A trading company in Western Europe has cleared its end-customer through its standard screening tool. The goods are dual-use items bound for a distributor in a third market. Weeks before shipment, a compliance manager notices that a beneficial owner of the distributor appears on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons). The export licence application the company planned to file with its national authority suddenly looks secondary. The OFAC question comes first.
Export-licence determinations under OFAC are not a single-step process. They require a business to confirm, in sequence, whether a US-jurisdiction nexus exists, whether the transaction is prohibited under the applicable OFAC programme, and whether a general licence (a standing authorisation permitting a defined category of transactions without a separate application) or a specific licence (a case-by-case authorisation) is available. As of May 2026, OFAC administers more than thirty active sanctions programmes, each with its own scope, prohibitions, and licensing criteria. A determination made under the wrong programme – or without considering extraterritorial reach – can void an entire trade relationship.
This guide works through the determination in five practical steps, compares the OFAC position with the UK and EU approaches where they diverge, and identifies the risk flags that trigger the need for specialist counsel.
Step 1 – Establish whether an OFAC nexus exists
Before any licensing question arises, a business must determine whether OFAC has jurisdiction over the transaction at all. OFAC's authority under IEEPA and related statutes extends to US persons wherever they are located, to persons within the United States regardless of nationality, and to transactions that involve US-origin goods, technology, or software, or that are processed through the US financial system.
That reach is wide enough to catch a wholly non-US supply chain. A European manufacturer exporting goods that contain US-origin components above a defined content threshold may fall within OFAC's programmes even though no US entity touches the contract directly. Similarly, a payment routed through a US correspondent bank converts a transaction between two non-US parties into one with a clear OFAC nexus. In our experience, businesses that assess "OFAC relevance" only by looking at their own nationality miss the product-origin and payment-routing vectors entirely.
The practical first question is therefore not "are we a US company?" but "does this transaction have any connection to the United States – in the goods, the financing, the banking channel, or the technology embedded in what we are shipping?" Only once that question is answered can the next step proceed.
This is also where the cross-border picture opens up. A business that concludes it has no US nexus may still face obligations under EU Council regulations or OFSI rules – both of which carry their own licensing regimes and prohibitions. The narrowing of the OFAC question does not close the compliance question.
Step 2 – Identify the applicable OFAC programme and its prohibitions
Once a nexus is confirmed, the determination turns on which OFAC programme or programmes govern the counterparty, the destination, or the goods. OFAC maintains a range of country-based, entity-based, and thematic programmes. A transaction may engage more than one simultaneously.
The starting point is the SDN List and the relevant blocked-parties databases. Screening the counterparty against these lists is necessary but not sufficient. The 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) means that an entity which does not appear by name on any list may still be legally blocked. 50 percent or more ownership by one or more SDN persons, in the aggregate and whether held directly or through layers of intermediate entities, triggers that status automatically. Screening tools that rely only on listed names will not surface it.
Beyond entity-level screening, the applicable programme defines what is prohibited. Some programmes prohibit only transactions with listed persons. Others prohibit broad categories of activity in or with a particular country or sector – trade finance, the supply of certain goods or technology, and the acceptance of payment from defined sources. A business exporting industrial equipment needs to confirm not only that the buyer is clean but that the goods themselves are not subject to a sector-based restriction under the applicable programme.
Have you considered whether the technology embedded in your goods is itself a controlled item under a thematic OFAC programme, independently of the identity of the buyer? That question is rarely asked at the commodity-description stage, and the answer can change the licensing route entirely.
Step 3 – Assess available authorisations
If a prohibition is identified, the determination shifts to whether an authorisation is available. OFAC provides two forms: general licences and specific licences.
General licences cover defined categories of transactions – humanitarian activity, personal remittances, certain journalistic activity, specific agricultural or medical goods – and operate as standing permissions. No application is required; the transaction must simply fall within the terms. The critical discipline here is reading the conditions and exclusions precisely. A general licence may authorise the export of food but exclude its sale to a government entity in a programme country, or permit a transaction up to a defined monetary ceiling. Acting on a general licence without verifying all its conditions is itself a potential violation.
Where no general licence covers the transaction, a specific licence application to OFAC is the route. OFAC reviews applications on a case-by-case basis and applies a licensing policy that differs by programme. Some programmes carry a general policy favouring applications for certain goods; others operate under a policy of denial for transactions that would provide a direct benefit to a listed person or a restricted sector.
In our practice, the most consequential decision at this stage is whether to apply at all before the facts are fully understood. An application that presents incomplete ownership information, or that mischaracterises the end-use, will not only be refused – it may prompt a referral for further investigation. Preparing the record carefully before filing is not bureaucratic caution; it is the single most effective risk-management step in the process.
The position here is also where the OFAC approach diverges most sharply from the EU and UK regimes. Under EU Council regulations, the licensing authority is typically the competent national authority of the member state, not a single central body. Under OFSI, specific licences are granted by the Treasury, and the licensing criteria reflect the grounds set out in the applicable thematic regulations under SAMLA. The procedural parallel – you apply, the authority reviews, it decides – is superficially similar. The substantive criteria, the timelines, and the appeal routes differ materially. A business seeking parallel authorisations under OFAC, OFSI, and an EU regime should not assume that success in one jurisdiction predicts success in another.
Step 4 – Address the BIS and dual-use dimension
Export-licence determinations under OFAC do not exist in isolation from the US export-control regime administered by the Bureau of Industry and Security (BIS) under the Export Administration Regulations (the EAR). In our experience, businesses – particularly those outside the United States – treat OFAC and BIS as separate questions to be answered in sequence. That sequencing can create a gap.
An ECCN (Export Control Classification Number under the US Commerce Control List) determines the BIS licence requirement for a given item to a given destination for a given end-use. A transaction that clears the OFAC analysis may still require a BIS export licence, or may be barred entirely under the EAR's restrictions on exports to specific end-users or for specific end-uses. Conversely, a transaction that is OFAC-permissible because the buyer is not on any OFAC list may be caught under the BIS Entity List – BIS's list of parties subject to enhanced licence requirements – for reasons that have nothing to do with sanctions designation.
The interaction runs the other way too. A BIS licence, once granted, does not authorise a transaction that would otherwise violate OFAC prohibitions. The two regimes are cumulative, not alternative. A business needs a clean bill of health under both before it can lawfully ship.
For businesses handling goods that may also be subject to UK or EU dual-use controls, the analysis multiplies. EU dual-use rules and the UK Export Control Order each impose their own classification and licensing requirements. Items that fall below an ECCN threshold may nonetheless require a licence under EU or UK rules, particularly for sensitive destinations or end-users. We regularly advise exporters who have obtained a BIS licence and then discover, on EU or UK counsel, that a parallel licence is required before the goods can clear their port of departure.
For a detailed assessment of how BIS classification intersects with OFAC obligations, see our service on deemed exports and technology controls under the BIS/EAR.
Step 5 – Document the determination and maintain the record
A completed determination – whether the conclusion is that no authorisation is required, that a general licence applies, or that a specific licence has been granted – must be documented. OFAC's rules require that records relevant to a transaction subject to its jurisdiction be maintained for a defined period. The obligation applies even where the transaction was ultimately determined to be permissible.
Documentation serves two functions. First, it demonstrates due diligence in the event of a later query or enforcement action. OFAC's enforcement guidelines place significant weight on the quality of a compliance programme, and a well-documented determination is concrete evidence of genuine, contemporaneous compliance effort. Second, it creates an internal audit trail that allows the business to confirm, on a repeat transaction with the same counterparty, that the underlying facts have not changed – that the counterparty has not been newly designated, that the ownership chain remains the same, and that the applicable programme has not been amended.
Record-keeping in this context is not a passive compliance exercise. It is the evidentiary foundation for any penalty-mitigation argument if a violation is later identified. Businesses that treat each transaction as a fresh screen without preserving the analysis behind it lose that foundation entirely.
The cross-border dimension applies here as well. If the transaction also engaged OFSI or an EU competent authority, those regimes carry their own record-keeping requirements, which may differ in duration and scope from OFAC's. A single record designed for one regime may not satisfy the requirements of another.
Risk flags: when to involve specialist counsel
Several patterns in an export-licence determination signal that specialist input is needed before a decision is taken. None of them necessarily means the transaction cannot proceed – but each means the analysis is more complex than a standard screening check can resolve.
- Layered ownership. Where the counterparty has more than two levels of beneficial ownership, or where any layer involves a jurisdiction with limited corporate-registry transparency, the 50 percent rule analysis cannot be completed from public sources alone. An aggregation error at this stage creates an undetected sanctions violation.
- Multiple regime engagement. A transaction that engages OFAC, OFSI, and an EU competent authority simultaneously requires concurrent analysis. A position that is permissible under one regime may be prohibited under another; the stricter prohibition governs.
- General-licence reliance. A business that proposes to proceed under a general licence without having read all the conditions, exclusions, and monetary caps of that licence has not completed the determination. We have acted for businesses that faced enforcement queries arising from general-licence conditions they believed were satisfied but had not verified.
- Changed circumstances mid-transaction. A counterparty designated after a contract is signed, a change in ownership that triggers the 50 percent rule, or a programme amendment that narrows a previously available authorisation – each of these requires the determination to be revisited from the beginning.
- Voluntary self-disclosure. If a business discovers that it has completed a transaction without a required licence – or under a general licence that did not in fact apply – early legal review is essential. A VSD (voluntary self-disclosure to a regulator) filed promptly and accurately is one of the most significant factors in OFAC's penalty calculation. Late or inaccurate disclosure is worse than none in several documented enforcement contexts.
A common myth in this area is that a completed BIS export licence covers the OFAC position. It does not. BIS and OFAC are separate regimes with separate licensing authorities, separate prohibitions, and separate enforcement tracks. Obtaining one does not satisfy, or even inform, the other. This misunderstanding is among the most frequent sources of apparent violations in our practice – businesses that have done the export-control work conscientiously and then discover, in an enforcement context, that the sanctions step was never addressed.
Related practices
- Deemed exports and technology controls under BIS/EAR – classification, licence requirements, and end-use controls for US-origin technology.
- Export-licence determinations under OFSI – UK financial sanctions licensing procedure and OFSI criteria compared.
- Export-licence determinations under OFSI: advanced questions – handling complex OFSI licensing scenarios and cross-border authorisations.
If a transaction has already been flagged, or if an initial screen has returned results that the business does not know how to interpret, an early review preserves options that narrow quickly with time.
To discuss an export-licence determination or a potential OFAC compliance issue, contact Calder & Vance at info@caldervance.com.