Exemptions allow acts otherwise prohibited by financial sanctions under specific circumstances that are generally set out in the financial sanctions legislation. Such exemptions apply automatically where the specified criteria are met and, unlike licenses, do not require an application to the Office of Financial Sanctions Implementation (OFSI).
Licenses are written authorizations by OFSI permitting acts that are otherwise prohibited by financial sanctions. OFSI may grant such licenses where the applicable legislation provides grounds enabling it to do so and those grounds are met.
The UK regulations contain the following grounds for obtaining licenses:
- Basic needs—expenses necessary to ensure that designated persons or financially dependent family members are not imperiled;
- Legal fees and disbursements—must be reasonable and involve genuine legal advice or litigation;
- Fees or charges for holding or maintaining frozen accounts or economic resources – subject to a reasonableness threshold;
- Payment of court judgments or arbitral decisions against the designated person or entity—must have been given before the date of designation and cannot be for the benefit of another designated person;
- Satisfaction of contractual obligations—obligation must have been incurred prior to the date of designation and cannot make funds available to the designated person;
- Extraordinary expenses—cannot be recurring or easily anticipated, and cannot be used to avoid limitations to other grounds for obtaining a license;
- Extraordinary situations – this applies to non-UN designated persons;
- Humanitarian assistance activity etc. – payments to facilitate any humanitarian activity; and
- Diplomatic missions—anything to be done in order that the proper functions of a diplomatic mission or consular post or an international organization enjoying immunities in accordance with international law, may be carried out.
OFSI publishes blog posts which provide updates on its guidance and on specific topics such as applying for a license.
The Treasury has a general power to grant licenses under the UK’s domestic terrorist sanctions regimes (as opposed to specific licensing grounds) and can issue licenses relevant to specific persons as well as general licenses applicable to all persons designated under particular domestic terrorist regimes. Such licenses can be granted where there is a legitimate need for transactions with the designated persons and those transactions do not give rise to any risk of financing terrorism. OFSI has issued a limited number of general licenses applicable to the “Terrorism and Terrorist Financing” and “ISIL (Da’esh) and Al-Qaida” sanctions regimes, which can be found here. On 11 January 2021, the Treasury revoked 3 general licenses which related to the provision of insurance and the payment of legal fees by third parties. At present, there is only one general license which is for legal aid. 1 General licenses do not require an application to OFSI, but must be reported if used.
With respect to importing or exporting goods restricted by sanctions, a license may be required from the UK’s Export Control Joint Unit in addition to a license from OFSI.