Guidance

OFSI Licensing: Designated Individuals Licensing Principles

Updated 27 February 2024

1. Overview

This guidance sets out policy principles that OFSI applies to licence applications relating to designated individuals (i.e. natural persons, as opposed to other legal persons such as companies) across all UK financial sanctions regimes.

The principles help to clarify OFSI’s interpretation and application of the various licensing grounds and will also help applicants better understand the circumstances under which OFSI may refuse to license certain activities, even where a licensing ground is met.

For a more general introduction to licensing, please see chapter 6 of our General Guidance and our Introduction to Licensing blog.

How applicants should use the principles

Applicants should consider the principles carefully before applying for a licence from OFSI. When completing an OFSI licence application form, it will be helpful to make clear how your application adheres to the principles. If licensing the proposed activity would require OFSI to deviate from any of the principles, you should provide additional supporting information to explain why this would be justified by the specific circumstances of your or your client’s case. OFSI are unlikely to grant such requests in the absence of clear and compelling reasons from the applicant which explain why it would be appropriate to depart from the principles.

The principles should not be considered to replace any legislation, or any of OFSI’s current guidance.

How OFSI will use the principles

The principles will be applied by OFSI’s licensing caseworkers and decision makers to ensure structure, consistency, and fairness throughout our licensing decision-making.

Although the principles help guide OFSI’s decision-making, they are not absolute. OFSI considers each application on a case-by-case basis and OFSI may depart from the principles in exceptional circumstances.

The principles are listed below in general hierarchical order, with the first principle taking precedence over the second, and so on.

2. Fundamental Principles

Principle	Detail
1	OFSI retains the discretion to refuse licence application requests where OFSI determine that, even where the grounds of a licensing purpose have been satisfied, it would not be appropriate to license that activity.
2	OFSI will not license activity which could undermine the integrity and objectives of the sanctions regime, either in terms of the nature of the activity or its ‘value’ (i.e. preserving the value of the frozen assets).

3. Principles on Basic Needs

Principle	Detail
3	Licensing decisions (including refusals) should not significantly cause harm to the health, or personal security of a designated person (DP) or a dependent family member.
3(a)	OFSI will generally apply the same considerations and principles in relation to the health and personal security of a DP’s dependant family members, as to the DP themselves.
4	Licensing should permit basic needs, which OFSI considers to include the reasonable standard of living as compared to a person receiving the net UK median wage.
4(a)	Ordinarily, Principle 4 will be generally satisfied by granting a designated individual the net UK median wage.
4(b)	Where expenditure is in excess of what can be reasonably expected under the net UK median wage, OFSI will take an objective view of what is required to fulfil the individuals’ ordinary basic needs.
4(c)	Where DPs have an asset which they regularly use, or occupy, DPs may need to demonstrate how they have reduced use of that asset to be necessary to their basic needs only, or have reduced use to a reasonable level (depending on the licensing purpose which is being relied on).
5	In most cases and unless there are mitigating factors or extenuating circumstances, licences will not enable a designated person to continue the lifestyle or business activities they had before they were designated. In particular high-net-worth individuals should not expect licences to allow continuation of their previous lifestyle.
6	OFSI accepts that in designating individuals there is always a risk of economic harm to unconnected third party non-designated persons. OFSI will consider the impact of not licensing, or only partially licensing, on third party non-designated UK persons and whether that would have a significant detrimental impact on those persons.
6(a)	While OFSI will consider detrimental impact on others, it is not a determinative factor and must be balanced against upholding the objectives of the sanctions regime, and operational feasibility of licensing that activity.
6(b)	Detrimental impact would generally only be considered to be satisfied where a non-designated person relies on a DP for an overwhelming majority of their financial security, to which there are no feasible alternatives, or those alternatives are disrupted by sanctions (for example, a UK-company’s only supplier, employees of a DP, dependants of a DP).
6(c)	DPs will be expected to wind down some business relationships with third parties, although OFSI will give consideration as to how this can be done on a case-by-case basis.

4. Principles on Frozen Assets

Principle	Detail
7	OFSI may license payments that are proportional to the holding and maintenance of a DP’s assets, where such payments are necessary to the ensure that principle 3 (the basic needs of a DP and their dependants) is not infringed.
8	OFSI will generally only license payments to maintain the current state of an asset, and not improvements.
8(a)	In exceptional circumstances, OFSI will license improvements where that ensures the safety of the asset, there is a prior obligation in place for such work, or there is a clear statutory/sectoral requirement to make those improvements.
9	Requests for the maintenance of luxury assets which are for the personal recreational use of a DP (for example yachts, high-value cars, second homes) will not be prioritised and OFSI will generally not license payments which solely enable the use of such assets.
10	Where necessary, and covered by an applicable licensing purpose, OFSI may permit high expenditure or large monetary caps to permit DPs to “wind-down” their existing obligations. This is to exit those arrangements with UK suppliers or suppliers in allied overseas jurisdictions to which there is a diplomatic interest (for example paying arrears to UK or allied overseas jurisdiction based suppliers).
10(a)	Existing arrangements are not accepted as necessarily the most appropriate arrangements going forward, and DPs may need to demonstrate the necessity and/or reasonableness of any existing obligations.
10(b)	In line with Principle 10, OFSI would generally consider “winding down” under the Basic Needs, Prior Obligations and/or Routine Holding and Maintenance derogations to non-exhaustively include: • arrears payments to creditor for services or goods already provided • salaries to cover notice periods and redundancy payments to staff for services • tax obligations • payments, such as fees, to public bodies

5. Principles on Ownership & Control

Principle	Detail
11	OFSI will generally not make ownership and control determinations on behalf of applicants unless it is necessary to do so to issue a licence. It is incumbent upon applicants to demonstrate (with reference to clear facts and to the relevant legal tests in the specific legislation) how a company is owned or controlled and is therefore subject to sanctions. OFSI will not accept speculative applications.
11(a)	For the purposes of issuing a licence, where the position is not entirely clear, but there are respectable arguments that an asset is owned or controlled by a DP, OFSI has a preference for issuing a licence (as opposed to issuing a negative ownership and control determination for the purpose of refusing a licence).

6. General Principles

Principle	Detail
12	OFSI will generally permit DPs to receive monies (for example salaries) to UK accounts. Those funds should be transferred to frozen bank accounts and should not normally be received from another DP. They must satisfy the relevant licensing purpose.
13	In identifying a prior obligation, OFSI may exercise its residual discretion to license only a proportion of that obligation (taking into account break clauses etc). This is applicable where licensing ongoing payments would be disproportionate to the aims of the regime. OFSI will not license such payments permanently.
14	OFSI will not generally license activity which can reasonably be provided by the State (for example healthcare or education). It will also not generally license activity that can be carried out at a more basic level (for example, using public transport rather than a private driver).
15	OFSI will not generally permit international travel under the basic needs licensing purpose unless it would cause significant harm to the health of a DP or is essential to their private and family life. For example, visiting a seriously unwell family member. Where travel is licensed, it will be subject to the published Travel Guidance.
16	OFSI may include contingency sums to monetary caps for permitted activity to reduce the administrative burdens of processing future applications.