As readers of OFSI’s previous blogs will be aware, the new UK autonomous sanctions framework in place since January 2021 brings important opportunities and changes. Among the updates contained in these new regulations, some of these specifically relate to licensing. OFSI’s licensing team therefore want to take this opportunity to provide an overview of the licensing process, explaining the new changes, OFSI process and some top tips on how to complete a licence application.
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, such licence applications are considered and processed by OFSI’s licensing team.
Licensing is a function we take very seriously. It is a fundamental part of the legal responsibilities we have as the UK’s competent authority for financial sanctions. When we consider licence applications, we take into account the aims of the sanctions regime and relevant licensing grounds set out in the regulations.
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.
A licence will often include specific permissions and conditions. These are the important details that set the parameters of each written permission. While licences outline the permissions for activity that can take place, it’s important to note that they don’t compel any party to take any action.
To request a licence, a licence application form must first be completed and submitted to OFSI. This is a crucial document which the licensing team will use to assess any application. A fully completed application form helps speed up the process of granting a licence as it should reduce the need for OFSI to ask further questions. This should include details such as:
what you are requesting (e.g. exact amounts and payment routes)
the legal basis for the request (e.g. legal fees)
the urgency of the application, including hard deadlines
We will also require evidence to substantiate your application, which can be submitted alongside the application form. OFSI considers each application on its own merits, which means licences can be tailored to meet the needs of each application.
When explaining the ‘legal basis’ of your application, this must be done with reference to the specific legal grounds set out in the relevant regulations. If your application is to amend a licence that existed prior to the new UK Sanctions and Anti-Money Laundering Act (the Sanctions Act) coming into force, the legal grounds to amend it could be substantially different. Please check the new legislation carefully, consider the appropriate licencing grounds and give a full explanation of the legal basis in your application.
The initial application process is not trying to catch you out. It can however require a substantial amount of information. As soon as possible once an application has been submitted, the licensing team will begin reviewing and considering it, and will be in touch if further information is required. This process must be completed before a decision can be reached and we aim to engage with the substance of the completed application within 4 weeks. This does not however mean a decision will be reached within 4 weeks, as depending on the facts of the case, and crucially, what information has been provided and when, this can take anything from days to months. As has already been said, OFSI treats each application separately, so even if you’ve provided similar information in past applications, don’t be surprised if you are asked to provide the same information.
The surest way to avoid potential delays to an application, however, is providing detailed evidence at the initial application stage.
Although we always process applications as quickly as possible, in certain cases there can be a requirement for us to notify the United Nations before any licence is granted. This applies to certain UN-designated individuals/entities. This process can add time onto an application process while the UN makes it considerations.
While OFSI looks to progress all applications as quickly as possible, we prioritise urgent and humanitarian cases. However, it may not be possible to consider last-minute extension requests to existing licences before a licence expires, so it’s important to apply in plenty of time before the expiration date. If a licence does expire then this will result in the need to replace the licence (which will lead to a delay).
Once OFSI has made a decision on your application, we will inform you of the outcome and, if a licence is going to be issued, we will share a draft version of it with you. This step is to confirm the accuracy of the details on the licence ahead of it being formally issued, and is not designed for substantive amendments e.g. changes to payment caps. If these are requested then the licence will need to go through the decision-making process once more, which will lead to delays. To avoid this, please make clear what you are requesting to be licensed at the start of the application process.
If you find that you hold a licence and you (or another party to the licence) are struggling to interpret it, then you should consider applying for an amendment. OFSI does not give views on how licences should be interpreted or give legal advice, therefore, you should consider working with other relevant parties to the licence to come up with proposed amendments that work for you.
What has changed under the Sanctions Act?
Full UK autonomous sanctions under the Sanctions Act came into force at the start of 2021. Some key things to consider as a result include:
The regulations, which can be found on gov.uk, clearly define the licensing grounds which need to be used when making an application. The onus is on you to justify the legal basis of an application. These grounds are generally found in the ‘Schedules’ of the regulations, and OFSI’s sanctions regime pages has links to the regulations for each specific sanctions regime.
The “Basic needs” licensing ground is now more clearly defined referring to the basic needs of both people and entities. When applying under this licensing ground, please make sure to clearly explain why you consider the payment (and activity to which it relates) to be a basic need of a designated person/entity.
There is a new licensing ground for “Extraordinary situations”, which is, as the name implies, for exceptional circumstances. If applying under this ground, the onus is on you to justify and provide evidence that the situation is extraordinary.
Certain licensing grounds, such as for the “Maintenance of funds and frozen resources”, have reasonableness written into the regulations. If you are applying for a licence where “reasonable” is written into the regulations, there is a legal requirement for OFSI to assess this and the onus is on you to provide evidence and arguments as to why a payment is reasonable. For these types of applications, the licensing team may request for example a breakdown of the proposed work, payments and arguments for reasonableness.
OFSI has the power to issue general licences for country sanctions regimes and has already issued one. Further information can be found in our general guidance however OFSI does not accept applications for general licences.
Top Tips for Applicants
Before applying, read the licensing section in OFSI’s general guidance. Do also look at OFSI’s other specific guidance documents where relevant.
Don’t be alarmed if OFSI ask follow-up questions following the submission of an application – we often ask for clarifications and further information.
Do consider whether there is a “reasonableness” test and whether further information will be required.
Provide as much information and evidence as you can at the start of the application to avoid delays.
Before applying, consider engaging with any parties to be included on a requested licence (e.g. banks).
You may want to consider seeking independent legal advice before applying. While this is not a requirement, OFSI cannot offer legal advice.
For further information on licensing and financial sanctions implementation more broadly, please see OFSI’s general guidance.
To keep up to date with OFSI news, do subscribe to our e-mail alert service, and contact us directly at OFSI@hmtreasury.gov.uk .