Introduction

An OFAC license may be either a General License or a Specific License. General Licenses are issued by the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury on its initiative, as part of its mandate to implement and enforce U.S. sanctions policy.

This article focuses on OFAC Specific Licenses. Any individual or legal entity may apply for an OFAC license if needed. Such a need may arise in various situations related to U.S. sanctions. As a rule, if an action, such as a transaction, agreement, or payment, is prohibited under OFAC regulations and not authorized by a General License, a Specific License must be obtained from OFAC before proceeding.

International Money Transfer Blocked

One of the most common situations in which one needs to apply for an OFAC license is the blocking of an international money transfer. For instance, a Russian clothing retailer sends a U.S. dollar payment to its supplier in China. Shortly thereafter, the Russian bank initiating the transfer is added to the U.S. sanctions list. As a result, the U.S. correspondent bank processing the payment blocks the funds.

In a similar scenario, if OFAC lists either the sender or recipient of the payment, the U.S. correspondent bank will also block the funds and report this to OFAC. In such cases, the affected party must apply for an OFAC license, explaining the circumstances and why a license should be granted. This request must include all supporting documentation and relevant information.

Your Broker or Your Broker’s Custodian Gets on the OFAC SDN List

Another common scenario in which you need to apply for an OFAC license is when your broker is added to the U.S. sanctions list. For instance, you may have opened a brokerage account with Sberbank or Alfa-Bank to invest in securities traded on U.S. stock exchanges and purchased shares in American companies. Later, both Sberbank and Alfa-Bank were designated on the OFAC SDN List.

Alternatively, even if your broker has not been sanctioned, their custodian may have been, like SPB Bank or the National Settlement Depository (NSD). In either case, you will need to apply for an OFAC license to transfer your securities to another brokerage firm that is not subject to U.S. sanctions and whose custodial chain does not involve sanctioned financial institutions. Notably, an OFAC license may cover the transfer of the securities and associated dividends and U.S. dollar-denominated cash assets held in a blocked account.

Transactions Involving a Sanctioned Person or Blocked Assets

If you are planning a transaction involving a person or entity subject to U.S. sanctions—whether an individual, a legal entity, or an organization without legal status—you must first apply for an OFAC license, obtain it, and only then can you proceed with the transaction. The nature of the transaction itself does not matter in this context. A license is required if it involves a sanctioned person or entity, whether it’s a purchase agreement, a charitable donation, or any other transaction. For instance, this could include a real estate sale involving property owned by a sanctioned individual, or a charitable donation to a country subject to U.S. sanctions.

In both cases, if the transaction is not covered by an OFAC General License, you must apply for an OFAC license and obtain it before any further actions. Another variation of this scenario would be a transaction involving a sanctioned asset, such as a house, yacht, or aircraft, even if neither the buyer nor the seller is sanctioned at the time of the transaction.

Other Cases

In addition to the situations mentioned above, there are many other instances where one must apply for an OFAC license to avoid violating U.S. sanctions law. For instance, traveling from the U.S. to Cuba requires an OFAC license, unless the trip falls under one of the General License categories. Similarly, receiving payment for services rendered to a sanctioned individual or entity also requires such a license.

Sanction-related issues can vary significantly, and navigating the complexities of U.S. sanctions law is often challenging. In such cases, it’s advisable to consult a specialist who can provide guidance and, if needed, assist with OFAC-related matters.

Conclusion

Applying for an OFAC license is a complex and multifaceted process. To maximize your chances of success, consulting with U.S. attorneys who focus on this area and have years of proven experience is highly advisable. Contact us, and we will assist you with everything related to obtaining an OFAC license.