A sanctions counsel receives a call from a client who has just been designated. The client's domestic bank has frozen every account. The individual needs legal representation – urgently – yet the fee cannot be paid without potentially violating the very sanctions that prompted the call. This is not an edge case. It is one of the most operationally urgent access-to-justice questions in sanctions practice, and it arises across the major economies whenever a designation lands.
Legal-fees licences under OFAC are specific licences (case-by-case authorisations to conduct an otherwise prohibited transaction) and, in certain programmes, general licences (standing authorisations permitting a defined category of transactions without a separate application) that allow an attorney to receive fees and expense reimbursements from or on behalf of a designated person. They operate under IEEPA or TWEA, the statutory bases for most US sanctions programmes, and they are the primary mechanism that reconciles programme prohibitions with the constitutional and professional right to counsel. As of June 2026, the scope and fee caps differ materially across programmes.
This briefing sets out how OFAC administers legal-fees licences, what the prohibitions cover, how the procedure works, where the cross-border complications arise, and what risk flags legal advisers and their designated clients should have front of mind before any fee arrangement is made.
Who administers legal-fees licences under OFAC, and what is the legal basis?
OFAC – the Office of Foreign Assets Control within the US Department of the Treasury – is the administering authority for all sanctions programmes that give rise to legal-fees licence questions. Its authority derives from IEEPA and, for older programmes, TWEA. OFAC issues regulations for each programme, and those regulations either contain a general licence permitting payment of legal fees up to a defined cap, or they require the attorney or the designated client to apply for a specific licence before any fee is received.
The institutional structure matters because OFAC is both the licensor and, if a payment is made without authorisation, the enforcer. There is no independent licensing board. The same agency that imposed the designation decides whether the designated person may pay for counsel to challenge it. In our cross-border practice, clients and their counsel are often surprised that the two functions sit in the same institution.
The legal basis for refusing or capping fees is also important. OFAC does not contend that it is restricting access to counsel; it asserts that the payment of funds from a blocked account is itself a transaction requiring authorisation, regardless of what the funds are used for. That framing – payment-as-transaction rather than fee-as-exception – shapes how licence applications must be argued and documented.
For programmes that carry a general licence for legal fees, the cap is set in the programme regulations. For programmes without a general licence, or where fees will exceed the cap, a specific licence application is the only route. The application goes to OFAC's Licensing Division, which reviews it against OFAC's published licensing policy and, where the programme has a specific policy statement on legal fees, against that statement.
What does OFAC prohibit, and how do legal-fees licences fit the prohibition?
The core prohibition in virtually every OFAC programme is a broad block on transactions involving blocked persons or blocked property. Payment of an attorney's retainer from a blocked account, or transfer of funds to an attorney by a third party acting on behalf of a designated person, falls within that prohibition. The prohibition is not targeted at lawyers specifically; it catches every financial transfer involving blocked funds or blocked persons.
This means that even a payment by a relative or employer of the designated person – someone who is not themselves designated – can be prohibited if the underlying purpose is to benefit the blocked individual. Attorneys accepting fees in these circumstances without first confirming licence coverage risk making a prohibited transaction themselves. Does the attorney know whether the payor is also subject to any ownership or control analysis?
Three overlapping prohibitions are typically engaged. First, any transfer of funds or other property in which a blocked person has an interest. Second, any dealing by a US person with or for the benefit of a blocked person. Third, facilitation – the prohibition on causing or enabling a foreign person to do something a US person could not do directly. Legal advisers outside the United States are not automatically subject to OFAC jurisdiction, but US-nexus payments for their fees may be.
The legal-fees licence carves out of those prohibitions a defined class of transactions: payments to an attorney admitted to practice in the United States, for legal services rendered or to be rendered to a designated person, up to an authorised amount. The carve-out is programme-specific. A general licence in one programme does not extend to another.
A common misconception is that any payment to a lawyer is automatically exempt because legal representation is a constitutional right. That is not OFAC's position, and relying on that assumption without licence coverage is a significant enforcement risk.
How does the general-licence route work, and what are its limits?
Where a programme regulation contains a general licence for legal fees, an attorney may receive fees and reimbursement of expenses without making a separate application to OFAC, provided the payment stays within the authorised conditions. The conditions typically include a monetary cap per month or per matter, a requirement that the attorney be licensed to practise in the United States, and a prohibition on the funds passing through the designated person's blocked accounts in a way that would itself constitute a prohibited transaction.
The general licence is self-executing: if the conditions are met, no prior approval is needed. However, the attorney should document compliance with the conditions carefully, because OFAC's enforcement process can require the attorney to demonstrate after the fact that the payment fell within the general licence. Record-keeping is not optional.
Caps under general licences vary between programmes and have been revised at various points. We do not state a specific cap figure here because cap amounts are programme-specific and subject to amendment; verify the current position in the applicable programme regulations before any fee arrangement is finalised. What is consistent across programmes is that fees above the cap – and fees in programmes that have no general licence – require a specific licence.
A practical limit of the general-licence route is the monthly or per-matter ceiling. In complex designation challenges, enforcement-defence proceedings, or multi-jurisdiction matters, total fees may exceed any general-licence cap within a short time. Counsel should identify that point early and file the specific licence application before the cap is reached, not after.
How does the specific-licence application process work for legal fees?
A specific-licence application for legal fees is submitted to OFAC's Licensing Division through the OFAC licence portal. The applicant may be the attorney, the designated person, or a third party seeking to pay on the designated person's behalf. OFAC accepts applications from any of these. In practice, the attorney frequently takes the lead because the attorney has the greatest procedural familiarity and the fee structure to document.
The application must set out the identity of the designated person, the programme under which they are designated, the nature of the legal matter for which representation is sought, the proposed fee arrangement, and the source of funds from which fees will be paid. OFAC will want to understand whether the source funds are themselves blocked and, if so, the mechanism by which the payment will be made.
Processing time varies and OFAC does not publish guaranteed timelines for legal-fees licence applications. In our experience, applications that are well-documented, clearly limited to legal services, and accompanied by a credible fee estimate tend to progress more quickly than applications that raise questions about the ultimate recipient of value or the scope of services. Filing promptly – as soon as the need for representation is identified, not after fees have already been incurred – is the correct approach.
OFAC may issue a specific licence with conditions: a monthly cap, a requirement to report on fees received, or a restriction to a defined legal matter. Counsel should review conditions carefully. A licence granted for representation in a delisting proceeding does not automatically cover related litigation in a different forum.
In a recent matter, a financial-services firm acting for an individually designated client needed to cover both US-law representation and advice from counsel in a second jurisdiction. The US counsel secured a specific licence for their own fees through the OFAC licensing process. The cross-border dimension – payment to non-US counsel – required separate analysis of the relevant nexus and programme terms. That matter illustrated clearly why the US licence application and the international payment structure must be planned together, not sequentially.
What cross-border complications arise, and how do other regimes compare?
Legal-fees licences under OFAC sit within a broader international picture. The UK, EU, and several other regimes have their own equivalent mechanisms, and for a designated person with assets or legal proceedings in multiple jurisdictions the regimes operate independently and do not recognise each other's authorisations.
Under OFSI – the UK's Office of Financial Sanctions Implementation – a similar structure applies. OFSI administers its own licensing regime under SAMLA, the Sanctions and Anti-Money Laundering Act, and publishes specific guidance on legal-professional services licences. OFSI and OFAC share the broad concept: payment of legal fees from frozen assets requires authorisation. But the procedural requirements, the form of application, and the policy considerations that OFSI applies differ from OFAC's. For cross-border matters, we regularly advise that separate applications to OFAC and OFSI must be made in parallel, with consistent but independently documented support for each. A detailed comparison of the OFSI route is available in our companion briefing on legal-fees licences under OFSI.
Under EU sanctions regulations, the relevant Council regulation for each programme typically includes a provision allowing member states to authorise payments of legal fees. The authorisation is granted by the competent national authority of the member state where the assets are held, not by an EU-level body. This means that a designated person with assets in three EU member states may need three separate national authorisations, each from a different competent authority applying the same EU regulation but with their own procedural requirements.
For companies subject to secondary-sanctions risk – US sanctions applied extraterritorially to non-US persons – the position is more nuanced still. A non-US law firm advising a designated party on a non-US matter is not directly subject to OFAC's prohibitions unless there is a US nexus: a US-person attorney, a US-dollar payment, or a US correspondent bank in the payment chain. Identifying and managing that nexus is a material part of the legal-fees analysis in cross-border matters. Have all the payment pathways been checked for US-person involvement?
The divergence between regimes on fee caps, procedural requirements, and the scope of the authorised services creates real operational difficulty for international legal teams. A fee arrangement that works within an OFAC general licence may fall outside OFSI's licensing terms. Coordinating the two simultaneously requires care. Our frozen account management service covers situations where this coordination needs to be managed systematically across multiple asset-freezing authorities.
What risk flags should counsel and clients watch for?
Several recurring risk patterns emerge in legal-fees licence matters. Identifying them early determines whether representation can proceed without exposure for the attorney or the client.
The first risk is proceeding without confirming licence coverage. Where an attorney receives fees in the belief that a general licence applies, but the applicable programme has no general licence or the general licence cap has been exceeded, every fee payment may be a prohibited transaction. The attorney's exposure is real. OFAC enforcement does not treat the attorney's good-faith assumption as a complete defence in the absence of documented review of the applicable programme regulations.
The second risk is misidentifying the programme. Several major sanctions programmes are administered under IEEPA, and the regulations across programmes are not identical. An attorney familiar with the general-licence terms in one programme may incorrectly assume the same terms apply in another. Checking the specific programme regulations – not relying on general recollection of OFAC practice – is essential.
The third risk is the third-party payor. Where a colleague, employer, family member, or investor seeks to pay the designated person's legal fees, the source-of-funds analysis and the payor's own designation status must be verified. If the payor is themselves subject to sanctions, the payment may involve a second layer of prohibited transactions. If the payor is not designated but the funds ultimately derive from blocked property, that may not be a safe source.
The fourth risk is scope creep in the licensed matter. A specific licence issued for representation in an OFAC administrative challenge does not automatically extend to related civil litigation, parallel proceedings before a different authority, or appeal proceedings commenced after the licence period. Each distinct legal matter may require its own authorisation. Counsel should map the full scope of anticipated representation at the outset and ensure the licence application covers it.
The fifth risk is record-keeping. Whether operating under a general licence or a specific licence, counsel must maintain records sufficient to demonstrate that payments received were within the licence conditions. Inadequate records leave the attorney unable to demonstrate compliance if OFAC later makes enquiries. Maintaining contemporaneous records of the amount, date, source, and purpose of each payment is standard practice, but in our experience it is often treated as an afterthought rather than a licence condition.
A persistent myth in this area is that OFAC will always prioritise access to justice and issue legal-fees licences without meaningful scrutiny. In practice, OFAC applies its standard licensing criteria to legal-fees applications. It evaluates the national interest, the potential for funds to benefit the designated party beyond the immediate legal engagement, and the consistency of the proposed fee arrangement with the objectives of the sanctions programme. Applications that are poorly documented or that seek broad authorisations without clear limits face genuine risk of delay or denial.
What obligations arise once a legal-fees licence is in place?
Receiving a legal-fees licence – whether a self-executing general licence or a specific licence issued after application – creates ongoing obligations that counsel must manage actively.
First, the attorney must stay within the scope of the licence. A specific licence that authorises representation in defined proceedings does not create a standing authorisation to receive fees for any legal matter involving the designated client. Treating it as a blanket permission is an error with enforcement consequences.
Second, where OFAC imposes reporting conditions on a specific licence, those reports must be filed on time and in the form specified. Failure to comply with licence conditions is itself a potential violation, separate from the underlying sanctions prohibition.
Third, the attorney must monitor for changes in the designated person's status. If the designation is revoked or modified, the licence terms may change. If the designated person is redesignated or subject to a new programme, the existing licence may not cover the new designation. Checking OFAC's SDN List (OFAC's list of Specially Designated Nationals and blocked persons) periodically during the matter – not only at the point of engagement – is a professional obligation in this context.
Fourth, the attorney must consider the effect of any change in the programme. OFAC sometimes amends programme regulations, including the general-licence terms. A general licence that applied at the outset of representation may be narrowed or revoked. Counsel should have a system for monitoring relevant programme-regulation updates during a long-running matter.
Fifth, the end of the licensed matter does not automatically permit the transfer of any surplus funds back to the designated person without further authorisation. If any amount was deposited in advance and not fully applied to fees and expenses, the handling of the residue must also be considered against the applicable programme rules.
We regularly advise legal teams on structuring licence compliance at the beginning of a matter precisely so that these operational obligations are built into the engagement management process rather than discovered after a compliance question arises.
Related practices
- Frozen account management – coordinating access to frozen assets across multiple sanctions authorities
- Legal-fees licences under OFSI – UK licensing procedure, conditions, and cross-regime comparison
- Licence amendment and renewal under BIS / EAR – managing export licences once issued, including scope amendments
The position above describes the general structure of OFAC legal-fees licensing. Your specific situation – the programme, the fee structure, the source of funds, the nature of the proceedings – changes the analysis materially. If a designation has just occurred and representation is needed urgently, early contact with sanctions counsel is critical.
If an attorney has already received fees that may not have been covered by a valid licence, or if OFAC has made enquiries about a fee arrangement, the priority is to scope the potential issue and assess whether a VSD (voluntary self-disclosure to a regulator) is appropriate. Time and documentation both matter at that stage.
For a confidential review of a legal-fees licensing question, contact Calder & Vance at info@caldervance.com.
Frequently asked questions on legal-fees licences under OFAC
Who administers legal-fees licences under OFAC?
OFAC – the Office of Foreign Assets Control within the US Department of the Treasury – administers all legal-fees licences under US sanctions programmes. For programmes that carry a general licence for legal fees, no application is needed if conditions are met. For programmes without a general licence, or where fees will exceed any applicable cap, the attorney or designated client applies to OFAC's Licensing Division. OFAC reviews applications against its published licensing policy and the specific policy for the relevant programme. There is no independent licensing authority separate from OFAC.
What does OFAC prohibit in relation to legal-fees licences?
OFAC's core prohibition is a broad block on transactions involving blocked persons or blocked property. Payment of an attorney's retainer from a blocked account, or transfer of funds to an attorney by a third party acting for the benefit of a designated person, falls within this prohibition. The prohibition extends to facilitation: enabling a non-US person to make a payment that a US person could not make directly. A legal-fees licence carves these payments out of the prohibition, but only for the authorised scope, amount, and matter. Payments outside those limits remain prohibited and carry enforcement risk for the attorney and the payor.
How is legal-fees licensing enforced under OFAC?
OFAC enforces compliance with legal-fees licence conditions through its standard enforcement process. A payment outside licence scope – whether by exceeding a cap, covering an unlicensed matter, or receiving fees without any applicable licence – is a potential violation of OFAC regulations. OFAC may issue a cautionary letter, impose a civil monetary penalty, or refer a matter for criminal prosecution by the Department of Justice in serious cases. Attorneys are not exempt from enforcement as a professional class. The existence of a good-faith belief does not substitute for documented compliance with applicable licence terms. Voluntary self-disclosure is a factor in OFAC's penalty calculus.
About the author
J. M. Aldridge advises multinationals and financial institutions on US sanctions and export controls, with a focus on OFAC licensing, secondary-sanctions risk, and BIS classification. Calder & Vance – International Sanctions & Export Control Counsel.
About Calder & Vance
Calder & Vance is an independent international sanctions and export-control boutique. We advise multinationals, financial institutions, exporters, and individuals on the major regimes – OFAC and BIS in the United States, OFSI and ECJU in the United Kingdom, the EU Council regulations and the EU General Court, the United Nations Consolidated List, and the regimes of Switzerland, Canada, Australia, the UAE, Singapore, and Japan. Our work is limited to lawful compliance, licensing, delisting, enforcement defence, and due diligence. To discuss a matter, contact info@caldervance.com.
Disclaimer: This material is general information, not legal advice, and is not a substitute for advice on your specific facts. Sanctions and export-control rules change frequently and differ by regime; verify the current position before relying on anything stated here. Calder & Vance does not advise on circumventing or evading sanctions. For advice on your situation, contact info@caldervance.com.