A multinational service business receives a designation notice on a Monday morning. Its contracts with the newly listed counterparty include a six-month software licence, a consultancy retainer, and an equipment lease. Payments are mid-cycle. Staff are deployed on-site. Unwinding these arrangements takes time – and both OFAC and OFSI impose hard limits on how much time a business actually has. Getting those limits wrong, in either direction, is a compliance event in its own right.
Wind-down authorisations (temporary permissions that allow a business to complete or terminate otherwise-prohibited transactions after a designation is made) exist under both US and UK sanctions law, but the two regimes differ materially on scope, duration, and the conditions a business must satisfy to rely on them. OFAC's authorisations are published as general licences (standing permissions for defined categories, requiring no individual application) and typically run for a fixed period after the designation effective date. OFSI's parallel mechanism operates under a different statutory basis and carries its own procedural expectations. Understanding where the two regimes converge – and, more importantly, where they diverge – determines whether a cross-border business can close out its positions lawfully or faces immediate exposure.
This analysis sets out the governing authority for each regime, maps the critical procedural differences, identifies the risk flags that arise when a wind-down period is running, and explains when specialist counsel should be instructed. It also addresses the EU position, which is relevant for any business whose transaction chain touches an EU entity or clearing bank.
What legal authority governs wind-down authorisations under OFAC and OFSI?
Wind-down authorisations under OFAC derive from the broad licensing authority granted by IEEPA and the relevant programme-specific regulations administered by the Office of Foreign Assets Control. OFAC issues general licences – which are programme-level, publicly available, and self-executing – and specific licences, which are case-by-case and require a formal application. For wind-down purposes, OFAC's approach has been to publish programme-specific general licences simultaneously with, or shortly after, a major designation. The general licence defines the category of transactions that may continue (winding down contracts, closing positions, returning funds), names the designated persons covered, and specifies the window – typically expressed as a number of calendar days from the designation effective date.
Under OFSI, the Financial Sanctions Implementation Office derives its licensing authority from the Sanctions and Anti-Money Laundering Act (SAMLA) and the relevant thematic regulations made under it. OFSI issues specific licences (individual, case-by-case authorisations) and, in some programmes, general licences that function similarly to their OFAC counterparts. However, OFSI has historically relied more heavily on the specific-licence mechanism for wind-down situations. This distinction matters operationally: a business relying on an OFAC general licence does not need to file anything before the window closes; a business seeking OFSI authorisation for a comparable wind-down may need to apply and receive written confirmation before proceeding.
In our cross-border practice, we regularly advise clients who assume that because OFAC has issued a wind-down general licence, the UK position is automatically aligned. It is not. A UK-nexus transaction – involving a UK entity, a sterling payment, or a UK bank – requires a separate OFSI analysis, regardless of what OFAC has authorised.
How do the procedural mechanics differ between OFAC and OFSI wind-down authorisations?
The core procedural difference is self-authorisation versus prior permission. Under a published OFAC general licence, a party that meets the conditions stated in the licence may proceed without contacting OFAC, provided it keeps records and can demonstrate compliance on review. The burden is on the transacting party to interpret the licence correctly and to document its reliance. OFAC's record-keeping expectations require that transaction records be retained for a defined period after the authorised activity – a requirement embedded in the programme regulations rather than in the licence text itself.
OFSI operates differently. Even where OFSI has issued a general licence covering a class of wind-down transactions, OFSI's enforcement guidance makes clear that licensees must read the conditions carefully. General licences issued by OFSI frequently require that the licensee notify OFSI of activity conducted under the licence within a short window – in some cases 10 business days of the transaction. Failure to notify does not necessarily invalidate the licence, but it is treated as a breach of a licence condition and can affect OFSI's assessment of culpability in any subsequent enforcement review.
Timing of the window is the second mechanical difference. OFAC's general licences have typically set wind-down periods measured in calendar days from the designation date. The length of those periods varies by programme and by the complexity of the contracts in scope. OFSI general licences tend to be more precise about the categories of permitted activity and more demanding about what records must be produced to OFSI on request. Neither regime publishes a standard wind-down duration that applies across all programmes: the instrument itself must always be checked.
A third mechanical point concerns the scope of permitted parties. Some OFAC general licences authorise wind-down activity by US persons only; others extend to non-US persons. OFSI licences are specific to the UK sanctions definition of a "designated person" and to the reach of UK financial-sanctions prohibitions. A transaction involving both a US entity and a UK entity must be assessed against both authorisations simultaneously, and the narrower of the two governs the transaction in practice.
Where do OFAC and OFSI wind-down authorisations diverge most sharply?
The sharpest points of divergence are: the notification obligation, the treatment of payments, and the interaction with the 50 percent rule (the principle that entities owned 50 percent or more by designated persons are themselves treated as designated). On notification, OFAC's general-licence model assumes self-execution; OFSI's model frequently assumes notification or, in some cases, prior consent. On payments, OFAC general licences often specifically authorise the receipt of funds from the designated person in connection with legitimate wind-down, provided the funds are not otherwise blocked. OFSI takes a narrower approach: funds received from a designated person may themselves be subject to an asset-freeze, and OFSI expects a specific licence before a UK-nexus financial institution processes any such payment.
On the 50 percent rule, OFAC applies a strict aggregation test: a company owned 50 percent or more in the aggregate by one or more blocked persons is itself blocked, regardless of operational independence. OFSI applies both an ownership test and a control test – an entity may be caught even if the ownership threshold is not met, if a designated person exercises dominant control. This means that in some wind-down scenarios, OFSI's prohibition extends to entities that OFAC does not treat as blocked. A transaction that the OFAC general licence authorises may still be prohibited under OFSI.
Is the OFSI notification obligation merely procedural? In practice, no. OFSI's enforcement guidance treats breach of a licence condition – including a failure to notify – as a separate potential violation, distinct from the underlying transaction. In our experience, clients who treat OFSI general licences as self-executing in the same way as OFAC general licences create an enforcement gap that can arise years after the wind-down period has expired.
The position above covers the standard case. Your facts – the counterparty's ownership structure, the currency of the payments, the UK nexus, and the specific instruments in play – change the analysis significantly. For an assessment of your exposure under either regime, contact Calder & Vance at info@caldervance.com.
What is the EU position, and why does it matter for cross-border wind-downs?
For businesses with EU-entity counterparties, EU-clearing relationships, or EUR-denominated payments, the EU position is a third regime layer that must be assessed in parallel. The EU does not operate a general-licence mechanism for wind-downs in the same way as OFAC or, to a lesser extent, OFSI. EU Council regulations implementing asset freezes against designated persons prohibit the making of funds available to, or for the benefit of, a designated person. Member States are responsible for issuing licences under their own national competent authorities.
In practice, this creates a fragmented picture. A French bank processing a EUR payment under an OFAC-authorised wind-down must still satisfy itself that the transaction is permissible under the applicable EU Council regulation and, if a licence is needed, must apply through the relevant Member State competent authority rather than to an EU-level regulator. The EU General Court has confirmed that the asset-freeze prohibitions are directly applicable and strictly construed. Unlike the OFAC general-licence mechanism, there is no single EU-wide self-executing wind-down authorisation.
Where the EU position is stricter than OFAC's, the EU prohibition governs for any EU-nexus leg of the transaction. This is the overriding principle in multi-regime analysis: the stricter prohibition applies. A cross-border wind-down that is authorised under OFAC but not under the relevant EU Council regulation cannot proceed on the EU-nexus leg, even if the US leg is clear.
In a recent matter, a financial-services business faced a designation affecting a contractual counterparty with both UK and EU entity structures. The OFAC general licence authorised the relevant payments, but the EU competent authority required a separate application that took several weeks to process. We assisted with the parallel filing strategy, prioritised the EU application timeline, and structured interim arrangements that remained within the permitted scope of the OFAC authorisation while the EU process ran. The matter resolved without a breach on either regime.
What are the principal risk flags during a wind-down period?
The most common risk flags we see arise not from the main contract but from ancillary arrangements that the parties overlooked during wind-down planning. The five highest-priority areas are set out below.
- Indirect payments and intermediaries. Where a wind-down payment routes through a third-party bank or correspondent, each intermediary must itself be satisfied that the payment is authorised. OFAC general licences bind US persons; a non-US correspondent bank's obligations are governed by its own regulatory environment and internal compliance policy. Do not assume the correspondent will process without a query.
- Sub-contracts and supply chains. A wind-down authorisation for the principal contract does not automatically cover sub-contracts or licence agreements that run alongside it. Each contract requires its own analysis against the authorisation language.
- The 50 percent aggregation problem in ownership chains. If the newly designated person holds interests in multiple counterparty entities, each entity's ownership structure must be re-mapped from the designation date. An entity that was not previously blocked may now be blocked through aggregation.
- Fees, expenses, and interest accruing during the wind-down period. Some OFAC general licences authorise the return of funds held but do not authorise the payment of interest or fees that accrue after the designation date. The authorisation must be read carefully against each payment head.
- Reporting windows. Under OFSI, failure to report a transaction conducted under a general licence within the required window – in some programmes, 10 business days – is itself a compliance breach. A dedicated tracking system for each authorised transaction is not optional.
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 for a confidential review.
How should a cross-border business structure its wind-down response?
A structured wind-down response begins on the day of the designation, not in the days that follow. The window starts running from the designation effective date; preparation time is part of the window, not a prelude to it. In our experience, the businesses that manage wind-down authorisations most effectively treat the designation as a project-management event, not solely as a legal question.
The sequence we recommend to clients is as follows.
- Identify and freeze all in-scope transactions within 24 hours. Before any analysis is complete, stop outgoing payments to the designated person and flag inbound payments for review. Pause deliveries, services, and data transfers where practicable. This preserves optionality and demonstrates good-faith compliance.
- Confirm the applicable authorisations within 48 hours. For OFAC, locate the relevant general licence and confirm that your entity and your transaction type fall within its scope. For OFSI and EU, identify whether a general licence exists or whether a specific-licence application is required. Do not assume the authorisations are symmetrical.
- Map the 50 percent position for every counterparty entity. If the designated person has ownership interests in other entities in your transaction chain, assess whether those entities are now blocked under each regime's test. OFAC uses ownership only; OFSI and the EU add control. Re-run this analysis if new information about the ownership structure emerges.
- Notify OFSI and EU competent authorities where required. Check general-licence conditions for notification obligations. In some programmes, notification must occur within 10 business days. Set an internal deadline that precedes the regulatory deadline by at least three business days.
- Document everything in real time. Record the basis for each transaction conducted during the wind-down period, the authorisation relied upon, the parties involved, and the amounts. Retain records for the period required by the applicable regime. OFAC's record-retention rules are embedded in the programme regulations; OFSI's expectations are set out in its enforcement guidance.
- Instruct counsel where the analysis is not clear. If the counterparty's ownership chain is complex, if the contracts involve multiple jurisdictions, or if the authorisation language does not plainly cover your transaction type, the cost of an enforcement action substantially exceeds the cost of early advice.
The decision matrix for a cross-border business in this position depends principally on nexus and authorisation coverage. A US person with a US-law contract and an OFAC general licence in force has the clearest path: self-execute, document, retain. A business with a UK nexus and no applicable OFSI general licence must apply for a specific licence and should not assume that the wind-down can proceed in the interim. A business with both US and EU nexus faces the most complex position and will need parallel analysis across at least two, and potentially three, regimes.
A common misconception about wind-down authorisations
A persistent myth among compliance teams is that a wind-down authorisation effectively "pauses" the sanctions prohibition for the duration of the window, so that normal business can continue subject only to a final closing date. That is incorrect on multiple counts.
Wind-down authorisations are narrow permissions. They authorise specifically defined closing-out activity – completing existing contracts, returning pre-designation funds, terminating ongoing services. They do not authorise new business, new deliveries, or the extension of credit. Where a counterparty uses the wind-down period to move assets, alter its corporate structure, or otherwise change its position, those actions are not covered by the wind-down authorisation and may themselves be prohibited. Under OFSI, the general position is that any transfer of funds to or from a designated person requires either an applicable general licence or a specific licence; the wind-down period does not relax this position, it provides a narrow path through it.
A second aspect of the myth is that the wind-down authorisation covers third parties who deal with the party relying on it. It does not. A supplier that continues to deliver goods to a business during its OFAC-authorised wind-down must conduct its own analysis of whether those deliveries are authorised under the applicable licence and under any other regime that applies to it. Supply-chain exposure does not travel automatically with the authorisation.
Related practices
- Frozen account management – BIS / EAR – managing blocked and frozen accounts under US export-control and sanctions rules
- OFSI vs EU: Wind-down authorisations compared – parallel analysis of the UK and EU wind-down regimes
- Frozen account management – BIS / EAR matter – illustrative matter on managing frozen accounts under the EAR