INTERNATIONAL TRADE LAW
OFAC Sanctions Licensing: General vs. Specific
An OFAC license is permission from the U.S. Treasury to do a transaction that sanctions would otherwise prohibit. The Office of Foreign Assets Control (OFAC) administers U.S. economic and trade sanctions, and when a deal touches a sanctioned country, person, or activity, a license is often the only lawful way to proceed. Understanding the two kinds of license — general and specific — is the first practical step.
For related reading, see our overviews of OFAC sanctions compliance and how to apply for OFAC licenses.
General license vs. specific license
This is the distinction that matters most:
| General license | Specific license | |
|---|---|---|
| What it is | A standing authorization for a whole category of transactions | A written authorization for one applicant’s particular transaction |
| Do you apply? | No — it is already published in the regulations | Yes — you apply to OFAC and wait for a decision |
| Conditions | You must meet every stated condition exactly | OFAC sets the terms and any limits in your license |
| Best for | Routine, pre-approved activity | One-off or unusual deals not covered by a general license |
A general license is self-executing. If your transaction fits squarely within a published general license and meets all its conditions, you do not need to ask OFAC — you simply keep records showing you qualified. A specific license is what you request when no general license covers you; you file an application through OFAC’s licensing portal and cannot proceed until OFAC grants it.
The practical workflow is: figure out whether the transaction is even prohibited, check whether a general license already authorizes it, and only then apply for a specific license.
Who and what OFAC reaches
OFAC sanctions fall into two broad shapes:
- Comprehensive programs target entire jurisdictions — historically Cuba, Iran, North Korea, Syria, and the Crimea and other occupied regions of Ukraine — where most dealings are off-limits absent a license.
- List-based and targeted programs focus on specific people, companies, vessels, or sectors, the best known being the Specially Designated Nationals and Blocked Persons (SDN) List.
If you deal with a blocked party, the obligation is generally to freeze (“block”) the property and report it — not to quietly walk away.
The 50 percent rule (the trap most people miss)
OFAC’s 50 percent rule is where compliance programs most often fail. An entity does not have to be named on the SDN List to be blocked. If one or more blocked persons own, in the aggregate, 50 percent or more of a company — directly or indirectly, through layers of ownership — that company is itself treated as blocked, even though its name appears nowhere on the list.
That means screening the names on the invoice is not enough. You have to understand the ownership behind your counterparties.
Strict liability — why intent doesn’t save you
OFAC enforces civil sanctions violations on a strict-liability basis. You can be penalized even if you did not know you were dealing with a sanctioned party and had no intent to violate the law. Civil penalties under the International Emergency Economic Powers Act are steep — the statutory maximum is the greater of roughly $377,700 per violation (a figure OFAC adjusts annually for inflation; this is the level set in early 2025) or twice the value of the underlying transaction. Because liability does not require intent, the burden is on you to screen, document, and license correctly before you transact.
Applying for a specific license
When you do need a specific license, OFAC weighs the request against U.S. foreign-policy and national-security objectives. A strong application:
- Identifies the exact authority — which sanctions program and prohibition the transaction implicates.
- Describes the transaction completely — parties, goods or services, value, dates, and purpose.
- Explains why it should be granted — for example, that it serves humanitarian, contractual wind-down, or other policy-aligned ends.
- Includes supporting documentation and responds promptly to OFAC follow-ups.
Approvals can take time and may come with conditions. Build the licensing timeline into your deal, not the other way around.
FAQ
Do I always need to apply for a license to deal with a sanctioned party? No. First check whether a published general license already authorizes the activity. Only when none applies do you file for a specific license.
Does a general license require me to keep records? Yes. Relying on a general license means you must be able to show you met every condition. Keep that documentation in case OFAC ever asks.
What is the 50 percent rule? A company owned 50 percent or more, in the aggregate, by blocked persons is itself blocked — even if it is not on the SDN List. Screen ownership, not just names.
Can I be penalized if I didn’t know the other party was sanctioned? Yes. Civil liability is strict, so lack of knowledge or intent is not a defense — though a strong compliance program and self-reporting can reduce exposure.
Unsure whether a deal needs an OFAC license? Reidel Law Firm delivers a flat-fee import/export compliance memo that screens your transaction and maps your sanctions exposure in plain English, with direct attorney access. Request a flat-fee compliance memo →
