A multinational professional-services firm signs a long-term service agreement with a client in a third market. Midway through performance, the counterparty's parent is designated by OFAC. The underlying contract is now caught by a sanctions prohibition. The question is immediate: can the firm continue billing, receive outstanding payments, and wind down its obligations – or must it freeze every activity on day one?
Wind-down authorisations under OFAC – whether issued as general licences (standing authorisations permitting a defined category of transactions without a separate application) or as specific licences (case-by-case authorisations to conduct an otherwise prohibited transaction) – create a time-limited window to terminate pre-existing contractual relationships in an orderly way. As of June 2026, OFAC issues wind-down general licences concurrently with many new designation actions, though the scope, duration, and permitted activities vary significantly between programmes. No general licence is permanent, and each carries conditions that, if missed, expose the licence-holder to enforcement action.
This briefing covers the governing authority, the types of wind-down authorisation available, how the procedure works, where UK and EU regimes diverge, the risk flags that practitioners see in practice, and when to involve sanctions counsel.
What authority governs wind-down authorisations, and what is their legal basis?
Wind-down authorisations draw their legal basis from OFAC's power to issue licences under the International Emergency Economic Powers Act (IEEPA) and, in certain older programmes, the Trading With the Enemy Act (TWEA). OFAC administers the relevant programme-specific regulations and holds full discretion over the scope and duration of any authorisation it issues. No statutory right to a wind-down period exists; the authorisation is a discretionary relief that OFAC may extend, modify, or revoke.
Each sanctions programme operates through a separate set of regulations. OFAC may embed a wind-down general licence directly in the programme regulations at the time of their promulgation, or it may publish a stand-alone general licence after a significant designation event. Where neither exists, a party seeking to wind down must apply for a specific licence. That application is not guaranteed to succeed, and OFAC's licensing policy varies materially between programmes.
The practical consequence is that the first step after a designation hit is always programme identification. A business must confirm which OFAC programme has captured the counterparty or transaction, then locate the relevant general licence – or confirm that none exists. Acting under the wrong programme's general licence provides no protection.
What types of wind-down authorisation does OFAC issue?
OFAC uses two instruments to authorise wind-down activity: general licences and specific licences. Understanding their differences shapes every compliance decision that follows a designation event.
A general licence requires no application. It is published in the Federal Register and is immediately available to any US person – or, depending on its terms, to any person subject to US jurisdiction – who meets the conditions it specifies. Wind-down general licences typically permit a defined set of activities: completing transactions under pre-existing contracts, receiving payments owed for goods or services already delivered, paying staff or winding up local operations. The permitted period is usually expressed in calendar days from the effective date of the underlying designation. When that period expires, the general licence lapses automatically. No notification to OFAC is required to begin relying on a general licence, but record-keeping is mandatory.
A specific licence is a written authorisation issued to a named applicant in response to a formal application. Where no general licence covers the required activity, or where the general licence period has expired, a specific licence is the only lawful route. OFAC's review of specific-licence applications can take several months. Businesses that wait until the general licence period is nearly over before filing a specific-licence application risk a gap during which they have no authorisation to continue wind-down activities.
A third, narrower instrument deserves mention: statements of licensing policy. These are not licences but indicate that OFAC will favourably consider certain applications. They provide some comfort during the application period but confer no authorisation in their own right.
How does the wind-down procedure work in practice?
The wind-down procedure has five sequential phases. Each phase carries distinct legal obligations and, if mishandled, creates independent enforcement exposure.
- Identification. Confirm that the counterparty, transaction, or property is within scope of a specific OFAC programme. Check the SDN List (OFAC's list of Specially Designated Nationals and blocked persons), the Non-SDN consolidated lists, and apply the 50 percent rule (OFAC's rule treating entities owned 50 percent or more by blocked persons as themselves blocked) to the ownership chain. Do not stop at the direct counterparty.
- Blocking and reporting. If property must be blocked, block it immediately. OFAC generally requires that blocked property be reported within a short statutory window – verify the current deadline under the applicable programme before relying on any stated figure. Failure to report blocked property is itself a violation, separate from any failure relating to the wind-down.
- Locate the general licence. Search the applicable programme regulations and any stand-alone general licences for a wind-down authorisation. Confirm the scope of permitted activities and the expiry date. Note any exclusions: many wind-down general licences prohibit payments to the blocked person directly, even while permitting third-party payments to clear an outstanding obligation.
- Execute permitted activities strictly within scope. Every transaction during the wind-down period must be documented. The general licence does not authorise new business; it authorises the completion and termination of existing obligations. Entering into a new contract with the blocked counterparty during a wind-down period is not authorised and is a sanctionable act.
- File a specific-licence application if needed. If the general licence period will expire before the wind-down is complete, or if the required activity falls outside the general licence's scope, file a specific-licence application early. OFAC's review timelines are not published as fixed deadlines; in our experience, complex cases involving significant sums or novel facts take materially longer than straightforward applications.
Throughout all five phases, record-keeping is non-negotiable. OFAC requires that records of transactions conducted under a general licence be maintained for five years from the date of the transaction. This is not a courtesy requirement; it is a condition of the licence. An enforcement inquiry that begins three years after the wind-down period will expect to see contemporaneous documentation.
How do UK and EU wind-down authorisations compare?
OFAC's wind-down authorisations do not operate in isolation for any business with a transatlantic presence. A business headquartered in the EU or the UK that has US-dollar clearing relationships, US-person employees, or goods with US-origin content must manage the OFAC position alongside the OFSI and EU positions simultaneously. The three regimes diverge in ways that create genuine operational complexity.
Under the UK sanctions regime administered by OFSI (Office of Financial Sanctions Implementation), there is no direct equivalent of OFAC's general-licence mechanism. OFSI issues licences on a case-by-case basis under the Sanctions and Anti-Money Laundering Act (SAMLA) and the relevant thematic sanctions regulations. A business that needs to wind down activity with a UK-designated person must apply for an OFSI licence under a specific licensing ground. OFSI publishes its licensing grounds in guidance, and the wind-down ground is among those listed – but the application process is individual, not automatic. OFSI's processing time is not a fixed published figure; verify the current position before relying on any estimate.
The EU position under the relevant Council Regulations is different again. Member States' competent authorities issue licences, and practice varies across jurisdictions. Some member states process wind-down authorisation requests relatively quickly; others have materially longer timelines. The EU does not publish a single consolidated wind-down general licence equivalent to OFAC's instrument. Businesses with EU-nexus activities must therefore identify the competent authority in each relevant member state and manage parallel applications. The EU's ownership and control test – which determines whether a non-listed entity is caught through a listed person – applies a control limb that OFAC's mechanical 50 percent rule does not. An entity that falls below the 50 percent ownership threshold under OFAC may nonetheless be captured under the EU control analysis. That divergence matters acutely when mapping which counterparties require wind-down authorisation at all.
The practical answer for cross-border businesses is this: assume that each regime must be addressed separately, and that a general licence from OFAC provides no cover for UK or EU obligations. We regularly advise clients who have managed the OFAC position correctly and then faced separate enforcement inquiries in one or more EU member states because the parallel licensing step was not taken.
The position above covers the standard case. Your facts – the counterparty's ownership structure, the goods or services in question, the routes through which payment flows, and the regimes in play – will change the analysis materially. To discuss a wind-down licensing question, contact Calder & Vance at info@caldervance.com.
What are the most common risk flags in wind-down authorisation practice?
Wind-down authorisations are among the most mis-applied instruments in US sanctions compliance. The errors we see most frequently fall into five categories.
- Treating a general licence as open-ended. A wind-down general licence has a fixed expiry. Businesses that continue activity beyond that date, on the assumption that the authorisation remains in force, are operating without a licence. That exposure is strict-liability under OFAC's civil penalty regime.
- Continuing to accept new business during the wind-down period. The authorisation covers existing obligations, not new ones. A business that receives a new purchase order from the blocked counterparty and fulfils it during the wind-down period cannot claim licence protection. The general licence is not a temporary exemption from the prohibition; it is a structured exit route.
- Failing to apply the 50 percent rule to the ownership chain. A counterparty that is not itself designated may still be blocked because a designated person owns it 50 percent or more. If that indirect blockage is discovered mid-wind-down, it can retroactively vitiate reliance on a wind-down general licence that did not cover blocked entities – as opposed to directly designated persons.
- Inadequate documentation. OFAC enforcement teams look for contemporaneous evidence of compliance decisions. A spreadsheet created six months after the wind-down ended, reconstructing which payments were made and why, is not sufficient. The documentation requirement runs concurrently with the transactions; it cannot be reconstructed afterwards.
- Ignoring secondary-sanctions risk. Even where a US person is not directly involved, a non-US business that facilitates a transaction with an SDN may face secondary-sanctions consequences under certain OFAC programmes. The wind-down general licence issued to US persons does not automatically relieve a European intermediary of that secondary-sanctions exposure. Is the EU or UK entity in your group also managing its own licensing position, or is it relying on the OFAC general licence as though it applied universally?
A common misconception: the wind-down period is automatic
One of the most persistent myths in OFAC compliance practice is that a wind-down period always exists as of right when a counterparty is designated. In our practice, we encounter this assumption regularly – and it causes real damage.
No US person has a legal entitlement to a wind-down period. OFAC may issue a wind-down general licence; it may also designate a party with no accompanying general licence at all. Businesses that assume a wind-down period will be available and begin orderly termination activities, only to discover that no licence was issued, have already committed violations by the time they seek counsel. The correct sequence is the reverse: identify the designation, check for a general licence, and confirm its scope before taking any further action.
A related misconception is that the wind-down period covers all activities that were underway at the time of designation. It does not. General licences specify categories of permitted activity. An activity that falls outside those categories – for example, paying a fee or commission to the designated person itself, even in respect of pre-designation work – may not be authorised. Reading the licence text carefully is not optional; it is the threshold obligation.
If a transaction has already been executed on the assumption that a general licence authorised it, an early review of the position can identify whether a voluntary self-disclosure (VSD – a proactive notification to OFAC of a potential violation) is warranted and can preserve options that narrow significantly with time. Contact Calder & Vance at info@caldervance.com for a confidential review.
When should you involve sanctions counsel, and what does that engagement look like?
Sanctions counsel should be involved at the earliest point of uncertainty – not after the wind-down period has been running for several weeks. The earlier the instruction, the wider the range of available options.
Three situations require immediate instruction. First, where a wind-down general licence exists but its scope is ambiguous relative to the specific transactions the business needs to complete: this is a legal-interpretation question, not a compliance-operations question, and the wrong interpretation carries strict-liability civil penalties. Second, where no general licence covers the required activity and a specific-licence application to OFAC is necessary: the application must be carefully structured, and OFAC's queries during the review process must be answered promptly. Third, where the business has already conducted activity that may fall outside the wind-down licence: the question of whether a VSD is appropriate requires experienced judgment, and the decision to self-disclose – or not – is one of the most consequential in enforcement defence.
In a recent matter, a financial-services business discovered mid-wind-down that a general licence did not cover a category of fee payments it had already processed. We scoped the apparent violation, assessed the voluntary self-disclosure question against OFAC's enforcement framework, and prepared the submission. The outcome of any VSD process is not guaranteed and depends on OFAC's assessment of the facts; what early instruction does is maximise the options available.
Our engagement for wind-down authorisation matters typically covers: confirming which OFAC programme applies and whether a general licence is available; reviewing the scope of the general licence against the client's specific transaction inventory; preparing and submitting specific-licence applications where required; managing OFAC's queries during review; and advising on VSD and penalty-defence where a potential violation has already occurred.
Related practices
- Frozen account management under BIS/EAR – managing blocked assets and export licensing under US export-control rules
- Wind-down authorisations: programme-by-programme comparison – how wind-down licensing terms differ across OFAC's active programmes
- Wind-down authorisations and voluntary self-disclosure – when to disclose a potential wind-down violation to OFAC
Frequently asked questions on wind-down authorisations under OFAC
Who administers wind-down authorisations under OFAC?
The Office of Foreign Assets Control (OFAC), within the US Department of the Treasury, administers all wind-down authorisations under US sanctions programmes. OFAC publishes general licences that authorise defined categories of wind-down activity without requiring a separate application, and it reviews and decides specific-licence applications on a case-by-case basis. No other US agency has authority to issue an OFAC sanctions licence.
What does OFAC prohibit in relation to wind-down authorisations?
Outside the scope of an applicable general or specific licence, OFAC prohibits any transaction that directly or indirectly benefits a designated person or a blocked entity, including completing deliveries, receiving payments, paying fees, or transferring assets. A wind-down authorisation does not suspend the underlying prohibition; it creates a limited, time-bound, and condition-specific exception. Activity outside the licence's stated scope remains prohibited and can attract civil or criminal penalties.
How is wind-down authorisation enforcement handled under OFAC?
OFAC enforces compliance with wind-down licence conditions through its civil and criminal enforcement authorities. Civil penalties under OFAC's regime can reach the greater of a statutory maximum or the value of the transaction involved, as set by the applicable programme. OFAC considers voluntary self-disclosure as a mitigating factor in its enforcement framework. Companies that discover a potential wind-down violation should assess the VSD question promptly, since the benefits of disclosure depend on timing and the quality of the submission.
About the author
J. M. Aldridge advises multinationals and financial institutions on US sanctions and export controls, with a focus on OFAC licensing, secondary-sanctions risk, and BIS classification. Calder & Vance – International Sanctions & Export Control Counsel.
About Calder & Vance
Calder & Vance is an independent international sanctions and export-control boutique. We advise multinationals, financial institutions, exporters, and individuals on the major regimes – OFAC and BIS in the United States, OFSI and ECJU in the United Kingdom, the EU Council regulations and the EU General Court, the United Nations Consolidated List, and the regimes of Switzerland, Canada, Australia, the UAE, Singapore, and Japan. Our work is limited to lawful compliance, licensing, delisting, enforcement defence, and due diligence. To discuss a matter, contact info@caldervance.com.
Disclaimer: This material is general information, not legal advice, and is not a substitute for advice on your specific facts. Sanctions and export-control rules change frequently and differ by regime; verify the current position before relying on anything stated here. Calder & Vance does not advise on circumventing or evading sanctions. For advice on your situation, contact info@caldervance.com.