Criminal Defense Lawyers

OFAC General vs Specific Licenses Differences

When it comes to sanctions compliance, one of the most important things to understand is the difference between OFAC general licenses and specific licenses. Both authorize transactions that would otherwise be prohibited under OFAC regulations, but they function very differently.

In this article, we’ll break down the key differences between general and specific OFAC licenses so you can determine which type you need for your situation.

What is an OFAC license?

First, let’s start with what a license actually is. According to OFAC, “A license is an authorization from OFAC to engage in a transaction that otherwise would be prohibited.”

There are two main types of OFAC licenses:

• General licenses
• Specific licenses

Both allow you to engage in transactions that would normally violate OFAC sanctions – but that’s where the similarities end. The way you obtain each license and how they can be used differs significantly.

OFAC General Licenses

A general license is a pre-approved authorization published by OFAC that allows certain categories of transactions without requiring you to submit a formal application.

According to OFAC, “A general license authorizes a particular type of transaction for a class of persons without the need to apply for a license.”

In other words, if your proposed activity falls under an existing OFAC general license, you don’t have to apply or notify OFAC. You can proceed with the transaction as long as you meet all the terms and conditions outlined in the general license.

Some key things to know about general licenses:

• They cover broad categories of transactions, such as certain exports of agricultural commodities or medicine.
• They are published openly by OFAC and listed in the Code of Federal Regulations.
• You don’t apply for general licenses – they are self-executing if you meet the requirements.
• They may have expiration dates, reporting requirements, or other restrictions.

For example, OFAC General License 2A authorizes certain transactions related to agricultural commodities, medicine, and medical devices with the Government of Venezuela. As long as you comply with all the terms outlined in GL 2A, you can proceed without applying for a specific license.

OFAC Specific Licenses

A specific license is a written approval issued by OFAC to a particular individual or entity to authorize a particular transaction or set of transactions.

According to OFAC, “A specific license is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application.”

So in contrast to general licenses, you must affirmatively apply for and receive approval for a specific license before proceeding with a proposed transaction.

Some key things to know about specific licenses:

• You must submit a license application to OFAC describing the proposed transaction.
• OFAC will review your application and decide whether to approve or deny it.
• If approved, you will receive a written license document authorizing your activity.
• Specific licenses are typically narrower in scope than general licenses.
• They may include restrictions, reporting requirements, expiration dates, etc.

For example, you might apply for a specific license to pay customs fees to clear goods stranded at a blocked port. OFAC would review your situation and determine whether to issue the license or not.

Key Differences Between General and Specific Licenses

Now that we’ve explained the basics of each type of license, let’s summarize the key differences:

As you can see, the process of obtaining and using each type of license is very different. Understanding these key differences will help you determine whether an existing OFAC general license covers your proposed activity or whether you need to apply for a specific license.

When to Use Each Type of License

Here are some additional pointers on when to use each type of OFAC license:

• Use a general license for recurring transactions, like recurring exports of agricultural commodities to a sanctioned country. General licenses allow multiple transactions over time without reapplying.
• Use a general license if you need to act quickly, since there is no application process. Specific licenses can take weeks or months for OFAC review.
• Apply for a specific license for one-off transactions that don’t fit under an existing general license.
• Apply for a specific license if you need to deviate from an existing general license. For example, if you need longer payment terms.
• Apply for a specific license if you are unsure whether a transaction is authorized and need confirmation from OFAC.

The key is thoroughly reviewing the available general licenses before applying for a specific license. OFAC won’t approve a specific license that duplicates an existing general license. Carefully analyzing your situation is crucial.

How to Apply for an OFAC Specific License

If you determine a specific license is needed, here is an overview of the application process:

1. Review OFAC’s specific license application guidelines.
2. Gather all required information about the proposed transaction.
3. Complete the online application form or submit a letter including all required details.
4. Provide supporting documentation to justify your application.
5. Submit your application and pay the processing fee (if applicable).
6. Communicate with OFAC to provide any additional information requested.
7. Wait for OFAC’s decision on whether your specific license is approved or denied.

It is important to provide a compelling case for why your specific license should be approved. Having an experienced OFAC attorney assist with the application can greatly improve your chances of success.

OFAC Licensing Decisions

OFAC has broad discretion in deciding whether to approve or reject license applications. Some of the factors they may consider include:

• National security and foreign policy interests of the US
• Whether the transaction would undermine the objectives of a particular sanctions program
• Likelihood of a negative impact on US economic interests
• Humanitarian considerations

If your application is denied, you can request reconsideration or submit an amended application addressing OFAC’s concerns. However, in most cases if your initial application is rejected, it is difficult to get OFAC to reverse the decision.

Penalties for OFAC License Violations

It is critical to comply with all terms and conditions of any OFAC general or specific license. Violations can lead to significant civil penalties and criminal prosecution:

• Civil penalties up to $302,584 per violation
• Criminal fines up to $1 million and imprisonment up to 20 years for willful violations
• Denial of export privileges
• Reputational harm

Given the severe consequences, having a thorough understanding of OFAC licensing requirements is essential. Consulting with an experienced sanctions attorney can also help reduce risk.