A Complete Guide to General and Specific Licenses
- What is an OFAC license?
- Assess Your Need for an OFAC License
- OFAC License vs. OFAC Clearance: What’s the Difference?
- When is an OFAC license required?
- OFAC: who is obligated to comply with sanctions?
- Classification of licenses: General and Specific
- OFAC General Licenses
- How to check if the General License is active?
- Restrictions and conditions for the use of General Licenses
- OFAC Specific License
- When and how to get a Specific License
- Common mistakes when using licenses
- When Can You Petition for Removal from the SDN List Entirely?
- Where to track new licenses and changes?
- How to choose the right license and avoid mistakes?
- Frequently Asked Questions
Operating a regional or global business across multiple jurisdictions requires a strong understanding of international law, sanctions, and other legal provisions. In the U.S, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) is the central body regulating economic and trade restrictions through sanctions. OFAC regulations define the legal boundaries when interacting with sanctioned individuals and entities in targeted countries.
Violating OFAC sanctions regulations can result in severe penalties and reputational damage for the parties involved. Fortunately, an OFAC license facilitates lawful transfer of assets and financial transactions that otherwise would be considered unlawful. However, you need to understand the different types of OFAC licenses available, the application process, and common mistakes to avoid.
What is an OFAC license?
OFAC licenses are official permissions that allow individuals and legal entities to conduct transactions or other actions that otherwise would be prohibited by U.S. sanctions law. These documents do not lift sanctions but create a legal exception to the rules for specific situations.
Obtaining OFAC authorization means protecting your company from accusations of circumventing restrictions and proving the legitimacy of your intentions. Without such a license, any operation involving the interests of sanctioned countries or parties will be considered illegal and will result in strict measures from the American regulator. That makes an OFAC authorization a critical step for continuing operations in complex jurisdictions.
An OFAC license should not be confused with an OFAC certification. A license is a formal government authorization. A certification, by contrast, is typically a clause in a private contract where one party attests to its own sanctions compliance — a business-to-business assurance, not a document issued by OFAC.
Assess Your Need for an OFAC License
If a transaction involves a sanctioned party or blocked funds, review whether a general license covers it or a specific license may be required. Discussing the transaction details can help clarify which OFAC authorization process applies to your situation.
OFAC License vs. OFAC Clearance: What’s the Difference?
Before discussing license types, it’s important to distinguish a license from OFAC clearance — a term often confused with it. Clearance is not a document OFAC issues; it’s the outcome of a screening check performed by a bank, title company, or compliance team, confirming that a person, company, or transaction does not appear on the SDN List or another OFAC-administered list. Most transactions only require clearance. A license may be needed when a confirmed match or a country-based prohibition applies and no general license covers the transaction.
| Criterion | OFAC license | OFAC clearance |
|---|---|---|
| What it is | A government authorization issued or published by OFAC | The result of a screening check run by a bank, title company or compliance team |
| When it is needed | A transaction would otherwise be prohibited by sanctions | Routinely, before onboarding or closing, to confirm no party is sanctioned |
| Who issues it | OFAC (general licenses are published; specific licenses are issued to the applicant) | Nobody — it is an internal compliance outcome, not an OFAC document |
| Effect on sanctions | Sanctions stay in force; only the licensed activity is authorized | None — it only confirms that no sanctions issue was found |
In real estate transactions specifically, OFAC clearance is a standard step title companies run on all parties — buyer, seller, and any entity in the ownership chain — before funds can be disbursed at closing.
When is an OFAC license required?
For many companies, international operations are the foundation of their activities. However, interaction with sanctioned foreign governments, individuals, and other entities is associated with serious legal risks.
A license is needed only when a transaction is prohibited — for example, it involves a blocked person, property in which a blocked person has an interest, or a comprehensively sanctioned country — and no general license covers it.
OFAC authorization is also necessary when entering into contracts with counterparties from countries under embargo or with individuals included in the SDN (Specially Designated Nationals) list. The supply of certain goods or services to sanctioned parties may also require authorization. Much humanitarian activity is covered by general licenses issued since December 2022; activity outside them still needs a specific license.
OFAC: who is obligated to comply with sanctions?
The opinion that U.S. sanctions apply exclusively to American companies is a dangerous misconception. In reality, OFAC’s jurisdiction extends to numerous foreign entities. First and foremost, all “U.S. persons” are required to comply with economic sanctions regulations, which include U.S. citizens, permanent residents (green card holders), American companies and their foreign branches, and anyone in the United States. However, the key aspect is that the rules also apply to foreign individuals if their activities have a connection to U.S. jurisdiction.
Most U.S. dollar payments clear through U.S. banks, so non-U.S. parties that cause a U.S. bank to process a prohibited payment can face OFAC enforcement. Similarly, if a foreign company uses American goods, technologies, or services in a deal with a sanctioned entity, it also risks violating the law.
Classification of licenses: General and Specific
The OFAC licensing system provides two fundamental types of permits, the difference between which determines the entire process of interaction with the regulator. These are General Licenses and Specific Licenses. The main difference in OFAC licenses lies in the mechanism of their operation and obtaining.
A general license from OFAC is a public, pre-approved authorization that applies to an indefinite number of persons and allows certain types of operations without the need to submit an individual request. A specific license, on the other hand, is a personal document. It is issued to a specific applicant after a thorough review of their written application for conducting a unique transaction.
OFAC General Licenses
OFAC general license functions as a general exception to the rules, published for public knowledge. It allows conducting standard and less risky operations that, in the opinion of the U.S. government, do not contradict the goals of sanctions policy. Examples may include licenses permitting the provision of humanitarian aid, conducting certain academic exchanges, or winding down current operations with a company that has just come under sanctions.
How to check if the General License is active?
To legally utilize a general license, start by thoroughly studying its applicability to your situation. The first step is to visit the official OFAC website, where all current general licenses are published in the section dedicated to a specific sanctions program (for example, “Russia-related Sanctions“). It is critically important to carefully read the text of the license itself.
The wording in these documents is also crucial. You must ensure that your company, the proposed transaction, and the counterparty fully comply with all the described criteria. Any deviation from the text may render the use of the license unlawful.
Restrictions and conditions for the use of General Licenses
Each OFAC general license is not carte blanche but has strictly defined boundaries. It contains specific conditions, restrictions, and often an expiration date. For example, a license may permit the export of medical equipment but prohibit the supply of accompanying software. Some general licenses require reports; failing to file them can void the authorization (31 C.F.R. § 501.801(a)).
Violating even one seemingly insignificant condition completely nullifies the protection provided by the license. This turns a lawful operation into a sanctions regime violation with all the resulting consequences.
OFAC Specific License
Unlike a general one, an OFAC-specific license is an individual permit. It is issued in response to a written OFAC license request and addressed to a specific applicant for the execution of a particular, clearly described operation like the release of blocked funds. Obtaining such a document is a complex and lengthy process requiring convincing argumentation.
When and how to get a Specific License
A specific license is required when a transaction is prohibited and no general license covers it; OFAC grants it only if the transaction is consistent with the program’s policy. These could include complex commercial transactions, the sale of assets in a sanctioned jurisdiction, or legal support for cases that go beyond standard permissions.
The process of obtaining a specific license is a formalized and meticulous task that requires attention to detail. The applicant must convincingly prove to OFAC that the planned operation does not harm the interests of U.S. national security.
A specific license application process includes the following stages:
- A detailed description of the operation: At this stage, it is necessary to present detailed information on the underlying transaction as thoroughly and transparently as possible: who the participants are, what goods or services will be transferred, what the financial flows are, and what the ultimate goal is. The more relevant information you provide, the higher the chances of success;
- Collection of supporting documents: All relevant documents are attached to the application: draft contracts, invoices, business correspondence, founding documents of the participating companies, and a written justification for the necessity of the particular transaction. This package of documents must confirm every word in the description of the operation.
- Submission of an application through the OFAC online portal: The official and most preferred method of submission is through the special OFAC License Application Page portal. It allows tracking the status of the application and promptly receiving requests from the regulator.
- Waiting for a decision and communication with the agency: OFAC does not commit to a processing deadline: simple, well-documented requests can move quickly, while complex applications can take many months. During the review process, an OFAC officer may request additional documents or clarifying information.
OFAC’s policy is not to grant a specific license for a transaction that a general license already covers, so check the general licenses first. If the license is needed to unfreeze money, the application follows its own route — see the release of blocked funds. For other transactions, our team prepares and files the OFAC license application. Submit only one copy of each application; duplicates may delay processing (31 C.F.R. § 501.801(b)(2)).
Common mistakes when using licenses
Navigating the world of sanctions compliance is full of pitfalls, and mistakes can be very costly. One of the most common errors is using a general license without fully complying with its terms. A business may superficially review the authorization and assume it applies, missing critical details that render it inapplicable.
Another serious mistake is planning an urgent transaction based on the expectation of obtaining a specific license. Lengthy and unpredictable review timelines make this approach extremely risky. Finally, companies often overlook the dynamic nature of sanctions legislation, failing to monitor updates and license revocations, which can lead to unintentional violations of already amended rules.
Legal and financial risks associated with non-compliance with OFAC licensing requirements are enormous. They can not only halt a business but also destroy it. The consequences include:
- Civil penalties: Under IEEPA, up to $377,700 per violation or twice the value of the transaction, whichever is greater.
- Freezing of assets: Any funds or property associated with an illegal transaction may be blocked.
- Reputational losses: OFAC publishes its enforcement actions, and being named in one leads to a loss of trust from banks, partners, and clients worldwide.
- Criminal charges: For willful violations, fines of up to $1 million and up to 20 years in prison.
When Can You Petition for Removal from the SDN List Entirely?
Separate from licensing, a listed person can ask OFAC to remove the designation under 31 C.F.R. § 501.807 — for example, because the original basis was mistaken or circumstances have changed. Delisting lifts the sanctions altogether, which a license never does, and it is a different and usually longer process. See how SDN List removal works.
Where to track new licenses and changes?
OFAC compliance is a crucial step when transacting with foreign entities and individuals on the Specially Designated Nationals (SDN) list to avoid violations. The main and most reliable source of information is the official OFAC website.
All updates are published in the “Recent Actions” section, and on the pages of specific sanctions programs, you can find the current texts of general licenses. All official changes are also duplicated in the Federal Register of the United States (Federal Register).
For prompt receipt of information, OFAC offers a subscription to an email newsletter, which immediately notifies of all updates. Checking the status of licenses before each transaction should become a mandatory part of internal compliance control.
How to choose the right license and avoid mistakes?
OFAC licenses are the only legal way to ensure compliance when interacting with blocked persons, businesses, and jurisdictions under U.S. sanctions. The choice between a general and a specific license entirely depends on the nature, scale, and uniqueness of the planned operation. Each situation requires an individual assessment and deep immersion in legal texts.
The key takeaway is simple: amateurism in matters of sanctions compliance is unacceptable. The cost of a mistake is too high. In any doubtful situation, at the slightest uncertainty regarding the applicability of a general license or when it is necessary to prepare a request for a specific license, consultation with qualified lawyers specializing in sanctions law is mandatory. This is an investment that protects against multimillion-dollar fines and secures the future of your business.
Frequently Asked Questions
Do I need to apply for a general license?
No. A general license applies automatically when your transaction fits its terms, so there is nothing to file — but you must meet every condition and keep records. A specific license is different: it is requested through OFAC’s online License Application Page with a full description of the transaction, all parties concerned and the supporting documents. See how we prepare an OFAC license application.
How to check OFAC license?
The verification of an OFAC license depends on its type. There are two main types of licenses, and the methods of their verification differ.
- General License: This is a public authorization that applies to an indefinite number of persons and allows standard types of operations. To verify the existence and terms of a general license, it is necessary to: Go to the official OFAC website in the “Sanctions Programs and Country Information” section. Select the sanctions program of interest (for example, related to Russia or Iran). On the program’s page, find the “General Licenses” section and review the PDF documents published there. The text of each license clearly specifies the permitted actions, conditions, restrictions, and validity periods.
- Specific License: This is an individual, non-public document issued to a specific applicant. It is impossible to verify someone else’s specific license, as this is confidential information. If you yourself applied, you can check its status on the OFAC Licensing Portal using the assigned Case ID. If a counterparty claims to have a specific license for a transaction with you, they must provide you with a copy of it. Ask for a copy and check that the license number, licensee, parties, transaction and expiry date match your deal.
What are two types of license used by OFAC?
OFAC uses two main types of licenses to create exceptions to sanctions regimes: general and specific. The distinction between them is fundamental for understanding the sanctions compliance system.
General License. This is a pre-issued, public authorization that allows an indefinite group of individuals to conduct certain categories of transactions without the need to contact OFAC for individual permission. General licenses are published on the OFAC website and are often used to permit standard operations, such as providing humanitarian aid, offering certain legal services, paying pensions, and establishing transition periods for winding down activities with companies that have just been sanctioned.
Specific License. This is a personal written authorization that OFAC issues to a specific individual or company in response to a written application. Such a license is required for conducting unique transactions that do not fall under any of the general licenses.
What is an OFAC license and what is it needed for?
An OFAC license is an authorization to carry out a transaction that U.S. sanctions would otherwise prohibit. General licenses cover whole categories of activity, such as certain humanitarian transactions, without an application. Specific licenses are issued individually on request — for example, to release blocked funds or to make a particular payment involving a sanctioned party. Without the right license, dealing with a sanctioned person or jurisdiction exposes you to penalties.
Can I apply for a specific license if a general license already covers my transaction?
OFAC’s policy is not to grant a specific license for a transaction that a general license already covers. Check the applicable general licenses first, and apply for a specific license only when the transaction is prohibited and no general license authorizes it.
