When a person or organisation is subject to an asset freeze, any funds or economic resources belonging to them, must be frozen. You must not deal with these assets, or make them available to, or for the benefit of, a designated person unless there is an exception in the legislation you can rely on, or you have a valid licence.
In the UK, OFSI (Office of Financial Sections Implementation) consider and process licence applications.
What is licensing?
In practice, a licence from OFSI is written permission to carry out an act that would otherwise be in breach of financial sanctions prohibitions.
What is the legal basis for a licence?
OFSI can only issue a licence where there are legal grounds to do so. You need to assess which ground is relevant to your application, referencing the relevant regulations. The grounds listed are for regimes operating under the Sanctions and Anti Money Laundering Act (the Sanctions Act).
What are the grounds for a specific licence?
Licences can generally be obtained where the proposed transactions are for:
- covering expenses such as food, rent and medicines (referred to as basic needs)
- reasonable professional legal fees or reasonable expenses associated with the provision of legal services
- prior obligations (if the obligation/contract started before the sanction was imposed)
- covering the payment of fees/service charges for routine holding or maintenance of frozen funds or economic resources
- pre-existing judicial decisions
- extraordinary expenses, where considered appropriate
- extraordinary situations, where considered appropriate (only for non-UN listed persons)
- humanitarian assistance
- diplomatic missions
How do I get a specific licence?
To request a licence, a firm/individual must complete and submit an application form to OFSI.
Examples of when a specific licence might be required in practice
You may have clients that need to apply for a licence, a charity operating in a sanctioned country would need to apply for a licence to enable them to give humanitarian assistance.
Legal firms may decide to apply for a licence and if you provide legal services, alongside accountancy, then it may be that to give a sanctioned entity/individual such advice you decide to apply for a licence.
Money or assets held on behalf of a sanctioned individual may be frozen. You can’t make payments from any client account that holds funds for a sanctioned entity unless you have a licence. If the sanctioned individual requests funds to cover basic needs then there are grounds to apply for a specific licence to make payments such as rent payment, insurance payments and so on.
In the case of insolvency proceedings it may be that creditors include sanctioned individuals and entities in which case a payment can only be made if a specific licence has been applied for and approved.
What is a General licence?
Under the Sanctions Act, OFSI may issue general licences which allow multiple parties to undertake specified activities which would otherwise be prohibited by sanctions legislation, without the need for a specific licence. General licences usually have an expiry date.
Each general licence will include requirements for prior notification of use, record-keeping and reporting.
OFSI does not accept applications for general licences. More information is available in OFSI’s UK financial sanctions general guidance.
A list of general licences published by OFSI can be found on the General Licence page.
One recent example of a general licence is the one granted in relation to Chelsea Football Club which includes permitting the club to make payments to employees and pay for transfers to and from fixtures. This current licence has a May 2022 expiry date.
More recently there have been a number of ‘winding down’ licences which allow individuals/entities a fixed period to complete transactions with the sanctioned entity.