The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) enforces economic and trade sanctions that restrict transactions with certain individuals, countries, and entities. However, not all dealings are automatically prohibited. In many cases, parties may apply for an OFAC license to obtain legal permission to carry out specific transactions that would otherwise be restricted under sanctions regulations.
What Is an OFAC License?
An OFAC license is an official authorization issued by OFAC that allows a person or organization to engage in a transaction that would normally be prohibited by U.S. sanctions laws. These licenses are critical for businesses and individuals involved in international trade, humanitarian efforts, or asset management that intersects with sanctioned parties or jurisdictions.
There are two types of OFAC licenses: general and specific. General licenses apply to a category of transactions and do not require individual applications. Specific licenses, on the other hand, are issued on a case-by-case basis in response to a formal request. To better understand the differences, visit this explanation of what is an OFAC license.
When Is an OFAC License Required?
An OFAC license is required whenever a U.S. person or entity seeks to conduct a transaction involving a sanctioned country, individual, or entity. Common scenarios include sending humanitarian aid to a sanctioned country, unblocking frozen funds, or fulfilling contractual obligations with restricted parties.
One unexpected area where OFAC regulations can surface is credit reporting. Individuals may encounter an OFAC alert on credit report when their name matches a person on the SDN list. While this does not always mean an actual match, it can delay or block financial approvals until the situation is resolved.
Failing to obtain a license for a restricted transaction can result in severe penalties, including fines, asset seizure, or even criminal charges. Therefore, early legal consultation is essential to determine if a license is needed and how to apply.
How to Obtain an OFAC License?
To obtain a specific OFAC license, an applicant must submit a detailed written request. The application should explain the purpose of the transaction, identify the parties involved, include supporting documentation, and demonstrate that the activity is consistent with U.S. foreign policy and national security interests.
Processing times can vary significantly depending on the complexity of the case. OFAC may request additional information or clarification before issuing a decision. It is advisable to avoid proceeding with any transaction until formal approval is received.
OFAC Authorization for the Release of Blocked Assets
In some cases, a license may be used to release blocked assets or funds frozen under sanctions. This is particularly common when the asset holder can demonstrate legal ownership, a change in control, or a humanitarian need.
For example, an estate executor may apply for a license to access funds belonging to a deceased person listed under sanctions. Similarly, a business may seek to recover payments owed before sanctions were imposed. Each case is reviewed individually, and the burden of proof lies with the applicant.
Legal Assistance in Dealing with OFAC
Dealing with OFAC regulations, especially in relation to licensing, requires precision and deep legal knowledge. Missteps in the application process or failure to understand the scope of an issued license can lead to non-compliance.
Legal professionals experienced in OFAC matters help ensure that all documentation is accurate, complete, and compelling. They can also assist in interpreting existing general licenses, preparing specific license applications, and resolving issues related to OFAC alert on credit report.
Whether you are navigating a business transaction, unlocking frozen assets, or correcting a mistaken identity on a sanctions list, the proper use of an OFAC license is critical. Consult a qualified attorney to protect your interests and avoid unnecessary risks.
