A professional-services firm operating across three jurisdictions retained legal counsel for a designated individual. The engagement letter was signed. Fees were invoiced. Then the firm's compliance team identified that the client appeared on a sanctions list – and that payment of those fees, without authorisation, would constitute a dealing in blocked funds. The matter stalled. Time was running.
Legal-fees licences – authorisations permitting counsel to receive payment from, or on behalf of, a designated person – exist under each of the major sanctions regimes, but their scope, procedure, and timing differ materially. A single cross-border mandate can engage OFAC, OFSI, and EU rules simultaneously. Getting the sequencing wrong can freeze both the client's defence and the firm's ability to act.
This case comment walks through how a legal-fees licence matter proceeds in practice across multiple regimes, where the procedural traps sit, and what a professional-services business should build into its engagement process before the issue arises.
What is a legal-fees licence and when is one required?
A legal-fees licence (a specific authorisation permitting a designated person's funds to be used for reasonable legal representation costs) is required whenever counsel is instructed by, or on behalf of, a person or entity whose assets are blocked under the applicable sanctions programme. The prohibition on dealing with blocked funds is not limited to commercial transactions. It applies equally to professional fees.
The need for a licence arises at the moment of the dealing, not at the moment of instruction. In practice, that means a firm can be formally retained, complete work, and issue an invoice – and still be unable to receive payment without an authorisation in place. Discovering this sequence in reverse order, after fees have accrued, is one of the most common pressure points we see in cross-border legal-services matters.
Under OFAC, a general licence (a standing authorisation permitting a defined category of transactions without a separate application) often covers receipt of legal fees below a defined threshold from certain programme-specific lists, but the thresholds and their conditions vary by programme. Where no general licence applies – or where the fees exceed its scope – a specific licence (a case-by-case authorisation from OFAC) is required. Under OFSI in the United Kingdom, there is no direct equivalent to the US general-licence mechanism for legal fees; a specific licence application to OFSI is the standard route. The EU regime operates similarly, with the competent authority of the relevant member state processing applications under the applicable Council regulation.
The position above covers the standard case. Your facts – the identity of the designated person, the programme in play, the fee amount, the nationality and location of counsel – change the analysis materially.
For cross-border matters involving a frozen account or related asset-management question alongside the legal-fees question, see our related service on frozen account management under the BIS/EAR.
The cross-border complication: three regimes, one matter
Where counsel is instructed on a matter touching more than one jurisdiction – as it routinely is for individuals and entities with international operations, assets, or co-defendants – the legal-fees question does not resolve under a single regime.
Consider the position of a law firm with offices in London and Brussels, instructed by an individual designated under both OFAC and the EU Council regulation. Payment routed from a blocked account in a US correspondent bank engages OFAC rules. Payment of the same invoice from a European account held by an EU-incorporated entity engages the EU regulation. The London office's receipt of its portion of the fee engages OFSI. Three applications, three competent authorities, and potentially three different timelines running in parallel.
In our cross-border practice, the most acute difficulty is not complexity in isolation – it is the absence of a co-ordinated timeline across regimes. OFAC processes specific-licence applications on an internal queue that practitioners cannot directly query with precision. OFSI publishes indicative processing windows; as of mid-2026, its guidance indicates that straightforward licensing applications are typically decided within a defined statutory period, though more complex matters take longer. The EU member-state competent authorities operate on their own administrative timetables, which differ between states.
What does that mean in practice? A firm may receive OFSI authorisation to accept payment and then wait a further period for the OFAC licence before the corresponding US-side disbursement is lawful. During that gap, work continues, fees accrue, and the firm carries both the credit exposure and a compliance question about whether ongoing work without confirmed multi-regime authorisation is itself a prohibited service.
The answer to that question depends on whether the relevant general licences cover the provision of legal services pending a specific-licence application, and whether counsel's own jurisdiction imposes obligations on firms representing designated persons. These are not abstract points. They determine whether the engagement can continue at all while the applications are in train.
How the matter unfolded: the procedural sequence in practice
In a recent matter, an individual designated under both the applicable UK regime and a parallel EU programme retained counsel in London and an affiliated office in an EU member state. The retainer covered both a delisting application and parallel civil proceedings. Fees for the delisting work and for the civil proceedings were bundled in a single engagement letter. That bundling created the first procedural problem.
The applicable OFSI licensing ground for legal fees in designation-challenge proceedings is narrower than the ground covering legal fees in unrelated civil litigation. Where a single retainer covers both types of work, the application must disaggregate the fees by category – or risk the application being returned as insufficiently particularised. We have seen this cause multi-week delays in matters where the underlying proceedings are themselves time-sensitive.
In the matter at hand, the application was restructured to address the delisting fees under the designation-challenge ground and the civil-proceedings fees under the general legal-representation ground. The applications were filed concurrently but treated as separate submissions. OFSI required additional documentation on the individual's financial position – specifically, evidence that no unlicensed funds were available to meet the fees – before proceeding.
On the EU side, the competent authority required the firm's EU office to file under the applicable Council regulation rather than relying on the UK-issued licence. Post-2020, UK licences do not satisfy EU obligations, and EU licences do not satisfy UK obligations. That distinction – obvious in principle – is still missed in practice, particularly by firms whose EU offices are accustomed to deferring to their London compliance team on sanctions questions.
The matter was ultimately authorised under both regimes. The sequencing, though, added several weeks to the process and required the firm to make a commercial decision about whether to advance work during the pending period or pause until both licences were confirmed.
Risk flags: where legal-fees licence matters go wrong
Licensing matters go wrong at predictable points. Understanding those points before a matter arises is considerably more useful than identifying them after a compliance breach.
The first risk flag is late screening. A law firm that screens a new client only at the conflict-check stage and not against the full sanctions lists may not identify a designation until after fees have been invoiced or, in the worst case, received. Receiving payment from a blocked person without a licence is a strict-liability breach under most regimes. The good faith of the recipient is a mitigating factor in enforcement, not a defence.
The second is the general-licence assumption. Practitioners familiar with the US system sometimes assume that because OFAC general licences exist for legal fees under certain programmes, a licence is not needed. That assumption has two failure modes: the fee may exceed the general-licence ceiling; or the programme in question may not have an applicable general licence at all. The position varies by programme and should be confirmed, not assumed.
The third is the UK-EU divergence point noted above. A licence from one competent authority does not extend to the other regime. If the client, the counsel, or the payment account sits within both regimes, both licences are required.
The fourth is documentation. Each competent authority requires evidence of the services to be provided, the fees to be charged, and – critically – the designated person's financial position. Applications that are filed without full supporting documentation are frequently returned or placed in a supplemental-information queue, adding material delay. In our experience, this single factor – inadequate supporting documentation on first submission – is responsible for a disproportionate share of processing time in otherwise straightforward applications.
The fifth, and perhaps least visible, risk is the interaction with the firm's own money-laundering obligations. Accepting a retainer from a designated person, even with a sanctions licence in place, does not extinguish the firm's obligations under the applicable anti-money-laundering regime. Those obligations run in parallel. In some cases, the AML risk assessment and the sanctions licence application inform each other, and both should be addressed before work commences.
If a matter has already been flagged – if fees have been received without a licence, or if a licence application has been refused – an early review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to discuss the position.
The OFAC dimension: secondary sanctions and the non-US firm
A question that arises in cross-border legal-fees matters involving OFAC-designated individuals is whether a non-US law firm needs an OFAC licence at all. The answer depends on whether the transaction involves US persons, US dollars, or US-origin funds – but the practical risk profile for most international firms is broader than that simple test implies.
A non-US firm receiving fees in US dollars – even if both the firm and the client are outside the United States – routes the payment through the US correspondent-banking system. That routing creates a US-nexus for the transaction and brings it within OFAC's jurisdiction. It is not the nationality of the parties that determines the reach of OFAC's rules; it is the involvement of the US financial system or US persons in the transaction.
Beyond that, the secondary sanctions risk (the risk that a non-US firm providing material support to a designated person under certain programmes could itself become subject to US sanctions) is a real, if distinct, consideration. Secondary sanctions do not operate identically to primary sanctions, and the analysis differs by programme. But for a firm considering whether to seek OFAC authorisation proactively – or simply to proceed on the assumption that the US rules do not apply – the secondary-sanctions question is one that should be explicitly addressed.
In our cross-border practice, we regularly advise international law firms and professional-services businesses on exactly this question. The starting point is always the same: map the US-nexus points in the transaction before concluding that OFAC authorisation is not required.
What is the lesson for similar businesses?
The lesson from this matter is not that legal-fees licences are unobtainable. They are a well-established licensing ground under each of the major regimes. The lesson is that they require advance planning, and that the cross-border version of the problem is not simply the sum of its domestic parts.
A myth we encounter consistently in this area is that the existence of a general licence, or the principle that legal representation should be accessible to designated persons, means that the administrative steps are a formality. They are not. Each regime requires a separate application, separate supporting documentation, and separate administrative processing. The competent authorities treat these applications carefully and expect applicants to do the same.
For a professional-services firm, the practical steps are these. First, screen against all relevant sanctions lists at the point of initial enquiry, not only at the point of engagement. Second, confirm which regimes are engaged by the matter – based on the client's nationality, location, assets, and the payment mechanism proposed. Third, where a designation is identified, do not proceed with work before taking advice on whether a general licence covers the position or whether a specific-licence application is required. Fourth, if multiple regimes are engaged, file the applications concurrently and treat them as separate submissions. Fifth, retain documentation of the entire process.
None of those steps is complex. But omitting any of them can convert a manageable licensing question into an enforcement matter – and the difference in cost and complexity between the two is significant.
For further illustration of how licence amendment and renewal works within the EU context, see our related matter note on licence amendment and renewal under an EU matter. For the equivalent OFSI process, see our note on licence amendment and renewal under OFSI.
Related practices
Related practices
- Frozen account management (BIS/EAR) – managing blocked-account access and BIS-related licence questions concurrently with an OFAC matter.
- Licence amendment and renewal – EU matter – updating authorisations mid-matter where scope or fees change under EU Council regulations.