Many times potential clients will call our office stating that they believe they need an OFAC license. On numerous occasions, it has been the case that they didn't need any kind of licensing because the transactions did not involve any prohibited activity. This is particularly true with foreign persons who have heard of OFAC, but do not know the extent of OFAC's jurisdiction. In determining whether an OFAC license is needed, first consider whether there are any U.S. persons involved in the transaction. A U.S. person is characterized as a U.S. citizen, permanent legal resident, entity formed under the laws of the United States, or anyone physically present in the U.S. Next, determine whether any of the parties are sanctioned targets or ordinarily reside in sanctioned countries. Finally, determine the nature of the transaction and whether it is prohibited. If all three apply, then a license would be needed.
Consider Exemptions and General Licenses
OFAC authorizations generally come in three categories: 1) Exemptions; 2) General License; and 3) Specific Licenses. When one seeks to obtain an OFAC license they are referring to the third category, specific licenses. Exemptions are those transactions which are outside of the President's authority to sanction. For example, under most sanctions programs, travel related transactions are exempted. General licenses on the other hand are open ended authorizations. This means that you do not have to apply to use the authorization. The difference between an exemption and a general license is that OFAC can rescind a general license at any time, where as it is out of their authority to apply sanctions to exempted activity. Before pursuing an OFAC specific license see if there is an exemption or general license that covers the transactions you wish to engage in.
Advocating for OFAC Licenses
If after going through the above steps, it is determined that an OFAC specific license is needed then there are some things to keep in mind. First, an OFAC specific license application is an advocacy piece and should not only include the facts representing the underlying transaction, but should also address the law and policy underlying the regulations. Moreover, there are numerous OFAC policy statements which can be used to successfully advocate for issuance of the license. Always keep in mind that OFAC has broad discretion to issue licenses. As such, effective legal and policy arguments could be the difference between a license being granted or denied. Finally, make sure the license application is well formed and thorough. In the event of a denial, there are some rights to appeal. The original license application will be part of the administrative record and the appeal will be determined upon the representations made in the original application.
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