In my practice I have found that many people believe a license authorization issued by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) is a magic bullet to allow them to deal freely with parties in sanctioned countries or with sanctioned targets themselves. Nothing could be farther from the truth. While an OFAC license does allow its holder to engage in transactions with parties who are either targeted by U.S. sanctions programs or who reside in a sanctioned country, that authorization is narrowly tailored to only allow the transactions requested in the license application and authorized in the OFAC license. In addition, only those parties with whom authorization was sought to deal with are covered by the license. Furthermore, there are numerous conditions and restrictions placed on OFAC licenses that must be followed.

For example, some common examples of restrictions imposed by OFAC licenses will include a description of the authorization, conditions prohibiting export of goods controlled by the U.S. Department of Commerce’s Bureau of Industry and Security, conditions on how the funds related to the authorized transaction may be sent to the U.S. person, warnings concerning the involvement of any blocked persons not included within the authorization of the license, warnings concerning the fact that the license does authorize transactions retroactively, and various reporting and/or record keeping requirements for transactions undertaken pursuant to the license authorization.

When viewing an OFAC license it becomes clear that the authorization is narrowly tailored and subjects the holder of the license to various conditions and prohibitions. As such, it is the duty of the OFAC license holder to ensure that they are reporting to OFAC when they have to report, and maintaining records of their transactions carried out pursuant to the license. In addition, a diligent holder of an OFAC license will continually check the OFAC SDN List to ensure that none of the parties involved in the transactions have had sanctions imposed upon them, unless of course, the license authorizes dealings with such blocked party. OFAC compliance is virtually a must for anyone dealing with sanctioned parties or countries. However, getting an OFAC license isn’t the beginning and end of OFAC compliance. It is merely the beginning.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.