How to use exceptions and licences to comply with sanctions
How to check if certain transactions, goods and services are exempt from sanctions measures (exceptions), and how to use or apply for sanctions licences.
Overview
An ‘exception’, listed in the regulations, gives an automatic exemption to a given activity. It means you do not have to have a licence, as long as certain defined circumstances apply to your activity.
If no exception applies, then a licence is required for any activity that would otherwise be prohibited under the regime. A licence is written permission to carry out the activity that would otherwise be prohibited. Licences are issued, managed and if necessary revoked by:
- the Office of Financial Sanctions Implementation (OFSI) for financial sanctions and the Oil Price Cap
- the Insolvency Service for director disqualification sanctions
- the Export Control Joint Unit (ECJU) (part of the Department for Business and Trade (DBT) for export sanctions
- DBT’s Import Controls team for import sanctions
- DBT’s Office of Trade Sanctions Implementation (OTSI) for trade services sanctions
- the Department for Transport (DfT) for transport sanctions
Exceptions
Each regime contains its own exceptions, but there are many exceptions which are common to all or most regimes. Before you use an exception, you must go to section 3.1 of the statutory guidance for the regime to check it applies in that regime.
General exceptions
Almost all regimes include an exception to allow actions that a responsible officer has determined to be in the interests of national security, or for the prevention or detection of serious crime in the UK or elsewhere. This exception can be used for any prohibition or requirement in the sanctions.
Another exception allows ‘authorised conduct’. This exception allows certain otherwise prohibited activities if they are authorised by an appropriate licence or other authorisation which is issued under the law of the Channel Islands, Isle of Man or any British Overseas Territory.
Exceptions to financial sanctions
There are some common exceptions that enable certain activities under financial sanctions, including:
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allowing the crediting of a frozen account with interest or other earnings, where the credited amount must also be frozen
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allowing funds to be made available to a designated person, if the payment is to a frozen account settling an obligation that arose before the recipient became a designated person
There are more details about common exceptions in section 6 of OFSI’s general guidance – see sections 6.1, 6.2, 6.3 and 6.4.
To help explain the exceptions that apply to specific restrictions on financial services and investments under the Russia sanctions regime, OFSI has produced Financial sanctions guidance for Russia.
If you are unsure whether an exception applies in your circumstances, you are advised to seek independent legal advice.
Examples of exceptions to financial sanctions
For individuals who were designated by the UK Government (rather than only by the UN), there is an exception that allows certain ‘required payments’ to be made from frozen accounts to certain UK public bodies and utilities. OFSI has provided answers to FAQs on the required payments exception.
Other specific exceptions can apply in particular regimes, for example to protect basic human needs and recognise humanitarian priorities. These examples are not exhaustive and for the full conditions you need to refer to the regime’s statutory guidance.
Example: DPRK (North Korea) regime
Exceptions allow payments to sanctioned government organisations in respect of healthcare, agriculture and humanitarian purposes, among others.
Example: All relevant regimes that have a purpose to comply with United Nations (UN) obligations
An exception (the ‘UN humanitarian exception) allows activities where financial sanctions might otherwise apply if they are necessary to ensure the timely delivery of humanitarian assistance or to support basic human needs.
Conditions for using exceptions to financial sanctions
Exceptions often have notification requirements attached to their use, and failing to notify may in itself be a civil or criminal offence and liable for a monetary penalty or criminal conviction.
Other conditions for using exceptions include keeping records. If you are not sure of the conditions for using an exception you must contact OFSI or seek independent legal advice.
Exceptions to trade sanctions
Some regimes have exceptions that allow people to move goods that would otherwise be subject to export sanctions, as long as these goods are:
- their personal effects, or
- of a non-commercial nature, for their personal use and contained in their luggage, or
- necessary for the official purposes of a diplomatic mission or consular post, or of an international organisation enjoying immunities in accordance with international law
If you are unsure whether an exception applies in your circumstances, you are advised to seek independent legal advice.
Examples of exceptions to trade sanctions
Specific exceptions can apply to sanctioned goods and services in particular regimes, often to protect humanitarian priorities or address implications for businesses and for the UK and global economy. These examples are not exhaustive and for the full conditions you need to refer to the regime’s statutory guidance.
Example: Russia regime
An exception allows auditing services to be provided to a Russian subsidiary of a UK credit institution.
Example: Belarus regime
An exception allows the export of machinery-related goods and technology for non-military use and for a non-military end-user, where this is necessary for humanitarian assistance activity, addressing health emergencies, or providing a response to natural disasters.
Exceptions for transport sanctions
Transport sanctions are imposed under 4 regimes, and various exceptions can apply. For the full conditions you need to refer to the regime’s statutory guidance.
Example: All regimes where transport sanctions apply
Exceptions allow for the granting of access to ship to enter a UK port in case of an emergency, or for a aircraft to land in the UK if failing to land would endanger the lives of persons on board or the safety of the aircraft.
Licences
If no exception applies, then the sanctioned activity is prohibited in its entirety. You may be able to use a licence to enable that activity, for example:
- allowing payments for basic needs from a bank account that is frozen because it is held by a designated person
- exporting sanctioned goods for certain purposes, such as humanitarian assistance
- providing financial services for bringing fertilisers subject to sanctions to a third country for agricultural use
A licence is written permission for such activity. A licensing body can:
- issue a licence for general use – a ‘general licence’
- issue a licence for use by certain trade or group – a trade licence (for trade sanctions only)
- issue individual licences (also known as ‘specific licences’) in response to applications based on the licensing grounds or licensing considerations
Licensing grounds and licensing considerations
The government has identified that certain activities, prohibited under a sanctions regime, may be consistent with the purposes of the sanctions. These pre-defined activities are known as licensing grounds or licensing considerations .
If you apply for an individual licence, you may need to demonstrate in your application how the proposed activity aligns with one, or more, of the licensing grounds or considerations, or with the purpose of the sanctions.
Example of licensing consideration: Myanmar sanctions regime
The Myanmar sanctions prohibit the export, making available, transfer, supply or delivery of military goods and technology.
In relation to this prohibition, a licence may be granted for non-lethal military goods or technology if they are intended solely for humanitarian or protective use.
General licences and how to use them
In some cases where there is a higher demand for a certain licence, the responsible body may have issued a ‘general licence’.
You can use a general licence without making a licence application. General licences may be amended, revoked or expire, so check the licence is valid. Note that general licences often have reporting and record-keeping conditions, which are set out in full on the licence document.
General licences for financial sanctions, issued by OFSI
OFSI has issued a large number of general licences to allow activities in certain circumstances that would normally prohibited under financial sanctions. Most of them permit certain payments or remittances from or to frozen accounts. There are more details about general licences in section 6.9 of OFSI’s general guidance.
Example: interim basic necessities general licence
For the first 2 months after a person is designated (or until an individual licence is issued for them) certain payments to cover basic necessities are covered under a general licence, issued by OFSI.
Example: payments to visa application service providers
A general licence allows for payments to authorised visa application services providers from a designated person (DP), or on behalf of a DP.
General licences for trade sanctions, issued by ECJU
The Export Control Joint Unit (ECJU), part of the Department for Business and Trade, has issued general licences that may authorise certain activities prohibited under the Russia sanctions. Other licensing requirements may apply to your goods as well.
Trade licences and how to use them
You can use a trade licence without having to make an application as long as you’re a registered member of a particular trade or group. This type of licence is known as a ‘class licence’.
Example: trade licence for acquisition of metals
The Trade Licence for acquisition of metals is a class licence, available for general use by:
- The London Metal Exchange (LME)
- LME Clear Limited
- global metal exchange members, and
- clients of global metal exchange members
Individual sanctions licences: how to apply for and use them
Before you apply for an individual licence, check that there is not:
- an exception that applies to the situation
- an OFSI general licence that applies to the situation
- a general trade licence that applies to the situation
If you are unsure if an exception or a general or trade licence applies, view the licensing guidance and then contact the appropriate licensing body as directed.
Guidance on licence applications
Financial sanctions: licensing guidance
OFSI has issued guidance on Licences that allow activity prohibited by financial sanctions. Also read OFSI’s blogposts:
- Introduction to licensing
- Reasonableness in licensing: updated approach
- How OFSI prioritises licence applications
- An update on OFSI’s licensing process and policies
Director disqualification sanctions: licensing guidance
The Insolvency Service has issued guidance on Licence applications for directors subject to director disqualification sanctions.
Trade sanctions: licensing guidance
DBT has 3 licensing bodies responsible for administering licences on behalf of the Secretary of State. The body you need to apply through is dependent on the activity you want to carry out.
DBT has produced guidance where you can check which trade licence you need. This will guide you to the application page for each type.
If you are carrying out activity that falls under the remit of more than one of DBT’s licensing bodies, you will need to submit separate licence applications for each one.
The Department for Business and Trade has issued guidance where you can check which trade licence you need: How to apply for a trade sanctions licence.
Transport sanctions: licensing guidance
The Department for Transport has issued guidance on Transport sanctions: apply for a licence.
Overlap between trade sanctions and financial sanctions
Check if you need 2 licences for a trade activity
Some activities are prohibited by both financial and trade sanctions. You should make sure you have the necessary licences to undertake activity that is subject to both financial and trade sanctions.
Activities may be prohibited by both financial and trade sanctions if:
- sanctioned goods, technology or services are going to an individual or entity subject to financial sanctions (‘designated person’)
- funds to pay for sanctioned goods, technology or services are transferring through or to an individual or entity subject to financial sanctions (designated person)
Trade sanctions licences permit prohibited activity under trade sanctions. If the trade involves an individual or entity subject to financial sanctions (designated person), you must check if an exception applies or if you need a licence from OFSI.
Exemptions for immigration sanctions
In certain circumstances permissions may be granted by the UN to allow travel which would otherwise be prohibited by a travel ban. These are more usually called exemptions. See how exemptions apply to travel bans.
Example: ISIL (Da’esh) and Al-Qaida sanctions regime
A person is not treated as an excluded person under Section 8B of the Immigration Act 1971 where entry or transit is necessary for the fulfilment of a judicial process or where the UN Committee determines on a case by case basis that the entry or transit is justified.