OFAC Licenses: When You Need One and How to Apply

A license issued by OFAC is an authorization that allows a transaction that would otherwise be prohibited by a U.S. economic sanctions program. There are two types: the general license, which authorizes an entire category of transactions in advance without the need to request permission, and the specific license, which is requested case by case and granted in writing. Knowing which one applies —or whether none does— is what separates a lawful transaction from a strict liability violation.

This matters to a non-U.S. company even though it is not a U.S. person: if your transaction touches U.S. dollars, U.S.-origin goods or the U.S. financial system, or has any other U.S. nexus, you may need an OFAC license to authorize conduct prohibited under primary sanctions. In more and more circumstances, OFAC requires non-U.S. entities to obtain OFAC licenses for transactions with no U.S. nexus that may nevertheless be sanctionable under U.S. secondary (or extraterritorial) sanctions. At Burke Compliance we analyze that exposure as part of our OFAC economic sanctions service. This article explains when you need a license, the difference between general and specific licenses, and how to apply step by step.

What Is an OFAC License?

An OFAC license is a permission that lifts, for a specific case or category, a prohibition imposed by a sanctions program. OFAC —the Office of Foreign Assets Control of the U.S. Department of the Treasury— administers these programs and is the only authority that can authorize an exception. Operating without the required license is a violation, even if the transaction is lawful in your country.

General License vs. Specific License

The key difference is that a general license is already published in OFAC’s regulations and applies automatically if you meet its conditions, whereas a specific license must be requested and you must wait for OFAC’s response. Before applying for a specific license, you should always check whether a general license covers your case.

	General License (GL)	Specific License (SL)
What it is	An authorization already published in the regulations for a class of transactions.	An individual, written authorization for a specific transaction.
Do you need to apply?	No. It applies automatically if you meet all its conditions.	Yes. An application is submitted to OFAC.
Timing	Immediate.	Variable; it can take months.
Risk	You must document that you meet every condition.	There is no guarantee it will be granted; OFAC decides.
When to use it	When a GL fits your transaction.	When no GL covers your case and the transaction is not otherwise permitted.

A common mistake is applying for a specific license for something a general license already covers, or assuming that a general license applies when it does not. Both extremes create risk: the first wastes time, the second leads to a violation.

When Do You Need an OFAC License?

You need a license when you want to carry out a transaction prohibited by a sanctions program and no general license authorizes it. The most common scenarios for a non-U.S. company are transactions linked to comprehensively embargoed jurisdictions or to designated parties.

• Transactions with sanctioned countries: dealings that touch an embargoed jurisdiction. You can see which ones in our article on countries sanctioned by the U.S..
• Transactions with SDN List parties: dealings with designated persons or entities, or with entities owned 50% or more by them.
• Unblocking funds or property that have been frozen (blocked) by a financial institution.
• Certain humanitarian, telecommunications or legal-assistance transactions, which are often covered by a general license but may require a specific one.

How to Apply for a Specific License Step by Step

An application for a specific license is normally filed electronically with OFAC through its license application portal, with detailed information on all parties and on the transaction. An incomplete application is the most common cause of delay.

1. Confirm there is no general license. Review the applicable sanctions program before applying for anything.
2. Gather the transaction details. Identity and beneficial ownership of all parties, description of the goods or services, amount, payment route and end use.
3. File the application on the OFAC portal. It is processed online, and you must explain why the transaction merits authorization. This normally requires explaining why the transaction would not harm U.S. national security or foreign policy.
4. Respond to requests for information. OFAC may ask for additional information; responding quickly and completely shortens the timeline.
5. Do not proceed until you have the license. Acting before the license is granted is, in itself, a violation.

What Happens If You Operate Without a License?

Operating without the required license exposes you to civil penalties under a strict liability regime: OFAC can impose penalties even if the company did not know the transaction was prohibited. Civil penalties under IEEPA reach amounts adjusted annually for inflation —more than USD 380,000 per violation— or twice the value of the transaction, whichever is greater. Willful violations can lead to criminal liability, with penalties of up to 20 years in prison and fines of up to USD 1 million per violation.

This exposure is not limited to U.S. companies. The reach of U.S. sanctions is extraterritorial when U.S. dollars, U.S.-origin goods, the U.S. financial system or any other U.S. nexus is involved, as we explain in our article on the extraterritorial reach of sanctions.

In practice

A European company has funds held by its correspondent bank in the United States: a legitimate payment to a supplier was blocked because an intermediary appeared to be linked to a designated party when, in fact, no such link existed. The company wants the payment processed as soon as possible and is about to resend it through another route.

That second attempt would probably trigger another blocking of funds. The correct route is a specific unblocking license from OFAC, documenting the fact that there is no link to any designated party. With sanctions, haste is the enemy: the lawful way out is almost always slower, but it is the only one there is.

Frequently Asked Questions

Can a non-U.S. company need an OFAC license?

Yes. If the transaction involves U.S. dollars, U.S.-origin goods or services, the U.S. financial system or designated parties, a non-U.S. company may need an OFAC license regardless of where it is domiciled. Increasingly, an OFAC license may be needed to authorize transactions with no U.S. nexus at all if the activity in question is sanctionable under secondary sanctions.

How long does OFAC take to grant a specific license?

There is no fixed timeframe. It depends on the program, the complexity of the case and the quality of the application. It can take months, so it is advisable to apply well in advance and not to commit the transaction to a fixed date.

Is applying for a license an admission of a violation?

No. Applying for a license is the normal procedure for authorizing a restricted transaction. A voluntary self-disclosure of a violation that has already occurred is a different process.

Not sure whether your transaction needs an OFAC license? Review it with our OFAC economic sanctions service or write to us through our contact page.