A commodities trader with long-running supply arrangements in a third market wakes to find that DFAT has introduced new autonomous sanctions measures overnight. The counterparty is not yet named on the Consolidated List – but its principal shareholder is. Contracts are part-performed. Payments are due. Goods are in transit. What happens now, and how long does the business have to act?
Australia's autonomous sanctions regime, administered by the Department of Foreign Affairs and Trade (DFAT), provides for wind-down authorisations – time-limited permissions to complete or conclude dealings that would otherwise breach a sanctions prohibition, where those dealings were lawfully entered into before the relevant measure took effect. The authorisation does not permit new business; it permits an orderly exit. The governing instrument is the Autonomous Sanctions Act and the associated regulations.
This guide walks through how a wind-down authorisation works under the Australian regime, where the process differs from OFAC, OFSI, and EU practice, and what compliance teams must do before they apply.
How Australia's autonomous sanctions regime governs wind-down permissions
DFAT administers Australia's autonomous sanctions through the Autonomous Sanctions Act and the Autonomous Sanctions Regulations, which are made under ministerial authority. The minister responsible for foreign affairs holds the power to issue permits – including wind-down permits – under the regulations. There is no separate licensing body equivalent to OFAC or OFSI; the single channel is DFAT's Sanctions and Enforcement Unit.
The regime operates on a prohibitions-first model. Certain dealings with designated persons or entities – supplying goods, providing services, making assets available, engaging in financial transactions – are prohibited. Where a business had a pre-existing lawful arrangement that is caught by a new prohibition, it faces a choice: cease immediately and absorb the commercial loss, or seek a wind-down authorisation to complete or close out that arrangement within a defined period.
In our experience advising on the Australian regime, the most important early question is whether the activity in question is genuinely covered by an existing arrangement, or whether it constitutes new business that has been restructured to resemble an existing one. DFAT examines that distinction carefully. A forward contract signed after the designation date, even if back-dated in accounting terms, will not qualify.
Australia's sanctions regulations permit DFAT to impose conditions on any authorisation it grants. Those conditions commonly include reporting obligations, time limits, and restrictions on the value or volume of permitted activity. Failure to comply with a condition is itself a breach of the sanctions rules.
Who needs a wind-down authorisation and when does the obligation arise?
The obligation to seek authorisation arises the moment a prohibition catches a pre-existing dealing. That can happen in three ways: a new autonomous-sanctions instrument designates a counterparty; an existing instrument is extended to cover additional activities; or an entity becomes caught through a re-assessment of its ownership or control links to an already-designated person.
The practical population of applicants is broader than it first appears. Exporters with open purchase orders are the most obvious category. But financial institutions holding collateral linked to a now-designated entity, shipping companies mid-voyage with a designated charterer, and professional-services firms mid-engagement with a designated client all face the same structural problem: they cannot complete the transaction without breaching the prohibition, and they cannot simply stop without legal and financial exposure.
What is the threshold question every affected business must ask? It is not "is our counterparty designated?" but "does any step we still need to take to conclude this arrangement require us to deal with a designated person or a controlled entity?" If the answer is yes – even for a single payment or a single delivery – an authorisation is required.
Businesses that assume a wind-down is self-executing – that they can simply continue and explain later – are taking a significant enforcement risk. DFAT's Sanctions and Enforcement Unit has the power to investigate and refer suspected breaches for prosecution. There is no administrative penalty regime that caps exposure at a manageable figure; criminal penalties under the Autonomous Sanctions Act are substantial. The time to engage DFAT is before you act, not after.
Step-by-step: obtaining a wind-down authorisation from DFAT
A wind-down authorisation application to DFAT follows a structured process, and the quality of the submission determines both whether the permit is granted and how quickly DFAT processes it.
- Map the prohibited dealings. Before any contact with DFAT, identify every step in the wind-down that touches a designated person, a controlled entity, or a prohibited goods or service category. This is the factual foundation. An incomplete map produces an incomplete application and risks a permit that does not cover every necessary step.
- Gather the transactional record. DFAT will require evidence that the arrangement was entered into lawfully before the prohibition took effect. Assemble the original contract, any amendments, correspondence establishing the commercial terms, and payment records. The evidentiary burden sits with the applicant.
- Identify the counterparty's designation status precisely. Is the counterparty directly designated, or is it caught through ownership or control links to a designated person? The answer affects how you describe the prohibited dealing in the application and what risk-mitigation steps DFAT will expect during the wind-down period.
- Draft the authorisation request. The request should describe: the nature and history of the arrangement; the specific dealings that require authorisation; the proposed wind-down period; the steps the business will take to ensure no new value is extended to the designated person; and any conditions the applicant proposes to accept. A well-structured request shortens DFAT's review time.
- Submit through the Sanctions and Enforcement Unit. DFAT does not publish a standard form for authorisation requests. Applications are submitted directly to the unit by email or in person. Include a covering letter, the substantive request, and supporting documents in an indexed bundle.
- Manage the interim period. Between submission and grant, the underlying prohibition applies. Unless and until DFAT grants the permit, no prohibited dealing may proceed. If you have goods in transit or payments that fall due during this period, you need DFAT to confirm urgency and to seek a decision on a compressed timeline. Document every communication.
- Comply with permit conditions and report. Once a permit is granted, read the conditions before resuming any activity. Report to DFAT as required. Keep records of every dealing conducted under the permit. When the wind-down period expires, cease all activity and report completion if required.
The position above sets out the standard procedure. Your specific facts – the nature of the goods or services, the counterparty's designation history, the jurisdiction of performance, and whether secondary-sanctions risk also applies – will change parts of the analysis. Do not treat this as a self-service checklist.
For guidance on the first steps in your specific situation, contact Calder & Vance at info@caldervance.com.
How does Australia's wind-down process compare with OFAC, OFSI, and the EU?
Australia, the United States, the United Kingdom, and the European Union each permit some form of wind-down or close-out activity under their respective sanctions regimes, but the mechanics differ in ways that matter for businesses operating across multiple jurisdictions.
Under the US regime, OFAC administers wind-down permissions through two channels: general licences (standing authorisations that permit defined categories of wind-down activity without a separate application) and specific licences (case-by-case authorisations applied for by the affected person). OFAC's general licences frequently specify a defined period – expressed in days – within which wind-down activity must be completed. Those deadlines are exact and non-negotiable. In our experience, businesses miss them because they calculate the period from the wrong start date.
OFSI in the United Kingdom operates on a specific-licence model. There are no standing general licences for wind-down activity in the same sense as OFAC. Each application is assessed on its facts. OFSI publishes guidance on its licensing approach, and it expects applicants to demonstrate that the wind-down will reduce rather than extend the designated person's access to economic resources. The ownership-and-control test under the UK regime also differs: OFSI applies both an ownership test and a separate control test, meaning that a company can be caught even where no single designated person holds fifty percent or more of the shares.
The EU operates through a member-state licensing structure. The competent authority differs by member state, and the standard for granting a wind-down licence varies in practice across jurisdictions, even where the underlying Council regulation is the same. Businesses with EU operations in multiple member states may find themselves managing parallel applications to different authorities on different timetables.
Australia sits between these models. There is one competent authority – DFAT – and no standing general licences for wind-down activity. Every case is assessed individually. The process is more flexible than OFAC's rule-based general-licence system, but that flexibility comes with uncertainty: the applicant cannot simply invoke a defined authorisation window and proceed.
The cross-border risk that most frequently surprises applicants is this: even where DFAT grants a wind-down permit, the same activity may be prohibited by another regime operating on different criteria. A payment cleared in Australian dollars through an Australian correspondent may also pass through a US correspondent bank, at which point OFAC's rules apply independently of any DFAT permit. One permit does not provide global clearance. In our cross-border practice, we routinely advise clients to map their entire transaction chain against every applicable regime before assuming that a single authorisation resolves the problem.
If a transaction has already been flagged, or if a DFAT application has been refused or is overdue, an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss your position.
Ownership and control: the Australian test and its practical limits
Australia's autonomous sanctions regulations catch not only directly designated persons but also entities that are owned or controlled by them. Understanding that test is essential before an applicant characterises the nature of the dealing in a wind-down authorisation request.
The ownership and control analysis under the Australian regime requires a factual assessment of the designated person's stake in, and influence over, the entity in question. Unlike OFAC's mechanical fifty-percent threshold, the Australian position – consistent with the OFSI and EU approach – extends to control in a broader sense: the capacity of a designated person to direct or significantly influence the decisions of the entity, even without a majority ownership stake.
That distinction has practical consequences. A business that screens its counterparty, finds no direct designation, and stops there may be interacting with a controlled entity without knowing it. The controlling stake may be held through a nominee, a trust, or an intermediate holding company registered in a third jurisdiction. In our experience, the ownership chain analysis is the step most frequently skipped under time pressure – and it is the step that most frequently produces a compliance failure later.
For wind-down purposes, if the entity with which a business is winding down its arrangements is controlled by a designated person, the authorisation must cover that dimension of the dealing explicitly. An authorisation that refers only to the named counterparty and does not address the control relationship may leave the business exposed.
Risk flags and common errors in Australian wind-down applications
Certain patterns of error recur across wind-down applications in the Australian regime. Identifying them early reduces both the risk of a rejected application and the risk of a compliance failure during the wind-down period itself.
Delay in identifying the trigger event. The prohibition applies from the moment the instrument comes into force. Every day of prohibited dealing after that date without authorisation is a potential breach. Businesses that wait until legal advice confirms the position before starting the authorisation process lose time they cannot recover.
Assuming the counterparty is not caught. The first response of many businesses when a new designation is announced is to screen the named persons and conclude that their own counterparty is not on the list. That search is necessary but not sufficient. The ownership and control analysis must follow immediately.
Describing the wind-down period too broadly. Applicants sometimes request the longest period they can justify rather than the period they actually need. DFAT will assess whether the proposed timeline is proportionate. An over-broad request signals poor planning and may attract additional conditions.
Neglecting secondary-sanctions exposure. Australia's autonomous-sanctions regime operates independently of OFAC. But where the wind-down involves US-dollar transactions, US-origin goods, US-domiciled counterparties, or US financial intermediaries, OFAC's rules also apply. The extraterritorial reach of US sanctions – which extends to non-US persons in certain circumstances – means that a DFAT-authorised wind-down can still produce an OFAC violation. This is not a theoretical risk.
Failing to document dealings during the wind-down period. A permit grants authority to act within defined parameters. If DFAT subsequently queries whether the dealings were conducted within those parameters, contemporaneous records are the only reliable defence. Record every transaction, every communication, and every step taken under the permit.
When to involve sanctions counsel
Wind-down applications that involve a simple, single-jurisdiction arrangement and a clearly documented pre-existing contract can sometimes be managed in-house by experienced compliance teams. Most cross-border situations do not meet that description.
Sanctions counsel should be engaged as early as possible where: the counterparty's ownership structure is complex or opaque; the wind-down involves multiple jurisdictions or multiple currencies; the arrangement involves goods or services that may also be subject to export-control rules; the business has already taken steps during the prohibited period without authorisation; DFAT has made contact or indicated it is reviewing the position; or the wind-down period requested is likely to be contested.
Early engagement also matters for a more fundamental reason. The way a wind-down application is framed determines not only whether the permit is granted but also whether the business's prior conduct is disclosed in a way that creates or mitigates an enforcement risk. Counsel can advise on whether voluntary disclosure to DFAT is appropriate in the circumstances and how any such disclosure should be structured.
Related to wind-down authorisations, you may also wish to review our guidance on frozen account management under the BIS and EAR regime, which addresses related asset-management issues under the US export-control regime, and our parallel guide on wind-down authorisations under the BIS/EAR regime, which covers the US procedural track in detail.
Related practices
- Frozen account management under BIS/EAR – managing blocked assets and access under the US export-control framework
- Wind-down authorisations under Australia – advanced topics – extended analysis of complex multi-party and multi-jurisdiction close-outs
- Wind-down authorisations under BIS/EAR – step-by-step guide to the US Commerce licensing track for export-control wind-downs