A Swiss-incorporated trading intermediary receives a payment instruction from a counterparty it has served for several years. Routine screening produces a low-confidence match. The compliance officer escalates. A closer review of the ownership chain reveals that a person appearing on a SECO-administered list holds a meaningful stake in the counterparty's ultimate parent. The instruction cannot proceed. The intermediary is now sitting on restricted funds with an existing contractual obligation and no clear exit route.
Specific licence applications under Switzerland's sanctions regime – administered by SECO (the State Secretariat for Economic Affairs, Switzerland's principal sanctions enforcement and licensing authority) – are case-by-case authorisations that permit an otherwise prohibited transaction to proceed under defined conditions. The legal basis sits in the applicable Swiss embargo ordinances adopted under Swiss embargo legislation, and the application is assessed by SECO on the specific facts presented. No outcome is guaranteed, and the process demands careful preparation before a file is submitted.
This case comment walks through an anonymised SECO licensing matter: the situation that triggered the application, the legal question the matter turned on, how the Swiss procedure was managed alongside parallel obligations in other regimes, and the lessons that apply to any business facing a comparable position. As of June 2026, the pattern of issues described here continues to arise with regularity in cross-border trading and financial relationships.
The situation: a blocked ownership chain and a frozen instruction
The intermediary's compliance team identified, through second-tier ownership review, that a listed person held an interest above SECO's relevant ownership and control threshold in the counterparty's parent entity. Under the applicable Swiss embargo ordinance, assets that are owned or controlled by a designated person are subject to a freeze. The payment instruction therefore constituted a potential dealing in frozen assets – a prohibited act absent a specific authorisation.
The initial compliance response was to suspend the transaction and issue an internal escalation notice. That was correct. What the team did not immediately appreciate was that the same ownership chain created potential exposure in two further jurisdictions: the instructing bank held a correspondent account in the United States, bringing OFAC's secondary-sanctions reach into the picture, and the underlying contract had been negotiated through a European subsidiary, which sat within EU sanctions jurisdiction.
Three regulators were therefore relevant. SECO governed the Swiss entity's direct obligation. OFAC's rules applied extraterritorially through the US dollar clearing channel. The EU framework applied to the European subsidiary's contractual position. Determining which prohibition was strictest, and which could be addressed by a licence, required mapping all three before any application was filed.
In our experience, this multiplicity of regimes is the single most common complication in a SECO licensing matter. Businesses focus on the Swiss process – understandably, given that the Swiss entity holds the frozen funds – but they file without first confirming whether a parallel OFAC or EU prohibition exists that would defeat the purpose of a Swiss licence, even if granted.
What was the legal question?
The core question was whether the intermediary's payment obligation fell within a category of transactions for which SECO will grant a specific licence, and whether the conditions of such a licence could be structured so as to avoid creating a residual violation in the other jurisdictions.
Under the applicable Swiss ordinance, SECO may authorise a transaction that would otherwise be prohibited if the applicant demonstrates that the purpose of the authorisation is consistent with the humanitarian or other grounds recognised under the relevant embargo instrument. The Swiss approach is not identical to the OFAC specific-licence regime, which operates under IEEPA and applies a "specific licence" test focused on the particular facts, nor is it identical to OFSI's licensing regime in the United Kingdom, which operates under the Sanctions and Anti-Money Laundering Act and applies defined grounds. Understanding the differences mattered here.
OFAC's licensing grounds are written into the relevant programme regulations and typically include categories such as payments for certain authorised goods, humanitarian transactions, or wind-down of pre-existing contractual obligations. OFSI's grounds are set out in the relevant thematic regulations and cover a comparable but not identical set of categories. SECO's grounds are defined in the applicable ordinance and may differ in scope and in the evidentiary standard SECO applies to assess them.
A critical practical divergence: under OFAC, the applicant can often point to a specific regulatory statement of licensing policy. Under SECO, the discretion is wider and the written guidance thinner. That places a heavier burden on the applicant to build the factual and legal case in the application itself. We regularly advise clients that a SECO specific-licence application is, in effect, a self-contained legal brief addressed to the regulator – not a form submission.
How was the SECO licence application prepared?
Preparation began with a structured ownership and control analysis of the counterparty chain. The first step was to establish, on documented evidence, precisely what interest the listed person held, how the ownership was structured, and whether any other listed persons held additional interests that might, in aggregate, cross the relevant threshold. Swiss law, like OFAC's 50 percent rule and the EU and UK ownership-and-control tests, treats aggregated holdings as potentially decisive; the analysis cannot stop at the first named shareholder.
The ownership mapping produced a precise figure for the listed person's effective economic interest. That figure was material to the SECO application because it bore on the argument that the transaction, if licensed, would not constitute a meaningful disbursement of value to the designated person – the contractual payment obligation was owed to a legal entity with minority designated-person ownership, and the commercial purpose of the underlying contract predated the designation.
Second, the application required a clear statement of the contractual and commercial position: when the contract was entered into, what goods or services it covered, the value of the pending obligation, and why the obligation could not be discharged by means that avoided any contact with the designated ownership chain. SECO expects applicants to demonstrate that they have considered alternatives and that the licence is genuinely necessary, not merely convenient.
Third, the application addressed the cross-regime position. This element is not formally required by SECO's process, but omitting it would have been a significant error. Including a short explanation of why the parallel OFAC and EU positions did not, on the specific facts, create a blocking obstacle – and why the SECO licence, if granted, would be operated consistently with those regimes – strengthened the presentation and pre-empted likely regulatory queries.
The file submitted to SECO contained: the ownership analysis with source documentation; the contractual summary with key dates; a statement of the applicable Swiss legal basis and the licensing grounds relied upon; the cross-regime analysis; and a proposed licence condition – namely, that the payment be made net of any economic benefit that could reasonably be attributed to the listed person's proportional interest, channelled through an independent disbursement account.
Where do SECO, OFAC, and OFSI diverge in specific licence practice?
Three divergences shaped the strategy in this matter and are worth recording for any business that faces a comparable multi-regime position.
First, timeline expectations differ. OFAC does not publish a binding statutory deadline for specific-licence decisions; in practice, complex applications extend for several months. OFSI similarly operates without a fixed statutory determination period on standard applications, though it publishes guidance on its general target timelines. SECO does not publish a binding processing deadline, and decisions on complex matters can take a period of weeks to months depending on regulatory workload and the completeness of the file. Businesses should plan for a period of restricted access to funds that may extend beyond initial expectations. Building that planning into the engagement from the outset – and communicating it clearly to contractual counterparties – reduces the risk of secondary disputes arising while the application is pending.
Second, the form of the licensing condition may differ materially between regimes. OFAC specific licences typically define the permitted transaction with precision: amount, parties, currency, and timing. OFSI licences similarly carry conditions. SECO licences in our practice also tend to carry conditions, but the precise formulation is negotiated through correspondence, and there is more opportunity – and necessity – to propose workable conditions proactively in the application itself rather than waiting for the regulator to set terms.
Third, the interaction between a SECO licence and a parallel OFAC restriction is not automatically resolved by the SECO grant. A Swiss entity that obtains a SECO licence for a payment routed through US dollar clearing still needs to confirm, independently, whether OFAC's rules require a separate authorisation for the US correspondent bank leg. This is not a hypothetical concern. We have acted for clients who completed a SECO-licensed transaction only to find that the US leg of the same payment created a separate compliance exposure that had not been addressed.
The practical rule: always map the payment chain, not just the legal entity's jurisdiction. US dollar clearing, EU-based intermediaries, and UK correspondent banks each bring their own regime into contact with the transaction.
Risk flags that indicated counsel was needed immediately
Several indicators in this matter signalled that the business needed specialist counsel before taking any further procedural step.
The first was the presence of a contractual deadline. The counterparty had the right, under the underlying contract, to trigger a breach notice if the payment was not made within a defined period. A pending SECO licence application does not, of itself, suspend contractual time limits. The intermediary needed legal analysis of whether the contractual force-majeure or sanctions-compliance clause provided a defence, and if so, whether notice had to be given to preserve it. Getting this wrong – in either direction – could have converted a regulatory compliance issue into a separate commercial dispute.
The second flag was the uncertainty about the exact ownership percentage. Initial screening had produced a range rather than a precise figure, because the counterparty's ownership disclosures were incomplete. Filing a SECO application on the basis of an imprecise ownership figure creates a material risk: if SECO's own enquiries produce a different figure, the factual foundation of the application is undermined. We secured a supplementary corporate disclosure from the counterparty before the file was submitted, removing this source of uncertainty.
The third flag was the US correspondent banking exposure. The intermediary had initially assessed this as a US-person issue only. That is a common misreading of OFAC's secondary-sanctions and correspondent-banking guidance. The risk was not limited to the US correspondent bank's own position; it extended to the Swiss entity's ability to use US dollar clearing at all for this transaction, absent either an OFAC licence or a determination that the transaction fell within a general licence or statutory exception.
A fourth flag: the European subsidiary had its own legal counsel who had not been briefed on the sanctions dimension. Coordinating the legal analysis across the Swiss entity, the European subsidiary, and the correspondent banking relationships required a single coordinating counsel who could produce a consistent cross-regime assessment. Fragmented legal advice across a multi-regime sanctions matter is one of the most reliable ways to produce a result that satisfies one regulator while creating exposure before another.
The route taken and the outcome
A specific licence application was filed with SECO on the grounds available under the applicable Swiss embargo ordinance, supported by the documentation described above. In parallel, we prepared a cross-regime opinion for the business that addressed the OFAC and EU positions and confirmed that, on the specific facts, the transaction as structured in the proposed licence conditions would not require a separate OFAC or EU licence – a position that was supported by available general-licence authority in both those regimes for the relevant category of payment.
The European subsidiary issued a contractual notice to the counterparty invoking the applicable sanctions-compliance clause, which suspended the contractual deadline pending regulatory resolution. This step was taken within the notice period specified in the contract, preserving the defence.
SECO issued questions on two points: the precision of the ownership calculation and the proposed condition for attributing economic benefit to the designated person's interest. Responses were submitted promptly and in writing. The application proceeded.
No outcome is guaranteed in any licensing matter, and this case comment does not represent a promise of a comparable result in other situations. What the process demonstrated was that early preparation, precise documentation, and coordinated cross-regime analysis materially narrowed the risk of regulatory complications arising mid-process.
A business that files a SECO application with incomplete ownership data, no cross-regime analysis, and no contractual protective notices in place is filing into avoidable uncertainty. These are procedural steps, not guarantees. But they define the quality of the application.
A common objection: "SECO is more flexible than OFAC, so the application is straightforward"
This belief surfaces regularly in our practice and it is incorrect in a way that causes real harm. The perception that SECO operates a lighter-touch sanctions regime than OFAC leads businesses to under-prepare their licence applications. In our experience, SECO applies close scrutiny to ownership and control questions, asks detailed factual questions, and does not grant licences on the basis of incomplete files.
The comparison with OFAC is also operationally misleading. OFAC's licensing process is heavily documented – the agency publishes licensing policies, sample applications, and extensive guidance notes. That volume of published material creates a detailed procedural road map. SECO publishes less in the way of public licensing guidance, which means the applicant carries more of the burden of structuring the argument from first principles.
Switzerland is also a party to UN Security Council-mandated sanctions programmes. The Swiss embargo ordinances implement those UN obligations, and the legal standard SECO applies to licensing applications must be read against that international baseline. A SECO licence that would conflict with a binding UN Security Council restriction is not available, regardless of what the business might achieve before OFAC or OFSI. This is a constraint that is sometimes overlooked by advisers who are more familiar with the US or EU regimes than with the Swiss legal framework.
The lesson is not that SECO is more difficult than OFAC – the regimes are structured differently and comparison by difficulty is not useful. The lesson is that SECO-specific preparation is required. Repurposing an OFAC application template for a SECO submission is not a viable strategy.
Related practices
- Frozen account management under the EAR – managing restricted funds and licensing under US export-control rules
- Specific versus general licence: an EU matter – how the EU distinguishes case-by-case and standing authorisations in practice
- Wind-down authorisation: a Japan matter – managing contractual obligations under Japan's sanctions regime