OFAC General License vs Specific License: When You Need Each

When it comes to navigating the intricate web of U.S. economic sanctions, many say it’s like navigating a legal minefield where the rules are constantly changing. As the ultimate enforcers of sanctions, the Office of Foreign Assets Control (OFAC) determines what are acceptable actions for global financial institutions and multinational corporations. Sanctions are the primary tool of modern foreign policy, and in a world where governments use sanctions to shape foreign policy, the challenge for the compliance officer is to find a legal way to do something that the law prohibits – namely, to complete a transaction that has been determined to be prohibited.

What does an OFAC license actually do? It is a common misconception that a license simply lifts or waives a sanction. Nothing could be further from the truth. In reality, OFAC Licensing provides narrow, highly specific exceptions to regulations that would otherwise be prohibited. Knowing the difference between a General License (GL) and a Specific License (SL) is not just a nuanced issue for compliance practitioners, it is an operational issue for corporations and financial institutions around the world. Misunderstanding a GL or SL can lead to “strict liability” resulting in millions of dollars in fines and damage to reputation.

From the self-executing provisions of General Licenses to the on a case-by-case basis determination for Specific Licenses is examined in this article. Issues that can derail OFAC Compliance, such as the oft-misunderstood “50% Rule” is also covered in detail as well as how technology can serve as the initial filter to tell companies which sanctions regimes they are even implicated in. With the sanctions landscape shifting dramatically, whether a company is relocating from a sanctioned country to provide humanitarian relief in a conflict zone or winding down the remnants of an operation in a newly-sanctioned country, understanding OFAC Authorisations is crucial to compliance and avoiding legal jeopardy.

The following topics are going to be covered in this article;

1. What Are OFAC Licenses?
2. General Licenses
3. Specific Licenses
4. Side-by-Side Comparison Table
5. Decision Flowchart
6. How to Apply for a Specific License.
7. Common Licensing Mistakes
8. License Denials and Appeals
9. Working with OFAC Counsel
10. How Sanction Scanner Helps

1. What Are OFAC Licenses?

Before we get into the different categories of OFAC Licenses, it would be helpful to establish what a license is. An OFAC license is an authorisation from the Department of the Treasury that allows an entity or individual to perform otherwise prohibited transactions in furtherance of their business or interests.

It is crucial to understand that having a license does NOT remove an apparatus from the list of prohibited items for the general public. The license simply creates a legal window in order to carry out specific activities under specific conditions. These exceptions are divided into two categories.

• General Licenses (GL): These are OFAC-issued licenses that are applicable to any person or a class of persons. General Licenses are self-executing, meaning that once the terms of the General License have been met, a person may perform the authorized action without the need to apply for a license.
• Specific Licenses (SL): These are written authorisations for specific individuals or entities. They are granted upon application where a transaction is prohibited and there is no General Licence that covers the specific circumstances of the case. Sanctions compliance due diligence typically starts with a determination of what “window” needs to be scrutinized for potential sanctions.

2. General Licenses

A General License (GL) is a standing invitation to conduct certain activities. General Licenses are set forth in a regulation (or on the OFAC website) relating to a particular sanctions program and authorize certain transactions for any persons so long as the conditions set forth in the license are met.

The Concept of "Self-Execution"

A key element of General Licenses (GLs) is that they are “self-effecting”. This means that, provided your contemplated transaction is covered by the terms and conditions of the GL, you do not have to file a notice with OFAC, contact an OFAC officer or await the receipt of a hard copy of the General License in the mail. You are simply deemed pre-approved.

While General Licences offer a degree of convenience, substantial responsibility still rests with the user to ensure that all conditions are met. In the world of sanctions, “almost” is not good enough and every aspect of the transaction must be carefully scrutinised to ensure that all terms of the General Licence are met.

Common Categories of General Licenses

OFAC issues General Licenses to balance national security with humanitarian concern, or to allow for an orderly wind-down of activities subject to a sanction when new sanctions are imposed.

Humanitarian Aid: To allow the provision of food, medicine, and medical devices to sanctioned countries like Iran or Syria so that innocent civilians are not put in greater jeopardy as a result of U.S. foreign policy.

Regulated by State: Sales to private parties, including out-of-state buyers. Many states, including California, permit the sale of firearms to private parties, including out-of-state residents as long as the sale complies with all federal and California requirements.

Protect the First Amendment: Allowing the journalistic activity to take place in the two sanctioned jurisdictions where news organizations could operate and pay for services.

Wind-Down Authorizations: When OFAC adds a new entity to the Specially Designated Nationals (SDN) List, it frequently issues a time-limited General License (GL), such as 30 days or 90 days, to afford U.S. persons a reasonable period of time to wind down and unrestrictedly exit any affected contracts or arrangements, to involuntarily close subject bank and/or securities accounts, and to complete any other necessary actions to suspend or terminate activities with designated parties.

2026 Context: Russia GL 134B

This wind-down authorization was used to permit U.S. persons to make certain covered transactions with respect to dealings involving five listed Russian financial institutions. General Licenses (GLs) and Temporary Licenses (TLs) frequently are amended (e.g. from an “A” to a “B” to a “C”) as deadlines are extended and conditions narrowed.

3. Specific Licenses

What if a transaction is prohibited but there is no General License covering it? In such cases Specific Licenses (SLs) are used. Specific Licenses are written authorizations granted to specific parties (individuals or organisations). They are obtained after a detailed application process, and are generally valid for a fixed period of time, differing from General Licenses which are published in advance and are usually automatically granted.

When Is a Specific License Required?

You need a Specific License if you can answer "Yes" to the following three questions.

1. Is the transaction prohibited by one of the OFAC sanctions programs currently in effect?
2. Is the transaction a transaction with a "U.S. Person" (i.e. U.S. citizen, U.S. resident or any corporation, etc., organised under U.S. laws)?
3. Have all the General Licenses been examined in detail and found not to apply to the particular facts of your matter?

Specific Licenses are issued for more complex, high-value or other unique cases where, in the interest of analysis, the Department wishes to issue a license on a case-by-case basis. Examples of licenses that may be issued on a Specific License basis include authorizations to release funds for payment of legal fees, the sale of a particular high-tech good not classified as humanitarian, or other special types of transactions, including the restructuring of debt involving a sanctioned sovereign state.

The "GL Precedence" Rule

A compliance officer must remember that OFAC will not issue a Specific License if there is already a General License issued for the same activity. In reviewing a compliance exemption request for a particular activity, the OFAC officer will easily determine that the activity is already authorized under a General License. If this is the case, the SL request will simply be returned to the submitter with a “Return Without Action” (RWA) notice. Hours can be wasted in needlessly preparing a request for an SL when a simple review of current regulations would have advised against it.

The Individualized Nature of the SL

A Specific License (SL) is not transferable. Therefore, while “Company A” has been issued a Specific License for the export to a designated sanctioned country of water-purification equipment and parts by specified companies, performing the exports under “Company A” name, “Company B” cannot utilise this license to export the exact same item to the exact same customer. Each company must apply for its own license, providing its own corporate information, its own end-user certificates, and details of its own transaction.

4. Side-by-Side Comparison

To simplify the decision-making process, the following table highlights the operational differences between the two licensing paths.

5. Decision Flowchart

In global trade, “guessing” which license may be required for a transaction is a recipe for disaster. While guesswork may be sufficient for some aspects of compliance, a repeatable and defensible logic must guide the work of compliance officers. Below is a simple 4 step decision matrix illustrating the internal logic of a sanctions expert.

Step 1: The Prohibited Activity Check

You have to first clearly confirm that a rule exists and is being violated. To do this, review all parties involved in a transaction (individuals, vessels, aircraft, entities, etc.) against any relevant SDN List and/or non-SDN List. Check for transactions involving sanctioned countries (i.e. countries and/or entities subject to embargo such as Iran, Cuba, North Korea etc.), parties blocked by law, or specific restrictions within certain industries that require a license to conduct business (i.e. sectoral sanctions on Russian energy etc.). If none of these conditions apply, no license is needed. If they do, then proceed to Step 2.

Step 2: General License (GL) Applicability

This is the most arduous part of the research. You have to thoroughly read through the program-specific regulations to look for a General License (GL).

The Scope Test: Does your activity fit the definition exactly?

The Condition Test also considers reporting requirements for non-conforming payments, which will be similar to those under the existing bankruptcy legislation. This includes restrictions on the use of credit cards and certain banks for making payments.

The Expiration Test: Is the GL still in play, or has it officially expired and do you need to start a wind-down process? If a GL applies, you may proceed, provided you document your compliance perfectly. If not, proceed to Step 3.

Step 3: Specific License (SL) Application

If an activity is prohibited and no General License exists, the only option is to seek authorization. There is no guarantee of success, however, and a strong argument must be made that the transaction is in the interests of U.S. foreign policy, including for humanitarian purposes that do not present unintended consequences to U.S. interests. Once the proper application is prepared, the license request must be submitted through the OFAC authorized portal and then waited on for a response.

Step 4: The "VSD" or "Cease and Desist"

By the time it is detected that the transaction has occurred without a license, it is too late to obtain a license and the focus must turn to mitigation. That is where a Voluntary Self-Disclosure (VSD) comes into play. Proceeding with a prohibited transaction without authorization is a strict liability violation. In other words, your intent is irrelevant; all that matters is that the transaction occurred. You will be assessed a fine for the violation.

6. How to Apply for a Specific License

If a Specific License is your only option, the process is arduous and the review by OFAC is deateiled. It may turn into a marathon.

The OFAC Online License Application Portal

Almost all applications will need to go through the OFAC License Application Page by 2026, with paper applications no longer accepted. The License Application Page allows you to create an account to submit applications online and securely upload the relevant evidence.

OFAC doesn't just want to know about the transaction; they want to know about the whole ecosystem around the transaction as well.

• Detailed Party Identification: Full names and addresses are required for all involved parties. OFAC is also concerned with the "Beneficial Ownership" of all companies, meaning using the 50% Rule to identify the owners of the company.
• Description of the Transaction: Instead of "selling medical equipment," specify "selling 50 MRI machines, Model X-100, manufactured in Ohio."
• The Legal Argument: You have to reference the specific code that prohibits your item and then argue why you should be granted a license to sell it. In other words, you have to clarify whether you believe that allowing the sale of your item will cause a local health epidemic, or if you are obligated by prior law to cease activity.
• End-User/Country of End Use Certificates: These are required to be provided to demonstrate that the proposed shipment will not be used for military end-use and also that the end-user and/or country of end-use is/are not designated by the relevant regulations as a secondary sanctioned party.

The "One and Done" Strategy

OFAC screening provides companies with vital protection from financial fraud, but as many know, the process is notoriously slow. That's mainly because of "back-and-forth" communication problems. If OFAC ever requests a missing document, your application is pushed to the back of the queue.

Be Transparent: Hiding adverse information will only harm your company in the end by decreasing credibility when OFAC finds out anyway.

Case ID Tracking: After you submit your complaint, you will receive a Case ID (e.g., RE-12345) to use when referencing your case in any correspondence.

Manage Expectations: The shortlisting process can create i.e. that the SL will be completed in weeks or months at most. In reality, even in a best case scenario, SLs take weeks/six months at most, and indeed the few that have gone to UN referral in the past (including the high-sensitivity cases involving Russia and Iran) have had a ‘complex’ assessment timeline of around six months to a year.

7. Common Licensing Mistakes

Even the most experienced compliance professionals fall prey to what we refer to as “licensing traps.” The fact that OFAC operates under a strict liability standard means that even a “good faith mistake” can cost millions.

1. Reading General Licenses Too Broadly

A GL is a very narrow gate. A GL that authorizes the export of “medicine” does not authorise the export of “medical research software.” Within a single GL, there is literally an inch of difference between being covered and not being covered. Don’t step an inch over the text.

2. The "Cross-Program" Assumption

Even though a General License exists for the same activity with respect to a different country or group of countries under the Cuban Assets Control Regulations (CACR), General Licenses do not automatically carry over from one sanctions program to another. Each sanctions program is its own legal island and you must carefully review and confirm authorization for each program that is implicated by the transaction.

3. Failing to Apply the 50% Rule

The most common mistake when complying with a General License is to believe that a General License authorizes trade involving “Company X.” In fact, even though a General License might permit activities with “Company X,” if “Company X” is 50% or more owned by a blocked person for whom the General License does not provide coverage, such activity would be prohibited. Thus, before determining that an activity is authorized under a General License, one must screen not only the entity with which the transaction will take place but also the ownership of that entity.

4. Missing Expiration Dates

While reviewing a client's wind-down license application, a subtle but critical mistake has been frequently identified. The GL expired at midnight on June 1st. Therefore, the last day of operation was December 31st, and any wire transfers posted on January 1st at 12:01 AM would constitute a violation. Interestingly, many companies do not consider the time difference or the processing time required by the banks. The GL expired at 11:59 PM on June 1st, but the wire transfer would clear at 12:01 AM on June 2nd.

8. License Denials and Appeals

So far, we have focused on preparing a good Specific License application, garnering all appropriate evidence and arguments in support. But even with a well-prepared application, the odds are against you at the Treasury Department. A Specific License is a privilege, not a right, and OFAC can deny your request for any reason related to the transaction not being in the interests of U.S. foreign policy or related to the national security objectives of the United States.

The "Final Agency Action"

The letter of denial that you receive from OFAC is known as the “Final Agency Action”. Unlike a traffic ticket or civil lawsuit, there is no Appeals Court in the Treasury Department where you can argue your case before a judge. Once OFAC issues a letter of denial, the legal door to that specific transaction is then locked and there is no further appeal available.

Reconsideration for "Good Cause"

Although OFAC does not have an official appeal process, it does offer the opportunity for a decision to be reconsidered. Although simply being dissatisfied with a OFAC decision is not enough to warrant Reconsideration, "good cause" can be shown under several circumstances.

• New Material Facts: Information which was not known at the time of submission of the application (e.g. Sanctioned entity details have changed e.g. ownership).
• Changed Circumstances: Either there has been a change in circumstances overseas, or the sanctions regulations have changed in favour of your case allowing you to travel.
• Correction of Error: You can prove that OFAC made an error in their assessment of your application, i.e. that OFAC made a clear factual error in their assessment of your application, such as identifying a party as a blocked person when in fact they are not a blocked person.

Denials are part of your permanent regulatory record; there is an increasing risk of criminal investigations for “material misrepresentation” if you attempt to recycle a denied transaction by making a minor change and re-submitting the transaction without disclosing the prior denial.

9. How Sanction Scanner Helps

Software providers are often misunderstood to serve as legal counsel to organizations. Sanction Scanner and other similar providers identify what and who poses a risk to an organization. Counsel then can determine the “Now What?”. An ideal compliance program includes technology to identify the risk and the counsel to lead the organization through the situation once a threat has been identified.

However, before you even apply for the license, you typically need to know which one is required. This requires an understanding of the boundaries set forth by the OFAC licensing structure, which includes both General and Specific licenses. The first step for any organization therefore, is to find out if a transaction involves a sanctioned party this is where Sanction Scanner comes in handy.

Identifying the Implicated Program

OFAC has dozens of sanctions programs to comply with. Each program has a handful of General Licenses as exceptions. Sanction Scanner identifies not only names flagged for sanctions but also the exact sanction program (and associated law) to reduce errors in processing.

• Is the hit related to the “Global Magnitsky” program?
• Is this a scheduled entity included in the “Russian Harmful Foreign Activities” sanctions? Understand the scope of the licensed program in order to determine which General Licenses apply.

Real-Time Screening and Adverse Media

Sanctions lists change on a daily basis. By the time a sanctioned party is formally added to the SDN list, a transaction lawful one day could already be a felony the next. Sanction Scanner alerts you to potential sanctions risk as Adverse Media is reported, and on a real-time basis as a party is added to SDN lists.

Minhac Celik

Marketing Lead

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