A business operating across multiple jurisdictions signs a distribution agreement. Six months later, new sanctions designations bite. The counterparty is caught. The contract cannot proceed – but it also cannot simply be abandoned. Payments are outstanding. Goods are in transit. Staff are owed wages. Each of these obligations touches a sanctioned relationship, and each requires legal cover before it can be resolved. That cover is the wind-down authorisation (a time-limited permission granted by a sanctions authority that allows a business to complete or close an existing contractual relationship with a newly sanctioned counterparty, rather than leaving obligations frozen mid-performance).
Wind-down authorisations allow businesses to conclude pre-existing contracts with newly sanctioned persons or entities within a defined period, subject to strict conditions. As of June 2026, the major regimes – OFAC in the United States, OFSI in the United Kingdom, and the relevant EU Council regulations – each operate wind-down mechanisms, but the permitted period, the conditions, and the application process differ materially between them. A business with a cross-border footprint must satisfy each regime that applies to it, not merely the most familiar one.
This guide sets out the governing authority for each major regime, the procedural steps a compliance team should follow, the conditions that determine eligibility, the risk flags that narrow the window, and the point at which specialised sanctions counsel becomes necessary.
Step 1: Confirm which regimes apply to your wind-down
The first question in any wind-down is not "how long do we have?" – it is "which authorities have jurisdiction over this transaction?" OFAC's reach extends to US persons wherever they are located, to transactions that clear in US dollars, and to goods of US origin, regardless of where the contracting parties sit. OFSI's rules apply to UK persons and entities, and to conduct within the United Kingdom. The EU regime applies to EU persons, EU-incorporated entities, and conduct within the EU. For a business with a parent in one jurisdiction, a subsidiary in another, and a supply chain that passes through a third, all three regimes may apply simultaneously – and each may impose a different wind-down period and different conditions.
Identifying the applicable regimes requires a systematic mapping of the transaction. Consider the nationality and incorporation of each contracting party; the currency of payment and the clearing route; the physical location of goods at the moment of designation; the identity of financial institutions involved; and whether any US-origin content, software, or technology is embedded in the goods or services. In our experience, the most common gap at this stage is the assumption that only the regime of the contracting party's home jurisdiction applies. That assumption is frequently wrong, and it is always worth testing before the clock starts.
The position above covers the standard case. Your facts – the counterparty, the goods, the route, the regimes in play – change the analysis materially. For an initial assessment of which regimes apply to your wind-down, contact Calder & Vance at info@caldervance.com.
Step 2: Identify whether a general authorisation already covers your wind-down
Before filing a specific licence application, a compliance team must check whether a general authorisation (a standing permission that permits a defined class of wind-down activity without a separate application) already covers the position. All three major regimes publish general authorisations or general licences for wind-down activity, but their scope differs in ways that matter.
Under OFAC's practice, general licences for wind-down activity are programme-specific. The scope of a given general licence – whether it covers payments, delivery of goods, termination of ongoing services, or winding down of derivative contracts – depends on which sanctions programme has been triggered by the new designation. The permitted period is typically stated in the general licence itself and runs from the date of designation, not from the date the business becomes aware of it. That distinction is important. A business that discovers a designation one week after it is published may already have consumed a significant portion of its authorised wind-down window. Practitioners consistently advise clients to configure their screening systems to monitor designation lists in near real-time, precisely because general-licence windows begin running immediately.
Under OFSI's approach, general licences for wind-down are published by HM Treasury and cover specified categories of activity with a sanctioned person. The coverage and duration vary by thematic regime. Some general licences are narrow: they may cover existing contractual payments only and exclude new deliveries or extensions of credit. Others are broader. A compliance team should read the applicable general licence carefully and should not assume that coverage under one thematic regime transfers to another.
The EU regime operates through derogations published in the relevant Council regulation. The structure is similar: the derogation permits defined wind-down activity for a stated period, subject to conditions including prior authorisation from a competent national authority in some cases. Competent authority requirements vary by member state. A business with entities in multiple EU member states may need to obtain authorisation from more than one national authority, even for a single wind-down.
Step 3: Assess eligibility – what conditions apply across regimes?
Eligibility for wind-down authorisation is not automatic. Each regime applies conditions, and failure to meet them can expose a business to civil or criminal liability even for activity that occurs within the stated wind-down period. Across OFAC, OFSI, and the EU regime, the following conditions recur in varying formulations.
First, the contract must have been in existence before the date of the relevant designation. Wind-down authorisations are not permissions to enter new business with sanctioned persons; they are permissions to close pre-existing obligations in an orderly way. A business that enters a new contract after a designation, even in the course of closing out an existing relationship, will not be protected by most wind-down provisions.
Second, payments to the sanctioned person must typically be made to a blocked or frozen account rather than being freely remitted. Under OFAC rules, proceeds owed to a sanctioned party must ordinarily be deposited in a blocked account in the United States. Under OFSI, a similar requirement applies. Under the EU regime, funds owed to a sanctioned person are generally frozen rather than remitted, unless a specific derogation permits onward payment.
Third, the business must not extend the term of the contract or add new obligations during the wind-down period. Renewals, extensions of credit, and deliveries of goods not already committed under the pre-designation contract are likely to fall outside the wind-down authorisation – and may constitute a new violation.
Fourth, some regimes require the business to notify the relevant authority of its intent to rely on a wind-down authorisation, or to report the transaction within a short period after it is completed. The reporting requirements differ by regime. Under OFSI, a person who holds or deals with funds or economic resources belonging to a designated person is subject to a statutory reporting obligation. The window for that report is short. Missing it is itself a potential violation, independent of whether the underlying wind-down activity was authorised.
In our cross-border practice, we regularly advise clients who have correctly identified the wind-down window but have overlooked one of these conditions. The most common oversight is the payment destination requirement: a business that remits funds directly to the sanctioned counterparty's overseas account, rather than into a blocked account, may void the protection the wind-down authorisation would otherwise have provided.
Step 4: Apply for a specific authorisation where no general authorisation applies
Where no general authorisation covers the wind-down, the business must apply to the relevant authority for a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction). The application process and decision timelines differ across regimes.
OFAC receives specific licence applications through its online licensing portal. Applications must include a description of the transaction, the identities of all parties, the legal basis for the request, and supporting documentation. OFAC does not publish binding statutory timelines for processing. In practice, processing times vary significantly by programme and by the volume of pending applications. Applicants should not assume that a pending application suspends the prohibition: the prohibition applies in full unless and until OFAC grants the licence.
OFSI processes specific licence applications for UK financial sanctions. Applications require a description of the proposed activity, evidence of the pre-existing contractual relationship, identification of all parties, and a statement of the legal basis for the request. OFSI publishes guidance on its licensing criteria and priorities. In our experience before OFSI, applications with clear supporting documentation and a well-articulated legal basis tend to progress more predictably than those submitted without a considered structure.
Under the EU regime, specific authorisations are granted by the competent national authority of the relevant member state. The process and timelines vary between member states. Some national authorities operate an expedited track for urgent wind-down matters; others do not. For a group with entities in multiple member states, coordinating parallel applications to different national authorities within a single wind-down timetable is a practical challenge that benefits from early engagement with counsel experienced in the relevant jurisdictions.
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 your position.
How does the cross-border dimension change the risk calculation?
The cross-border dimension does not merely add process complexity – it changes the underlying risk profile. A business that satisfies OFSI's wind-down conditions but inadvertently triggers OFAC's rules by routing a payment through a US correspondent bank has not achieved a compliant wind-down: it has complied with one regime and violated another. The stricter prohibition governs in practice, even where the home jurisdiction's rules would have permitted the activity.
Secondary sanctions risk is a distinct consideration for non-US businesses. OFAC has used its secondary sanctions authorities under IEEPA to extend consequences to non-US persons who engage in significant transactions with designated parties, even where those persons have no jurisdictional nexus to the United States in the conventional sense. A European trading company conducting a wind-down of a contract involving a party designated under a secondary-sanctions-heavy programme may find that OFAC's reach is relevant to it, even if no US persons or dollar payments are involved. The risk requires analysis at the outset, not as an afterthought.
Export-control rules interact with sanctions wind-downs in a further dimension. Goods in transit at the moment of designation may be covered by the wind-down authorisation for sanctions purposes, but the physical delivery of those goods may still require a licence under the EAR or under the UK's export-control regime, depending on the classification of the goods and the destination. A wind-down authorisation granted by OFAC or OFSI does not operate as an export licence. The two regimes run in parallel and must both be satisfied.
For businesses that hold dual-use goods at a sanctioned counterparty's premises or in transit, the interaction between the sanctions wind-down and the export-control position is particularly acute. We regularly advise on exactly this intersection. The practical answer is that the goods position should be resolved first, before the payment position, because the options for recovering or redirecting goods narrow more rapidly than the options for resolving payment obligations.
Risk flags: when does the wind-down window close early?
Several circumstances can close the wind-down window before it formally expires, or can void the protection of an authorisation that would otherwise have applied. Compliance teams should be alert to all of them.
The window closes immediately if the business takes any step that constitutes a new transaction with the sanctioned party, rather than completion of a pre-existing obligation. Agreeing to revised payment terms, extending a delivery schedule, or entering a settlement agreement that creates new obligations can each constitute a new transaction. The line between "completing" and "modifying" a pre-existing contract is not always clear, and it should be assessed with care before any communication is sent to the counterparty.
The window is also at risk if the business's own compliance posture is deficient. OFAC, OFSI, and EU competent authorities all consider the applicant's compliance history when assessing specific licence applications. A business that has not maintained a documented sanctions compliance programme, or that has not been able to demonstrate that the wind-down activity was identified and managed within a clear internal process, is less well-positioned to rely on discretionary authorisations or to secure favourable terms on a specific licence.
A further risk flag arises where the wind-down involves third parties – freight forwarders, financial intermediaries, agents, or sub-contractors – who may themselves be subject to obligations under one or more regimes. A wind-down authorisation covers the licensee. It does not automatically extend protection to service providers who handle the transaction on the licensee's behalf unless those providers are expressly named or the authorisation is structured to cover them. Ensuring that all intermediaries are aware of the scope and limits of any authorisation is a practical step that is often overlooked.
Finally, the position can be complicated by a change in ownership or control of the sanctioned counterparty during the wind-down period. Under the 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked, assessed in aggregate across all blocked owners), an entity that was not itself designated at the moment of the original wind-down authorisation may become blocked if a designated person acquires a sufficient ownership stake during the wind-down period. Monitoring the ownership position throughout the wind-down – not merely at its outset – is sound practice.
Common misconceptions about wind-down authorisations
The most persistent misconception we encounter is that a wind-down authorisation is a routine administrative step – a form to be completed, submitted, and received within the same timeline as a standard business process. It is not. A wind-down authorisation is a regulatory permission to engage in otherwise prohibited conduct. Its grant is not guaranteed, its scope is defined narrowly, and it carries conditions whose breach can expose the business to civil or criminal sanctions liability independent of whether the wind-down activity itself was completed.
A related misconception is that compliance with the most restrictive regime automatically satisfies all others. In our practice, we have seen businesses design their wind-down entirely around OFAC's requirements – correctly – but omit to consider whether OFSI's reporting obligations were met, or whether an EU competent authority notification was required. Each regime is self-standing. Satisfying one does not discharge obligations under the others.
A third misconception is that wind-down authorisations are available for all categories of sanctioned person or transaction. Some programmes prohibit certain categories of transaction entirely, without any wind-down provision. Others limit wind-down activity to certain types of obligation – payments under existing contracts, for example, but not delivery of goods. The scope of what is authorised must be read against the specific programme that has been triggered, not assumed from a general understanding of how wind-down provisions tend to work.
Finally, some businesses assume that identifying a wind-down issue late – after the general-licence window has already expired, or after a payment has been made to the wrong account – forecloses all options. It does not. Late identification increases risk and narrows the options, but it does not eliminate them. A voluntary self-disclosure (a VSD – a proactive disclosure to the relevant authority of a potential violation, made before the authority discovers it independently) can be an important mitigant in those circumstances, and in some regimes it is a formal factor in penalty mitigation.
Related practices
- Frozen account management under BIS/EAR – managing frozen or blocked assets within the US export-control and sanctions regime
- Wind-down authorisations: EU regime guide – step-by-step guide to wind-down authorisations under the EU Council regulations
- Wind-down authorisations: EU regime – advanced issues – addressing ownership-and-control questions and multi-member-state authorisation coordination