What Is the OFAC General License Issued for?

General licenses issued by OFAC allow certain individuals and/or organizations specified in the license to conduct transactions that would otherwise be prohibited under existing US sanctions. The issuance of a general license by the Office of Foreign Assets Control of the U.S. Department of the Treasury (OFAC) serves at least two purposes. First, it permits specific transactions necessary for humanitarian needs, maintaining stability in a particular segment of the global market, as well as winding down relationships with entities recently added to the US sanctions list and withdrawing funds. Second, it prevents an excessive influx of applications for OFAC specific licenses, which would be inevitable without the issuance of the corresponding general licenses.

OFAC General License No. 50: Why It Often Fails

General License No. 50 was issued by OFAC on August 19, 2022. This general license allows all individuals whose accounts in financial institutions were blocked due to US sanctions under Executive Order No. 14024 to unblock these accounts and transfer their assets to other financial institutions. Neither the individual transferring their assets nor the financial institution to which the assets are being transferred should be subject to US sanctions.

However, in practice, very few have been able to take advantage of this general license. American, European, and other financial institutions that have blocked accounts in compliance with US sanctions too often refuse to unblock them based on General License No. 50, instead demanding a specific OFAC license.

Other OFAC General Licenses

The same situation occurs with other general licenses issued by OFAC, typically in response to the inclusion of a particular Russian or other foreign organization in the US sanctions list (OFAC SDN List). For example, when the SPB Exchange was added to the US sanctions list on November 2, 2023, OFAC issued General License No. 76A, which allows all SPB Exchange counterparties to close their accounts with the entity and transfer their assets to other non-sanctioned financial institutions by January 31, 2024. However, in practice, utilizing this general license has proven to be extremely difficult. Subsequently, most individuals and organizations intending to close their accounts with the SPB Exchange and transfer their assets to other institutions are either waiting for the SPB Exchange to negotiate with OFAC or are attempting to obtain an OFAC specific license.

This scenario is also faced by individuals and legal entities attempting to close their accounts in other financial institutions that have come under US sanctions and withdraw their funds in accordance with general licenses issued for each specific case. In most cases, American, European, and other financial institutions where funds are blocked in compliance with US sanctions do not permit the unblocking of accounts and withdrawal of funds, insisting that an OFAC specific license is required for this purpose.

Why OFAC General License Often Fails to Work

OFAC general licenses often do not work in these and other cases because financial institutions holding the blocked assets, fearing secondary US sanctions, tend to over-comply. This overcompliance manifests primarily in their reluctance to unblock funds based on an OFAC general license, as there is a risk of misinterpretation and potential violations, which could result in severe penalties for the financial institution. The situation is different in the case of an OFAC specific license that explicitly names the individual or entity and the account that OFAC allows to unblock.

Financial institutions’ fears are completely justified. Both American and foreign entities that violate US sanctions can be fined huge amounts, and their executives may face significant economic and, in some cases, even criminal liability. For example, in one of the most high-profile sanctions cases involving financial institutions, the French bank BNP Paribas S.A. was fined nearly $9 billion in 2015 for violating US sanctions.

In another recent case, the world’s largest cryptocurrency exchange, Binance, agreed to pay a $4.3 billion fine for violating US sanctions. Furthermore, its founder and CEO, Changpeng Zhao, had to step down and personally pay a multi-million dollar fine and was sentenced by a US court to four months in prison.

What You Need to Do to Obtain an OFAC License

So, if a general license does not work in your case, you will need an OFAC specific license. If you are confident that you know what you are doing and the blocked amount is not big, you may try to obtain such a license on your own. In all other cases, it is best to consult with specialists (OFAC lawyers).