Category: Sanctions Programs

OFAC License

Also known as: OFAC Authorization, General License, Specific License

Simply put

An OFAC license is an official authorization from the US Treasury's Office of Foreign Assets Control (OFAC) that permits a person or business to carry out a transaction that would otherwise be prohibited under US sanctions rules. For example, it may allow the release of funds that have been blocked. There are two main types: general licenses, which broadly authorize certain categories of transactions, and specific licenses, which are issued to particular applicants for particular transactions.

Formal definition

Under the US sanctions programs administered by OFAC, a license is an authorization to engage in a transaction that would otherwise be prohibited (for example, the release of blocked funds). OFAC issues two types: general licenses, which authorize defined categories of otherwise-prohibited transactions without requiring case-by-case application (such as selected authorizations covering travel, employment, residence, and maintenance transactions with the Palestinian Authority), and specific licenses, which are granted to a named applicant to authorize a particular transaction and may be accompanied by interpretive guidance on how issued authorizations apply. A license authorizes conduct that would otherwise be prohibited; obliged persons should confirm the precise scope, conditions, and applicability of any license against the relevant OFAC program and regulatory text, as authorizations are program-specific and subject to their stated terms.

Why it matters

OFAC licenses are a central mechanism through which US sanctions programs accommodate legitimate activity that would otherwise be prohibited. Because OFAC's prohibitions can be broad, extending, for example, to the blocking of funds, a license is often the only lawful pathway for an obliged person to complete a transaction, release blocked property, or engage with a restricted party or jurisdiction. For compliance teams, understanding whether conduct is covered by an existing general license or requires application for a specific license is a threshold question that determines whether a transaction may proceed at all.

The distinction between the two license types carries significant operational weight. A general license authorizes defined categories of transactions without any case-by-case application, meaning a firm may rely on it directly provided its activity falls squarely within the stated terms and conditions. A specific license, by contrast, is issued to a named applicant for a particular transaction and cannot be relied upon by others. Misreading the scope of a license, assuming coverage that does not exist, or acting outside a license's stated conditions, can expose an institution to sanctions liability, because a license authorizes only the conduct it expressly permits and nothing more.

Because authorizations are program-specific and subject to their stated terms, licenses should never be treated as blanket permissions. A license reduces legal exposure for the specific conduct it covers, but it does not eliminate an institution's broader obligation to screen, monitor, and confirm that activity remains within the authorization's boundaries. Exact scope, conditions, and applicability should always be verified against the relevant OFAC program and regulatory text rather than assumed.

Who it's relevant to

Sanctions Compliance Officers

Sanctions compliance officers must determine whether a proposed transaction is prohibited under an OFAC program and, if so, whether it is covered by an existing general license or requires application for a specific license. They are responsible for confirming that activity falls within a license's stated scope and conditions, and for ensuring the institution does not act outside those boundaries.

Financial Institutions Handling Blocked Property

Banks and other obliged persons that hold blocked funds or property rely on OFAC licenses, such as authorizations for the release of blocked funds, as the lawful mechanism to act on that property. They must verify that any license invoked applies to their specific circumstances before releasing or transferring blocked assets.

Legal and Regulatory Counsel

Legal advisers assess whether a client's activity is authorized under a general license, prepare and submit specific license applications to OFAC, and interpret OFAC guidance on how issued authorizations apply. Because a license authorizes only the conduct it expressly permits, counsel play a key role in confirming scope against the relevant OFAC program and regulatory text.

Businesses Engaging with Restricted Parties or Jurisdictions

Companies whose operations touch sanctioned parties, jurisdictions, or activities, such as certain transactions with the Palestinian Authority covered by selected general licenses, need to identify whether their intended conduct is authorized and under what conditions. Where no general license applies, they may need to apply for a specific license before proceeding.

Inside OFAC License

Issuing Authority

An OFAC license is an authorization granted by the US Treasury's Office of Foreign Assets Control (OFAC), which administers and enforces US economic and trade sanctions programs. Licenses permit transactions that would otherwise be prohibited under the applicable sanctions program.

General License

A general license authorizes a particular category or type of transaction for all persons meeting its stated conditions, without the need to apply individually. It is published by OFAC and self-executing, meaning parties may rely on it if they satisfy its terms; the scope and conditions are defined within the license text.

Specific License

A specific license is a written authorization issued by OFAC to a particular applicant in response to an application, permitting a defined transaction that is not covered by a general license. It applies only to the named party and the described activity, subject to any conditions imposed.

Scope and Conditions

Each license sets out the precise transactions, parties, time periods, and any reporting or recordkeeping conditions to which the authorization applies. Activity falling outside these stated boundaries generally remains prohibited.

Relationship to Sanctions Prohibitions

A license functions as an exception to an underlying prohibition tied to a specific OFAC sanctions program (for example, country-based or list-based programs). Its availability and terms depend on the particular program and may differ across programs.

Reporting and Recordkeeping Obligations

Licenses typically carry conditions requiring the authorized party to retain records and, in some cases, submit reports to OFAC. Failure to comply with license conditions may affect the validity of the authorization.

Common questions

Answers to the questions practitioners most commonly ask about OFAC License.

Does obtaining an OFAC license mean a transaction is generally legal or free from sanctions restrictions?

No. An OFAC license authorizes a specific activity that would otherwise be prohibited under applicable US sanctions programs; it does not render the transaction generally legal or exempt from other requirements. The authorization is typically limited to the precise parties, activity, timeframe, and conditions described, and it does not remove obligations under other legal regimes or other sanctions authorities. Conduct outside the scope of the license may still be prohibited.

Is a general license the same as a specific license, so that no application is needed either way?

No, these are distinct. A general license authorizes a defined category of transactions for anyone meeting its stated terms without an individual application, whereas a specific license is issued by OFAC to a particular applicant in response to a request and applies only to that applicant and the described activity. Relying on a general license generally requires confirming that the activity falls squarely within its terms; a specific license generally requires submitting an application and awaiting OFAC's determination. The exact eligibility and conditions should be confirmed against the applicable general license text or the specific license issued.

How does an obliged entity determine whether a transaction may already be covered by an existing general license?

The entity typically reviews the relevant OFAC sanctions program and its associated general licenses to assess whether the specific activity, parties, and conditions fall within the terms stated. Because general licenses are drafted narrowly and vary by program, the analysis generally requires matching the proposed activity to the license's precise scope rather than assuming coverage. Where coverage is uncertain, entities may seek legal advice or apply for a specific license. The applicable general license text should be confirmed directly.

What information is generally needed to apply for a specific OFAC license?

Applications typically require a detailed description of the proposed activity, the parties involved, the relevant sanctions program, and the justification for authorization, along with supporting documentation as OFAC requests. Because requirements differ by program and case, applicants generally should confirm the current submission format and required content through OFAC's stated application procedures rather than relying on a fixed checklist.

What compliance considerations apply once a specific license is granted?

A license generally must be operated strictly within its stated scope, conditions, and expiry, and any reporting or recordkeeping conditions attached to it should be observed. Activity that exceeds the authorized parties, purpose, value, or timeframe may fall outside the license and may be subject to restrictions. Entities typically maintain records demonstrating that transactions conducted under the license conformed to its terms, and should confirm specific conditions against the license as issued.

Does holding an OFAC license affect an obliged entity's other AML and screening obligations?

Not necessarily. A license addresses the specific sanctions prohibition it authorizes; it does not by itself displace an entity's broader obligations, which may include ongoing sanctions screening, customer due diligence, and monitoring for suspicious activity under other applicable frameworks. These measures are intended to detect and manage financial crime risk and continue to apply according to their own scope. The interaction between a license and other obligations should be assessed against the applicable regulations.

Common misconceptions

An OFAC license permits a transaction anywhere US sanctions are a concern, satisfying all sanctions requirements globally.

An OFAC license authorizes conduct only in relation to US sanctions administered by OFAC. It does not override sanctions or restrictions imposed under other regimes, such as EU, UN, or UK measures, which operate under separate legal instruments and authorities. Parties may still require authorization or face prohibitions under those other frameworks.

Holding a general license means no further compliance steps are needed.

A general license applies only to transactions that meet all of its stated conditions. Parties relying on one generally must confirm the activity falls within its scope, satisfy any recordkeeping or reporting conditions, and continue other applicable controls. Reliance on a general license for out-of-scope activity does not provide authorization.

A specific license granted to one party can be used by other related parties.

A specific license authorizes only the named applicant and the described activity. It is not transferable to other persons or extendable to transactions beyond those described unless expressly permitted in its terms.

Best practices

Determine whether the intended activity is already covered by an existing OFAC general license before applying for a specific license, and document the analysis supporting reliance on any general license.

Review the exact scope, conditions, and expiration terms of any license and ensure the actual transaction does not extend beyond what is authorized.

Assess whether other sanctions regimes (such as EU, UN, or UK measures) also apply to the transaction, since an OFAC license does not authorize activity under those separate frameworks; confirm requirements against each applicable regime.

Maintain records and satisfy any reporting conditions attached to the license, as compliance with conditions may be necessary to preserve the authorization's validity.

Establish internal controls so that only named parties rely on a specific license, avoiding assumptions that it extends to affiliates or other counterparties.

Confirm current license terms and any specific figures, thresholds, or deadlines directly against the applicable OFAC program and license text, as these are program-specific and subject to change.