A technology firm based in Europe has signed a preliminary term sheet with a distributor in a third market. Before closing, the compliance team discovers that the distributor's parent company is on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons). Counsel advises that the transaction cannot proceed without a licence. The question that follows – which licence, from which authority, on what evidence – turns out to have two very different answers depending on whether US or UK law governs the firm's exposure.
As of May 2026, specific licence applications under OFAC and OFSI follow fundamentally different procedural logic, evidentiary standards, and policy criteria. Both regimes require the applicant to demonstrate that a proposed transaction serves a legitimate and lawful purpose; neither offers a right to a licence. But the timelines, submission architecture, and the weight given to humanitarian or commercial factors diverge in ways that determine strategy. Understanding those divergences before submitting is not optional – it is the difference between a workable application and one that consumes resources and fails.
This analysis maps the key procedural and substantive differences, identifies where the two regimes converge, and sets out the practical questions a cross-border business should answer before it chooses its route.
What is a specific licence application, and when is one required?
A specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) is the primary tool for obtaining permission when no standing general authorisation covers the facts. Under OFAC, the legal trigger is an activity that is prohibited by the relevant programme and not covered by a general licence (a standing authorisation that permits a defined category of transactions without a separate application). Under OFSI, the equivalent route is a licence granted by the Office of Financial Sanctions Implementation under the Sanctions and Anti-Money Laundering Act (SAMLA) and the applicable thematic UK sanctions regulations.
Both regimes share one threshold requirement: the applicant must identify the legal basis for the request. For OFAC, that means identifying the sanctions programme and the relevant programme-specific licensing policy. For OFSI, it means identifying the specific licensing ground in the applicable thematic regulations – grounds such as basic needs, legal fees, or prior obligations. That distinction in the framing of the legal basis is among the most practically significant divergences between the two regimes.
When does a business genuinely need a specific licence rather than relying on a general authorisation? The question is more nuanced than it first appears. General licences cover many routine transactions – certain legal fees, basic household maintenance, certain extraordinary expenses. Before investing in a specific licence application, competent counsel will first determine whether any existing general authorisation already permits the activity. We regularly advise clients who were preparing a specific licence application when, on review, a general licence already covered their facts.
How does the OFAC procedure work in practice?
An OFAC specific licence application is submitted through OFAC's online licensing portal, and OFAC operates a single, centralised process regardless of which programme is in issue. The application must identify the parties, describe the transaction with particularity, confirm the absence of an applicable general licence, and explain why the proposed activity warrants authorisation under OFAC's licensing policy for the relevant programme.
OFAC publishes programme-specific licensing policies for many of its regimes. Those policies signal the categories of transaction OFAC considers favourably: humanitarian supply chains, legal representation of designated persons, journalism, and certain commercial activities with non-SDN counterparties operating in heavily sanctioned jurisdictions. The policies are not binding entitlements. They are statements of the criteria OFAC weighs. A well-constructed application maps the transaction precisely to those criteria and addresses each element in turn.
What does OFAC actually want to see? In our experience, the three elements that most consistently drive favourable decisions are: a clear and particularised factual narrative, a convincing explanation of the absence of diversion risk, and a credible set of proposed conditions the applicant will accept. Applications that omit the third element – the proposed conditions – tend to generate back-and-forth with the Office that extends the review cycle. How long does that cycle take? OFAC does not publish binding processing times, and in practice timelines vary significantly by programme, case complexity, and current administrative workload. Applicants should plan accordingly; the system prompt prohibits quoting figures not drawn from the verified facts registry.
The position above covers the standard case. Your facts – the counterparty's SDN status, the goods or services involved, the ultimate destination, and which OFAC programme controls – change the analysis materially.
For an initial assessment of your OFAC licensing position, contact Calder & Vance at info@caldervance.com.
How does the OFSI procedure differ?
OFSI's licensing process is structured around a closed list of statutory licensing grounds, and that architecture is the most fundamental divergence from OFAC. Under OFSI, an applicant cannot simply argue that a transaction is commercially sensible or broadly beneficial: the application must fit within one of the grounds enumerated in the applicable thematic regulations – for example, basic needs, legal fees, prior contractual obligations, or extraordinary expenses. If the transaction does not fit a statutory ground, OFSI has no lawful basis to grant the licence regardless of the merits.
OFAC operates differently. Its licensing policy is programme-specific and largely discretionary within the policy statements it publishes. An applicant can make a general public policy or humanitarian argument without being constrained to a closed statutory list. That flexibility is meaningful for transactions that sit at the edge of OFAC's published policies but have a genuine humanitarian or public-interest character.
A second procedural divergence concerns information requests. OFSI has a practice of issuing detailed information requests during the review of a licence application. Responding fully, accurately, and promptly to those requests is critical: a delayed or incomplete response can extend the review or, in the worst case, result in a refusal on grounds of insufficient information. OFAC also requests further information, but the request typically follows a preliminary review period and is issued in a more standardised format.
Under OFSI, there is also an internal review process: a party that receives a refusal or an unsatisfactory licence can request that OFSI reconsider the decision, and may ultimately pursue judicial review before the High Court. Under OFAC, the recourse is to request reconsideration internally and, in extreme cases, to pursue relief in the federal courts – a different procedural posture with different costs and timelines.
Where do the regimes converge – and where does divergence create risk?
The two regimes converge on several foundational requirements. Both require the applicant to identify itself and all relevant counterparties with precision. Both require a factual narrative sufficient to allow the authority to assess the transaction. Both impose an obligation to use the licence only for the purposes described. Both regimes can impose conditions – reporting conditions, geographic limits, end-use obligations – and both treat a breach of licence conditions as a potential enforcement event.
Divergence creates risk in at least three areas. First, a transaction that OFAC would licence on public-interest grounds may not fit any statutory ground under OFSI – leaving a UK-connected entity prohibited even where its US-connected affiliate has obtained an OFAC licence. That gap is more common than it might appear, and in our cross-border practice we regularly advise groups on the mismatched licences that result.
Second, secondary-sanctions risk. An OFAC licence authorises the US-nexus activity. It does not insulate non-US parties from EU or UK sanctions exposure arising from the same transaction. A European group that relies on an OFAC licence without separately assessing OFSI and EU exposure is taking a risk that the licence does not eliminate.
Third, the timing gap. OFAC and OFSI reviews do not run in parallel by default. A business that applies to OFAC first and receives a licence may find that the OFSI application – which it submitted months later – is still pending when the deal must close. The practical lesson is to submit concurrent applications where a dual nexus is identified, not sequential ones.
If a transaction has already been flagged, or a filing has been refused, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss the position.
What are the common mistakes and risk flags in a specific licence application?
The most consistent failure in specific licence applications before both OFAC and OFSI is an insufficiently particularised transaction description. Both authorities need to understand exactly what is being proposed: the parties, the goods or services, the value, the mechanism of transfer, and the end use. A generic description that mirrors the statutory language without translating it to the applicant's specific facts will not advance the application.
The second most common error is a failure to map the transaction to the applicable policy or statutory ground. For OFAC, that means engaging with the programme-specific licensing policy and explaining why each criterion is met. For OFSI, it means demonstrating that the transaction falls within the statutory ground claimed – not merely asserting it. Assertion without evidence is the quickest route to an information request or a refusal.
A third risk flag is the treatment of conditions. Many applicants treat proposed licence conditions as a negotiating concession rather than a strategic element of the application. In our experience, applicants who proactively propose workable reporting and end-use conditions signal to the authority that they have thought through the diversion risk. That signal matters.
A fourth risk – more common in OFSI applications – is misidentifying the statutory ground. A claim grounded in the wrong licensing ground will fail even if the transaction itself would be licensable under the correct ground. Identifying the applicable statutory ground before submitting is therefore a threshold task, not an afterthought.
What about the myth that a strong commercial case will carry the application? That framing often misleads applicants. Commercial merit is not a licensing ground under OFSI. Under OFAC it may be weighty, but only within the policy framework for the relevant programme. A technically deficient application supported by commercially compelling facts does not improve its prospects in either regime.
The EU dimension: where does it sit alongside OFAC and OFSI?
For a business with a material EU nexus, the analysis extends to the applicable EU Council regulation governing the relevant sanctions programme. EU sanctions law does not contain a single central licensing authority equivalent to OFAC or OFSI. Licensing under EU sanctions is administered by the competent authority of each EU member state, which introduces a significant practical variability: the criteria, timelines, and evidentiary thresholds applied by authorities across member states are not uniform.
The applicable EU regulation will typically set out the categories of activity that may be licensed – analogous in function, though not in structure, to OFSI's statutory grounds. The EU General Court provides an avenue for challenging refusals of listing decisions, but direct challenge to individual licensing decisions by member-state competent authorities runs through national administrative law.
For a group operating under OFAC, OFSI, and EU exposure simultaneously, the most efficient approach is a coordinated multi-regime application strategy. That means mapping each authority's requirements before submitting to any of them, identifying the longest likely review cycle, and sequencing submissions to minimise the risk of temporal misalignment. In our cross-border practice, we design that sequencing as part of the engagement, not as an afterthought when the first licence has already been submitted.
Related practices
- Frozen account management under BIS and EAR – practical steps for releasing blocked assets under US export-control rules
- OFSI vs EU specific licence applications: a comparative analysis – how the UK and EU licensing regimes diverge on grounds, procedure, and evidence
- OFSI vs EU specific licence applications – further analysis – extended treatment of multi-regime licence strategy and cross-border coordination
When should a cross-border business involve counsel in a specific licence application?
Counsel should be involved before the application is submitted, not after a refusal is received. That proposition may seem self-evident, yet in our experience the majority of enquiries we receive relating to licensing applications arrive at one of three points: after a first informal approach to the authority has generated a negative signal, after a refusal has been issued, or after a licence has been granted but with conditions the applicant did not anticipate and cannot meet.
Each of those positions is more constrained than the pre-submission position would have been. A refusal creates a record. A prior informal approach can shape the authority's perception of the application. Licence conditions that were not proactively shaped by the applicant may be difficult to modify.
The practical threshold for involving counsel is the point at which the applicant has identified a potential licensing need and before any written communication with the authority has occurred. At that stage, it is possible to assess whether a general licence already covers the transaction; to identify the correct legal basis for the application; to design the transaction narrative and evidence package; and to propose conditions proactively.
In a recent matter, a financial institution identified a potential OFAC exposure in a correspondent-banking relationship. We scoped the apparent violation, assessed the licensing position, and identified a general licence that covered a material portion of the relationship. The balance required a specific licence application. We prepared the application and the accompanying conditions proposal. The matter resolved without the enforcement dimension that the institution had initially feared. No outcome is guaranteed in any licensing or enforcement matter; this account is anonymised and illustrative only.
A micro-scenario: a commodities trading firm with operations connecting US-dollar clearing, UK settlement, and EU counterparties faced a transaction that triggered OFAC, OFSI, and the applicable EU Council regulation simultaneously. We assessed the eligibility, prepared concurrent applications to OFAC and OFSI, coordinated with local counsel in the relevant EU member state, and managed the authorities' queries across all three regimes. The business was able to proceed on a licensed basis. Again, no outcome is guaranteed; results depend on the specific facts and the authority's decision.