OFAC General and Specific Licenses

An OFAC license is an authorization issued by the U.S. Office of Foreign Assets Control (OFAC) that permits a transaction or series of transactions otherwise prohibited under U.S. sanctions regulations. There are two types of OFAC licenses: general licenses and specific licenses.

OFAC issues general licenses on its own initiative to authorize certain types of transactions within a defined scope and time limits. Individuals and entities that meet the conditions of a general license may carry out those transactions without obtaining separate OFAC approval.

For example, if a financial institution is added to the OFAC SDN List, its clients who are not themselves subject to U.S. sanctions may be granted a limited period, typically one to three months, to withdraw their assets and wind down all dealings with the sanctioned entity. For this purpose, OFAC issues a general license that applies to all eligible account holders.

OFAC also issues general licenses to facilitate humanitarian projects, such as the provision of food and medical supplies, as well as to permit ordinary financial transactions, including the payment of taxes, dues, and fees to governmental agencies.

In contrast, an OFAC specific license can be issued only after an individual or entity applies to OFAC. It authorizes particular transactions for the applicant that would otherwise be prohibited.

In our example of a financial institution on the OFAC SDN List, a specific OFAC license would be required either once the designated period for winding down transactions has expired or if the entity holding the assets refuses to release them, even though a general license authorizes such transactions.

Since the issuance of an OFAC general license does not require any action from the parties involved, we will use the term “OFAC license” to refer to a specific license, unless otherwise noted.

When and Why Individuals and Companies Need an OFAC License

An OFAC license is required when a client is going to carry out a transaction that is generally prohibited under U.S. sanctions. The most common situation is when a client seeks to unblock assets that have been frozen due to U.S. sanctions.

U.S. sanctions policy can lead financial institutions to freeze the assets of foreign individuals and companies for various reasons. Most often, banks freeze assets when they process transactions for a person or entity added to the OFAC SDN List.

Under OFAC rules, not only those directly named on the SDN List are considered sanctioned, but also any companies in which a sanctioned person or entity owns 50% or more – whether directly, indirectly, or in aggregate. This means that if an individual on the OFAC sanctions list is the majority shareholder of a company, that company is automatically treated as sanctioned, even if it does not appear on the OFAC list itself. Furthermore, if a sanctioned person indirectly owns 50% or more of multiple companies through other entities or individuals, all those companies are likewise considered subject to U.S. sanctions.

Another common scenario arises when a non-sanctioned company sends a payment to a foreign company that is also not subject to sanctions. After the payment is initiated, OFAC adds the bank processing the transfer to its sanctions list. As a result, the U.S. correspondent bank freezes the funds.

At first glance, it might seem that the U.S. bank could return the money to the sender. After all, the company did nothing wrong. However, it doesn’t work that way. The U.S. bank will not release the funds until the client obtains an OFAC license.

A similar situation may occur when OFAC adds a brokerage firm, through which a client invests in the stock market, to the SDN List. In that event, the U.S. bank holding the firm’s assets will freeze them. If OFAC has not issued a general license covering the situation, the brokerage’s clients must apply for specific OFAC licenses to have their assets unblocked. In practice, however, U.S. banks often refuse to release assets even when a general license is in place, insisting that clients obtain a specific OFAC license first.

There are also other situations in which U.S. banks block the funds of individuals or companies for sanctions-related reasons and require an OFAC license for their release. In such cases, attempting to challenge the bank’s decision is usually futile. Banks strictly adhere to their sanctions compliance procedures and are unwilling to risk their business reputation by adopting a more lenient approach.

In these and many similar situations, clients must obtain an OFAC license to unfreeze their funds. They typically learn of this requirement from the bank holding their assets. When a client seeks to retrieve the funds, the bank typically responds that it can proceed only after receiving an OFAC license.

Do You Need an OFAC Lawyer to Apply for an OFAC License?

Once clients realize that they cannot access blocked assets without an OFAC license, they face the question of how to obtain one. Many wonder whether they can apply on their own or if they should seek assistance from an attorney.

If you have a strong command of English, you may apply for an OFAC license directly through the agency’s website. This approach may be appropriate when the amount at issue is relatively modest and retaining a lawyer is not financially practical. In most other cases, however, it is advisable to seek professional assistance from an OFAC lawyer.

Securing a license demands more than paperwork. It requires properly assessing the situation, gathering and preparing all required documents with clear explanations, and presenting a well-reasoned legal justification for a license requires specific expertise. U.S. attorneys who specialize in sanctions law (OFAC lawyers) have these skills. Without their professional expertise, applicants are unlikely to navigate the many nuances of the process successfully.

Because OFAC handles license applications through an administrative process, applicants must understand the principles of U.S. administrative law and procedure, OFAC’s internal rules (many of which the agency itself establishes), and numerous practical considerations, such as how OFAC evaluates arguments and how to communicate effectively with the agency during correspondence or negotiations. Gaining this knowledge requires both professional training and hands-on experience.

The first contact with OFAC is critical. If you submit an application on your own and receive a denial, it becomes much harder to reverse the outcome later. Unfortunately, we often see clients who try to apply without proper legal guidance, assuming that a U.S. lawyer can step in to handle an appeal if OFAC denies the application.

This approach is fundamentally mistaken, and here’s why. OFAC reviews license applications through an administrative process, but it does not provide a higher administrative body to appeal a decision. Under OFAC procedures, the agency’s decision on a specific license is final.

The only way to challenge a denial is to submit a new application to OFAC, and the grounds for doing so are very limited. Usually, you can submit a new application only if OFAC made a legal or factual mistake in its first review, if important information was missing, or if new and significant facts or legal developments have come up since the last application.

Facing an OFAC License Delay? Here’s What We Can Do for You

Unfortunately, OFAC often delays the review of license applications for various reasons. Since applicants usually don’t know these reasons, the situation can become very stressful, especially when significant assets are blocked, and there are no encouraging updates on when OFAC will make a decision.

Is there anything you can do in this situation? – The short answer is yes. However, to maximize your chances of a favorable outcome, it’s best to seek professional help immediately and work with an attorney experienced in OFAC sanctions. Professional guidance can help you avoid costly mistakes, since communicating with OFAC often requires specialized knowledge and experience.

We can step in to quickly assess your situation and propose practical steps to help accelerate OFAC’s decision. The specific measures we recommend will depend on factors such as how long ago you submitted your license application, whether you’ve had any communication with OFAC since filing, and whether the agency has requested additional documents or clarifications.

OFAC typically issues a licensing decision within about a year. If the agency remains inactive for a year and a half or longer, it usually doesn’t make sense to keep waiting without taking action. This is especially true when substantial assets remain blocked.

Under the law, OFAC, like any U.S. government agency, must review submissions and issue decisions within a “reasonable time.” The law does not define this term precisely, but in practice, inactivity for a year and a half or longer is generally considered an unreasonable delay.

If the agency has not responded to your OFAC license application for a year and a half, you can file a lawsuit asking the court to compel OFAC to issue a decision. However, this process is delicate and complex, requiring careful preparation along with specific preliminary and follow-up steps.

Because this type of litigation requires specialized knowledge of U.S. law, OFAC rules and regulations, and federal court procedures, it is essential to have an experienced attorney. Being admitted to practice before the U.S. District Court for the District of Columbia, the court that hears lawsuits against OFAC and other federal agencies, we are fully prepared to protect your interests, including through litigation. Contact us for a prompt assessment of your situation and a tailored course of action.