OFAC License or Clearance: What Your Business Needs to Work with U.S. Sanctions
Sanctions imposed by the U.S. Office of Foreign Assets Control (OFAC) create a complex legal environment for companies worldwide. These sanctions use trade restrictions and the blocking of assets to promote their foreign policy and national security goals. As such, the restrictions affect not only American organizations but also any business integrated into the international financial system. That means understanding the available legal tools isn’t just an advantage, but a necessity for survival against economic and trade sanctions.
The two main paths are obtaining an OFAC license and undergoing the clearance procedure. The choice between them entirely depends on your unique situation and ultimate goals.
What is OFAC and why do its decisions affect the whole world?
The Office of Foreign Assets Control (OFAC) is a division of the U.S. Department of the Treasury authorized to administer and enforce economic sanctions. Its main task is to support the national security and foreign policy objectives of the United States. It achieves this by prohibiting or restricting transactions with targeted countries, organizations, and sanctioned individuals. Additionally, OFAC maintains other lists of specified foreign individuals and entities subjected to non-blocking sanctions programs.
OFAC decisions have extraterritorial effect, which forces businesses far beyond the borders of the USA to comply with them. This happens because most international transactions go through American correspondent banks or are denominated in US dollars. Any such operation automatically falls under OFAC jurisdiction. Therefore, even companies without a direct presence in America face risks of payment and asset blockages if their counterparties end up on sanction lists.
OFAC License: Your official permission for specific operations
An OFAC license is an official document that grants an individual or organization permission to engage in a specific transaction or business activity generally prohibited by the current sanctions programs. It’s an authorized exception to the general rules set by OFAC sanctions programs.
Having an OFAC sanctions license allows you to legally complete business deals or continue a project in targeted foreign countries without violating the law. However, you need to differentiate between the two types of OFAC sanctions licenses issued to develop the right strategy when dealing with sanctioned parties.
The type of OFAC sanctions license you choose determines the application process and the scope of permitted activities. These types differ in their coverage and mechanism of action.
The following types of licenses exist:
- General license: Published on the OFAC website and allows certain categories of prohibited transactions for anyone who meets its conditions, for example, for sending humanitarian aid or providing certain legal services.
- Specific license: Issued on a private basis to specific individuals and entities after submitting an application and granting permission for an operation not covered by a general license.
Certain cross-border transactions involving individuals on the OFAC sanctions lists, like the Specially Designated Nationals (SDN) list or the foreign sanctions evaders list, require an OFAC sanctions license. For instance, you may need a specific license from OFAC to unlock funds for paying employees’ salaries or completing a commercial contract interrupted by the sudden imposition of sanctions against your partner.
OFAC Clearance: Full removal of sanctions and restoration of rights
The OFAC clearance process pursues a completely different goal. It is not about obtaining permission to operate within the framework of sanctions regulations, but an official confirmation from OFAC that restrictions on an individual or legal entity are fully lifted. Essentially, it is the process of exiting from under sanction pressure.
The ultimate result of a successful clearance process is “delisting” — the formal removal of a person from a sanctions list, such as the OFAC’s Specially Designated Nationals (SDN) List or the sectoral sanctions identifications list. The consequences of this step are profound.
OFAC clearance certificate facilitates the complete unfreezing of all previously blocked assets, and the company or individual regains the right to conduct business without restrictions with American and other international partners. Successful delisting also serves as a powerful signal to banks and investors, restoring business reputation.
License vs. Clearance: Key Differences
The choice between a license and the clearance procedure determines the entire subsequent strategy of interaction with the regulator. It affects the collection of documents, legal argumentation, and, most importantly, the final result. To make the right decision, it is necessary to understand their differences clearly.
| Criterion | OFAC Licence | OFAC Clearance |
|---|---|---|
| Goal | Permission for a specific operation. | Complete removal of sanction restrictions. |
| Result | Temporary permission for a prohibited action. | Exclusion from the sanctions list (delisting). |
| Legal consequences | Sanctions against the individual remain in force. | Sanctions are completely lifted. |
| Who is it suitable for | For those who want to make a deal under sanctions. | To those who are already on the sanctions list. |
The process of obtaining: from submitting an application to the OFAC decision
The process of obtaining an OFAC sanctions license is a multi-stage procedure that requires thorough preparation. It starts with an in-depth analysis of the situation and collecting comprehensive evidence to support your case. Then comes the preparation and submission of a legally precise application to the agency. After this comes the review stage, which may include additional requests from OFAC.
The timelines for receiving a response from the agency are extremely unpredictable. They depend on numerous factors, including the complexity of the case, the quality of the presented arguments, the workload of the agency itself, and even the current geopolitical agenda. An application for a simple license may be reviewed within a few months, while the process of lifting sanctions (delisting) often takes a year or even longer.
Many independent attempts to interact with the OFAC blocked persons list and other sanctions programs end in failure due to typical mistakes. These missteps not only lead to rejection but can also complicate subsequent appeals, as they create a negative case history. It is important to avoid common pitfalls.
Common mistakes made by applicants include:
- Incomplete or inaccurate information: providing OFAC data that raises doubts or concealing material facts;
- Weak legal argumentation: lack of clear evidence that the applicant’s situation meets the criteria for obtaining a license or lifting sanctions;
- Ignoring context: submitting a request without considering the current U.S. foreign policy and established OFAC practices in similar cases;
- Incorrect type of request: a demand for the complete lifting of sanctions when circumstances only allow for obtaining a special license.
Consequences of Ignoring OFAC Requirements
Willful and intentional violations of OFAC sanctions regulations may result in severe consequences like civil penalties and criminal prosecution. Due to the huge financial risk involved, civil monetary penalties may amount to millions of dollars and often exceed the transaction sum itself. In addition to fines, OFAC may block all assets and accounts of the company, paralyzing its operations. For individuals and company management, OFAC may impose criminal penalties.
How does professional legal assistance speed up the process?
U.S. sanctions law is a highly specialized and complex area of law where the cost of error is high. Engaging a specialized lawyer helps to build competent communication with the regulator. The specialist not only knows the laws but also understands the internal logic and unwritten rules of the agency’s operations.
A qualified lawyer performs several functions. He conducts an initial audit of the situation to assess the chances of success. Then he helps to collect and formalize the evidence base, forming a convincing dossier to persuade OFAC to lift economic sanctions. Finally, he drafts and submits the petition, as well as conducts all negotiations with OFAC, acting on behalf of the client and protecting their interests.
Simply put, a license is a tactical tool for solving a specific operational task, while clearance is a strategic goal for fully exiting the sanctions regime. The right choice depends not on what is “better,” but on what is achievable and necessary in your situation. The first step on this path should be a balanced and professional assessment of all circumstances. Hasty actions or an incorrectly chosen strategy may not only fail to bring results but also worsen the situation.
If you or your company are facing OFAC restrictions, contact us for an initial analysis of your case. Professional consultation will help you understand which path—obtaining a license or working on lifting sanctions—is the most relevant and promising for you. You will gain a clear understanding of possible next steps.
