A designated individual needs legal representation. The firm's solicitors are ready to act. But every fee payment is a transfer of funds – and if the client is a sanctioned person, that transfer is prohibited without a licence. The question is not simply whether a licence is available. It is which regime's licence, on what terms, and with what reporting obligations attached. For a solicitor or barrister advising across the UK and Australian regimes, the answer differs in ways that matter from day one.
Both the UK Office of Financial Sanctions Implementation (OFSI) and Australia's Department of Foreign Affairs and Trade (DFAT) operate licensing regimes that can authorise payment of legal fees to or for the benefit of designated persons. The two regimes share a broad structure but diverge sharply on the governing authority, the approval mechanics, permitted-amount limits, reporting requirements, and the speed of the process. As of May 2026, neither regime offers a truly automatic general licence for legal fees: both require positive authorisation, and the terms on which that authorisation is granted are not interchangeable.
This analysis maps the key divergences across the full licensing lifecycle – from the triggering prohibition through to ongoing compliance obligations – and identifies the risk flags that most frequently arise in cross-border matters where both regimes are engaged simultaneously.
What is the legal basis for legal-fees licensing under each regime?
Under OFSI, the authority to grant a legal-fees licence flows from the Sanctions and Anti-Money Laundering Act (SAMLA) and the specific thematic sanctions regulations made under it. OFSI holds delegated authority to issue licences in a number of categories, one of which covers legal costs. The regulations identify legal costs as a permitted licensing ground, meaning OFSI has statutory authority – not merely discretion – to consider such applications. The licensing regime operates on a case-by-case basis: each licence is specific, named, and bounded by conditions.
In Australia, the relevant instrument is the thematic autonomous sanctions regulations administered by DFAT under the Autonomous Sanctions Act. DFAT has authority to issue permits (the Australian equivalent of a specific licence) authorising transactions that would otherwise be prohibited as dealing with a designated person. Australia does not maintain a published general-licence mechanism equivalent to those found in some US OFAC programmes. Every authorisation for legal fees in the Australian regime is therefore a specific case-by-case determination, examined individually on the facts presented.
The critical structural divergence is authority and delegation. OFSI sits within HM Treasury and operates as a specialised financial-sanctions body with a dedicated licensing team, published guidance, and a relatively well-documented practice. DFAT combines sanctions policy and licensing functions within a broader diplomatic and trade ministry. In our experience, the institutional differences translate into practical differences in application responsiveness and the granularity of published guidance available to applicants.
How does each regime define a qualifying legal-fees payment?
OFSI's licensing practice distinguishes between legal costs that are reasonable and necessary for the defence of the designated person's own legal proceedings and broader advisory work. The qualifying scope under the UK regime covers legal representation in court and tribunal proceedings, including administrative and judicial review challenges to the designation itself. It also covers costs directly incurred in connection with the licensing application itself. Work that is commercial, transactional, or advisory in character – not litigation or regulatory defence – sits outside the core licensing ground and requires careful framing.
What does "reasonable and necessary" mean in practice? Under OFSI, that assessment is applied to the level of fees sought, not merely the category of work. OFSI may scrutinise hourly rates, the seniority of fee earners engaged, and whether the total quantum sought is proportionate. Applicants should expect to justify the fee level, not merely the category of work.
Australia's DFAT applies a similarly purposive interpretation. The qualifying transaction is one where the payment of legal costs is necessary for a designated person to exercise or protect a legal right – most obviously the right to legal representation in proceedings. DFAT does not publish the same volume of operational guidance as OFSI on the precise scope of qualifying work. That creates an information asymmetry for applicants: the Australian regime requires practitioners to argue the qualifying case on first principles where OFSI applicants can often anchor to published precedent categories.
One point of convergence is that neither regime intends the legal-fees licensing ground to function as a general derogation from the freeze. Payments that are not genuinely referable to legal representation – for example, advisory retainers on commercial matters – will not readily secure authorisation under either regime.
Where do the application mechanics diverge most sharply?
The application process under OFSI is conducted by written submission to OFSI's licensing team. The applicant – typically the solicitor's firm on behalf of the designated person – sets out the nature of the proceedings, the legal costs sought, and evidence that the fees are reasonable and necessary. OFSI will review the application and may seek further information before issuing a licence. OFSI's published guidance indicates that it aims to process straightforward licensing applications within a defined period, though complex or contested applications take materially longer. No specific processing time is hardened in the verified facts registry available to us at the time of writing; practitioners should verify the current published target before advising a client on timeline.
Australia's DFAT process requires an application to the Sanctions Permits Branch. The application must identify the designated person, the nature of the legal proceedings, the legal practitioner or firm to be paid, and the basis for the permit. DFAT does not publish granular guidance on internal processing timelines for sanctions permits in the same way OFSI does. The Australian process is in practical terms less predictable in terms of duration, and applicants in time-sensitive matters – a bail application, an urgent injunction, a hearing with a fixed date – face meaningful planning risk if the permit is not secured in advance.
This is a risk that practitioners frequently underestimate. We regularly advise legal teams who have assumed that the permit will follow the application quickly and have given the court or tribunal an undertaking on fee arrangements before the permit is in hand. That sequencing is precarious under both regimes, and particularly so under the Australian one.
A second divergence is in the treatment of advance versus periodic payments. OFSI licensing practice permits, and in many cases produces, licences structured around periodic payment tranches – quarterly amounts up to a specified ceiling – rather than a single lump-sum authorisation. That structure aligns with the way legal proceedings actually incur costs over time. DFAT's permit practice is less consistently documented on this point, and practitioners should not assume that an equivalent periodic-tranche structure will be approved without specifically requesting and justifying it.
How do the two regimes handle reporting and ongoing obligations?
An OFSI licence is not a one-time event. It carries ongoing obligations. The licensed party – typically the law firm receiving payment – must comply with any conditions specified in the licence, which ordinarily include reporting of amounts received, record-keeping, and notification to OFSI if circumstances material to the licence change. OFSI's enforcement guidance makes clear that non-compliance with licence conditions is itself a civil and potentially criminal offence, separate from the underlying designation-related prohibition.
Record-keeping obligations under the UK regime are tied to the broader statutory regime under SAMLA and its thematic regulations. Practitioners acting under an OFSI legal-fees licence should maintain complete records of all payments received, the invoices to which they relate, and all correspondence with OFSI. These records need to be available for inspection and must be kept for a period consistent with the applicable requirements – verify the current retention standard before relying on any specific period.
Australia's obligations on permit-holders are analogous in concept but differ in the specifics. A DFAT permit will typically impose conditions on the type of payments that may be made, the parties who may make or receive them, and reporting to DFAT if a condition is breached or if the circumstances change materially. Australia's autonomous sanctions regime does not carry the same volume of published operational guidance on the mechanics of ongoing permit compliance as the UK regime does. Practitioners in Australia must therefore read the conditions of their specific permit with great care, as the permit document itself is the primary source of compliance obligation.
One compliance risk that arises under both regimes is scope drift. A licence or permit issued for proceedings A does not cover proceedings B, even if the designated person is the same and the solicitor is the same. We have acted for law firms that discovered mid-matter that their licence had been issued by reference to specific proceedings and that a related regulatory investigation required a fresh application. The cost and delay of that discovery – after costs had already been incurred – is avoidable with proper licence-architecture review at the outset.
What is the cross-border risk when both regimes are engaged simultaneously?
A cross-border matter – for example, where a designated person holds assets in the UK and Australia and faces proceedings in both jurisdictions – requires licences from both OFSI and DFAT. The two licences are legally independent: OFSI's licence does not authorise a payment in Australia, and a DFAT permit does not authorise a payment in the UK. This is the foundational cross-border risk, and it is frequently underappreciated.
Beyond the need for parallel applications, the substantive divergences between the two regimes create a practical tension in how the legal team structures its engagement. A solicitor based in London who is instructed in both the UK and Australian proceedings needs OFSI authorisation for UK-sourced fee payments and, if acting in connection with Australian proceedings, must consider whether DFAT authorisation is also required for any payment from an Australian-held asset. The answer will depend on where the funds originate and where the transaction is executed – and both regimes apply extraterritorial reach in different ways to their nationals and entities.
Secondary-sanctions risk from other regimes – most notably the US – is a further dimension. Where the designated person is also on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons), US persons and, in certain circumstances, non-US persons with US-nexus exposure face additional constraints. A UK solicitor with a US dollar account, a US correspondent bank, or a US-entity partner may carry US exposure that sits alongside the OFSI licence question. In our practice, we advise on the interaction of the OFSI and OFAC licensing regimes in parallel, because a licence from one does not satisfy the other. Where the stricter prohibition governs, that is the position the transaction must meet.
The position above covers the standard structure. Your specific facts – the origin of the funds, the jurisdiction of the proceedings, the nationality of counsel, and the basis for the designation – will all affect which authorities must be approached and in which order.
For an assessment of your exposure under the OFSI or Australian regime, contact Calder & Vance at info@caldervance.com.
What are the most common risk flags in legal-fees licence applications?
Risk flags arise at every stage of the legal-fees licensing process, and the most costly are those that are identified only after a payment has already been made. The following pattern recurs across both the OFSI and Australian regimes in our cross-border practice.
First, the failure to identify that a client is designated before fees are invoiced and paid. Financial-sanctions screening of new clients is mandatory under the anti-money-laundering and sanctions compliance obligations that apply to law firms in both jurisdictions. A firm that takes payment from a designated person without a licence has committed an offence, even if it did not know the client was designated at the point of engagement. Retroactive licensing is theoretically available but is more complex and may not fully resolve the enforcement exposure.
Second, reliance on a licence or permit that has expired, has been amended, or has conditions that were not fully read. OFSI licences are issued for defined periods or defined quantum and lapse when either is exhausted. A firm that continues to draw fees after a licence expires is in breach, regardless of good faith.
Third, failure to apply separately for each set of proceedings. As noted above, a licence tied to one set of proceedings does not extend to related matters. The scope of any licence should be reviewed at each new instruction and at each material development in existing proceedings.
Fourth, the transfer of funds through an intermediary that is not named on the licence. OFSI licences typically specify the parties permitted to transact. Routing a payment through a different account, correspondent, or sub-account can breach the licence conditions even if the ultimate recipient is the named beneficiary.
A myth that circulates among compliance teams – and one worth correcting directly – is that a legal-fees licence is somehow automatic, or that legal services are categorically exempt from financial-sanctions prohibitions because of solicitor-client privilege or constitutional access-to-justice principles. Neither OFSI nor DFAT treats legal costs as exempt from the prohibition. The licence is required, and it must be in hand before payment.
How does Calder & Vance assist with legal-fees licensing across these regimes?
Our approach to a legal-fees licensing mandate is structured from the first consultation around three priorities: establishing the scope of the prohibition, identifying the correct licensing authority or authorities, and designing the application so that it reaches the fastest decision path available.
For OFSI applications, we assess eligibility, prepare and submit the licence application, and manage OFSI's queries through to issue. We also advise on the conditions of the licence once issued – including the reporting and record-keeping obligations that attach to it – and prepare any amendment or renewal applications when the scope of the proceedings changes.
For Australian DFAT permits, we work with local counsel in the relevant jurisdiction to prepare and submit the application, ensure the permit conditions are correctly interpreted, and advise on the interaction of the Australian permit with any OFSI or OFAC licence that may be required in the same matter.
Where both regimes apply simultaneously, we manage the parallel licensing process as a single co-ordinated mandate, sequencing applications to account for the different processing timelines and ensuring that neither application is delayed by information requests that could have been anticipated.
In a recent matter, a law firm acting for a designated individual in concurrent UK and overseas proceedings discovered that its existing OFSI licence did not cover a related regulatory inquiry that had opened several months after the original licence was issued. We prepared a supplementary application, managed OFSI's questions on the extended scope, and secured the amended authorisation before the next costs period commenced. The matter resolved without enforcement action.
If a transaction has already been flagged, or a payment has been made without a licence in place, an early review can preserve options that narrow with time. Contact us at info@caldervance.com.
Related practices
- Frozen Account Management – BIS/EAR – managing access to frozen assets under US export-control licensing rules
- Licence Amendment and Renewal – EU vs SECO – comparative analysis of amendment and renewal procedures under EU and Swiss regimes
- Licence Amendment and Renewal – OFAC vs Canada – how OFAC and Canadian GAC licensing renewal diverges in practice