required to supply arguments on the applicant’s behalf, and it will not.

Mistake 2. Incorrect Identification of the Blocking Institution

Applicants preparing applications without legal assistance frequently misidentify the institution that actually blocked their funds or assets. A single payment may pass through several correspondent banks; securities may be held at multiple custodians. If the application identifies the wrong bank or the wrong account, OFAC may be unable to connect the request to the actual blocking event. In such cases, OFAC typically issues a denial stating that it has no information on file relating to the request.

Mistake 3. Absence of Legal Analysis

Even a well-presented factual record leaves the application vulnerable without legal argumentation. The absence of references to applicable statutes, relevant Executive Orders, and established OFAC practice means that the reviewing officer is not given the legal foundation needed to support a favorable decision and will most likely not make one.

Filing an Amendment: How to Fix Mistakes Without Losing Your Place in Line

If an application has already been submitted and its quality is in doubt, the situation can be remedied. Correcting OFAC license application mistakes after filing is possible: OFAC accepts amendments to previously submitted applications, and an amendment can be filed under the same case number. This means the review timeline is not reset, and your place in the queue is preserved.

A properly drafted amendment corrects factual inaccuracies, supplies the missing legal analysis, and sets out the conclusions as to why the license should be issued. All of this substantially improves the prospects for a favorable outcome.

Fesenko, P.C. Law Offices reviews the submitted application, identifies its weaknesses, and prepares an amendment that gives OFAC the grounds to issue the license. Contact us for an assessment of your situation.