Licences that allow activity prohibited by financial sanctions

Question

Accepted Answer

Where a transaction involves a person or organisation who is subject to financial sanctions (whether directly or indirectly), you must obtain a licence to allow the activity to take place without breaching financial sanctions. You should not assume that a licence will be granted or engage in any activities prohibited by financial sanctions unless you have a valid licence.

OFSI can only issue licences on specific legal grounds which are set out below.

Additionally, to come within OFSI’s enforcement of financial sanctions, there must be a connection to the UK, which we call a UK nexus. A UK nexus will be considered on a case-by-case basis. See OFSI’s FAQ number 2.

Chapter 6 of OFSI’s general guidance covers exceptions and licensing. Information on OFSI’s licensing process and policies can be found here.

When should you apply for a licence?

OFSI recommends applying for a licence as early as possible before a licence is needed. Licence applications can be legally and commercially complex. In certain circumstances, the UN will need to approve them or be made aware of them. This can lead to a longer turnaround time. You may wish to consider taking independent legal advice before applying for a licence.

Applying for a licence

You need to provide as full an explanation as possible, and evidence, of the proposed transaction for which you need a licence.

OFSI’s licence application form includes some tips and links to OFSI guidance, blogs, and FAQs.

OFSI will return without action licence applications which are incomplete or where important information, such as an adequate explanation as to why the licensing purpose applies, is missing. In such cases a new licence application will need to be submitted to OFSI and will lead to delays in the outcome of your application.

Therefore, it’s in your interests to complete the application in line with OFSI’s requirements.

OFSI requires information and evidence including:

what the UK nexus (UK link) is
a detailed explanation of why you think the licensing ground applies (licensing grounds are listed in the form)
a detailed explanation of the sanctions regime which you are applying under, the sanctions which you believe are engaged, the licensing ground which you believe applies, and how all the requirements of the licensing ground are met
detailed information about the transactions (for example the value of the goods or services, parties to the contract, dates of future transactions, the amounts of intended payments; the payment currency; the intended payment route(s), details of all parties, including the sender, receiver of funds, intermediaries and beneficiaries)
the intended purpose of the transaction/funds/activity
explanation of the reasonableness of any proposed payment (where relevant)
for frozen assets, bank details - payment method, account details, payment route details and whether funds are available for payments
copies of documents to support your application - for example, retainer agreement or letter of engagement, memoranda or articles of association, trust deeds, lease agreements, contracts, quotations from suppliers. Please highlight the relevant sections.

You can include up to four attachments per application, with a maximum size of 7MB per attachment. If you need to provide OFSI with additional attachments, please do so once you have received your case reference from OFSI, which you can then respond to.

What types of licences are available?

OFSI can only issue a licence where there are legal grounds to do so. You need to assess which licensing ground is relevant to your application, referencing the relevant regulations.

The licensing purposes are set out in the relevant regulations. However, licences can generally be obtained where the proposed transactions are, including but not limited to:

covering expenses such as food, rent and medicines (referred to as basic needs)
reasonable professional legal fees or reasonable expenses associated with the provision of legal services
prior obligations (if the obligation/contract started before the sanction was imposed)
covering the payment of fees/service charges for routine holding or maintenance of frozen funds or economic resources
implementation/satisfaction of a judicial, administrative or arbitral decision or lien
post-designation judicial decisions (for non-UN designated persons only)
extraordinary expenses, where considered appropriate
extraordinary situations, where considered appropriate (only for non-UN listed persons)
humanitarian assistance
diplomatic missions
insolvency
divestment

You should check whether a licensing ground applies to a specific regime and pay particular attention to whether any UN regulations apply. Other licensing grounds may also apply, so check the regulations.

Under the Sanctions Act, OFSI may issue general licences which allow multiple parties to undertake specified activities which would otherwise be prohibited by sanctions legislation, without the need for a specific licence. You should check whether OFSI has issued a relevant general licence before completing a specific licence application. OFSI does not accept applications for general licences. More information is available in OFSI’s UK financial sanctions general guidance.

A list of general licences published by OFSI can be found on the General Licence page.

What is prohibited?

Prohibited transactions are outlined in the relevant regulation for the financial sanction. Visit the relevant country, thematic or terrorist group page for information and a link to the relevant regulations.

Urgent applications

OFSI prioritises cases where there are issues of personal basic needs and/or wider humanitarian issues at stake which are of material impact or urgency, or which are deemed to be of particular strategic, economic or administrative importance. You should provide an explanation as to the urgency of your application.

Do I need a separate licence to export goods to those subject to financial sanctions?

Yes. Export control licences permit prohibited activity under trade sanctions and embargoes. Even where an export control licence has been granted, you may still require a separate OFSI licence and it is not guaranteed that an OFSI licence will be granted. It is your responsibility to apply to the relevant authority and ensure compliance with any other relevant regulations.

An OFSI licence is required if:

the goods are going to a person or organisation subject to financial sanctions
the funds are transferring through a person or organisation subject to sanctions
the transaction would be in breach of sectoral financial sanctions

These licences are explained further in our Financial sanctions guidance.

Licence process in relation to terrorist groups

For licence applications relating to designations made under Counter-Terrorism regimes, please consult our counter-terrorism licensing policy page and the Counter-Terrorism licence section of OFSI’s General Guidance