An Insight to Navigating UK Financial Sanctions
Being designated under UK financial sanctions is not only a legal burden, it is a practical, financial, and reputational crisis. Sanctioned individuals often find their bank accounts frozen, legal relationships strained, and ordinary transactions blocked. However, the UK, through the Office of Financial Sanctions Implementation (“OFSI”), allows for exemptions through a licensing process. These licences enable designated persons or their representatives to legally access or transfer frozen assets for specific purposes such as paying legal fees, covering living costs, or fulfilling contractual obligations.
This guide offers a comprehensive overview of how to obtain a licence from OFSI. It explains what a licence is, who can apply, what the legal framework requires, and how to craft a compliant and effective application. Whether you are a designated person, an advisor, or a third party impacted by sanctions, understanding and strategically engaging with the OFSI licensing process is essential.
What is an OFSI Licence and why might you need one?
An OFSI licence is a written authorisation from the UK Treasury, via OFSI, permitting specific activities that would otherwise be prohibited by sanctions regulations. When a person or entity is designated under UK financial sanctions, their assets are effectively frozen. Any dealings involving their property, including transfers, disposals, payments, or services, are restricted. However, OFSI has the power to issue licences that authorise otherwise prohibited transactions, provided they fall within the strict grounds permitted by law.
Sanctioned individuals might need a licence to cover basic living expenses, pay for legal representation, receive income from a trust, or even sell or maintain their property. In some cases, third parties such as banks, lawyers, landlords, or service providers may also apply for licences to facilitate payments owed to them. Without an OFSI licence, even a seemingly routine payment, like rent or school fees, can constitute a breach of sanctions.
Who can apply for a Licence and what can it cover?
Applications can be submitted by the designated person themselves, or by a third party affected by the asset freeze. For instance, a law firm may seek a licence to be paid for representing a sanctioned client. Similarly, a landlord may apply to receive rent for a property occupied by a designated person. OFSI recognises that sanctions should not prevent access to justice or essential living standards.
The range of permitted grounds is set out in each sanctions regime. Common categories include payment for:
● Basic needs (e.g. food, utilities, medical treatment)
● Legal representation
● Fees for routine maintenance of frozen assets
● Satisfaction of pre-existing contractual obligations
● Extraordinary expenses authorised on a case-by-case basis
Each application must specify the legal basis being relied upon and include sufficient supporting documentation to justify the request.
Key Legal Frameworks and OFSI’s Decision-Making Criteria
OFSI operates under the authority of the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) and associated statutory instruments implementing UK sanctions regimes. Each regime, whether Russia, Iran, North Korea, or a global human rights framework, sets out specific licensing grounds. OFSI can only issue a licence if the transaction fits squarely within one of these prescribed grounds. These are not discretionary permissions but legal requirements.
For example, under the Russia (Sanctions) (EU Exit) Regulations 2019, allowable licensing grounds include basic needs, legal fees, extraordinary expenses, and humanitarian activities. When reviewing an application, OFSI assesses whether the evidence provided meets the test under the law and whether granting a licence might risk undermining the purpose of the sanctions. Applications lacking clarity, justification, or documentation are likely to be delayed or refused.
General guidance to applying for an OFSI Licence
Applying for an OFSI licence is a technical process that requires attention to detail, legal precision, and documentary support. The general steps are set out below:
1. Determine the Relevant Legal Ground: Identify the exact ground your application relies upon (e.g. basic needs, legal fees, pre-existing obligation, etc.) under the applicable sanctions regime.
2. Compile Supporting Documentation: Include invoices, contracts, bank statements, letters of engagement, proof of need, and any evidence demonstrating the transaction’s legitimacy and proportionality.
3. Prepare a Clear, Structured Submission: Address your request to OFSI, include all parties involved, explain the purpose of the transaction, and reference the specific legal ground relied upon.
4. Submit to OFSI Securely: Applications can be submitted via email to OFSI’s licensing team or through their secure portal, depending on the case. Format matters, one should avoid fragmented, incomplete, or speculative submissions.
5. Engage with OFSI If Queried: Respond promptly to any request for further information. Delay here can significantly extend the review timeline.
6. Await Determination: Depending on complexity and urgency, OFSI may take weeks to months to reach a decision. There is no statutory time limit, although urgent humanitarian requests may receive prioritisation.
Common Pitfalls and How to Avoid Them
Even well-intentioned applications can fail if not carefully prepared. Here are key mistakes to avoid:
● Submitting vague or incomplete applications: OFSI requires specific legal grounds and documented evidence. General statements of need are insufficient.
● Misapplying general licences: Not all circumstances fall under a general licence. Using one incorrectly can result in breach of sanctions law.
● Bundling unrelated requests: Each transaction or activity should be addressed separately. OFSI may reject overly complex or composite applications.
● Assuming urgency guarantees approval: OFSI prioritises humanitarian or legal needs, but urgency alone does not ensure success. The request must still meet the legal threshold.
● Failing to anticipate reputational impact: Public or financial disclosures triggered by licence applications may affect banking relationships and trigger further compliance reviews.
Case Studies and Examples
Consider the case of a designated Russian individual who held a UK property through a family trust. When sanctions were imposed, the trustees were unable to pay maintenance fees or sell the property. A targeted OFSI licence was successfully obtained to authorise property management fees, preventing asset deterioration.
In another instance, a sanctioned businessman sought to fund his UK legal defence. His law firm applied under the general legal fees licence. After submitting detailed engagement letters and cost projections, OFSI authorised the payments in stages, allowing for regulatory oversight while maintaining access to justice.
Strategic Considerations: Legal, Reputational, and Practical
Applying for an OFSI licence is more than a bureaucratic task it is a reputational and compliance-sensitive process. Legal advice should be sought not only to ensure correctness, but also to coordinate timing, narrative, and communications with banks, business partners, or co-investors.
Applicants must prepare for downstream consequences: Even if a licence is granted, banks may impose enhanced due diligence or restrictions. Public listings of OFSI licences though anonymised may signal regulatory involvement. Where possible, clients should use experienced counsel to act as an intermediary, reducing direct exposure and preserving legal privilege throughout the process.
How Linkilaw Supports Sanctioned Clients
At Linkilaw, we specialise in designing strategic responses to sanctions exposure. Whether assisting sanctioned individuals, family offices, trustees, or corporate service providers, we help clients prepare robust, legally grounded OFSI applications that withstand scrutiny and secure the necessary permissions.
We handle communications with OFSI, coordinate with financial institutions, and advise on broader compliance and reputational risk. Our cross-border approach ensures that OFSI licensing is just one element in a wider framework of legal and regulatory strategy tailored to protect our clients’ interests both in the UK and internationally.
