A designated individual or company needs legal representation. Their counsel requires payment. The assets are frozen. How does the client pay? This is not a theoretical question – it arises in every enforcement matter, every delisting proceeding, and every regulatory investigation where OFAC has blocked property. The answer is a legal-fees licence (a specific authorisation from OFAC permitting the payment of legal fees and costs from otherwise blocked funds or accounts, within defined limits). Getting that licence, and getting it quickly, is often the difference between effective representation and a proceeding conducted without adequate counsel.
Under OFAC, a legal-fees licence is a specific licence (a case-by-case authorisation to conduct an otherwise prohibited transaction) permitting payments to counsel from blocked assets. The application is submitted to OFAC with supporting documentation; OFAC reviews applications and may impose conditions including a cap on the aggregate fee amount authorised. As of mid-2026, this remains one of the most procedurally sensitive licence categories – a deficient submission prolongs the freeze and delays representation.
This page explains how the legal-fees licensing process works under OFAC, where it intersects with the UK and EU regimes for clients facing parallel proceedings, what risks a deficient application creates, and how Calder & Vance prepares and manages these applications on behalf of designated persons and their proposed counsel.
What does a legal-fees licence authorise, and who needs one?
A legal-fees licence authorises the release of blocked funds specifically and exclusively for the payment of reasonable legal fees and costs. The authorisation is narrow: it covers the designated person's representation in defined proceedings, and OFAC routinely scrutinises whether the requested fees are reasonable in scope and amount. It does not constitute a general unblocking of assets.
The need arises most commonly in four situations. First, a newly designated individual or entity needs to retain or continue retaining counsel to challenge the designation itself. Second, a company subject to an OFAC investigation requires legal representation but its accounts are frozen or its counterparties will not transact with it. Third, a business in a blocked-assets dispute requires ongoing legal support that its counsel cannot fund from unblocked sources. Fourth, an individual in a criminal or civil matter touching on sanctions needs representation, and all accessible funds have been frozen.
In our practice, the application almost always comes under time pressure. Counsel has been retained – or is being sought – and the absence of a fee licence immediately creates a conflict between the lawyer's duty to advise and the lawyer's inability to be paid. Acting early, before the designation crystallises into a frozen position with no accessible cash, is the most important step a prospective applicant can take.
The position above covers the standard case. Your facts – the identity of the designated person, the nature of the proceeding, the jurisdiction of counsel, and the regime in play – change the analysis materially.
For a confidential assessment of a legal-fees licence application, contact Calder & Vance at info@caldervance.com.
What is the legal basis for OFAC's legal-fees licensing authority?
OFAC's authority to issue specific licences, including legal-fees licences, derives from the sanctions statutes that govern the relevant programme – principally the International Emergency Economic Powers Act (IEEPA) – and the programme-specific regulations that implement them. Those regulations typically contain an express provision recognising that payments of legal fees may be authorised on a case-by-case basis. The mechanism reflects a longstanding tension in sanctions enforcement: the state's interest in maintaining the asset freeze as a coercive tool, and the designated person's procedural interest in being represented.
OFAC administers all specific-licence decisions centrally. There is no delegation to a bank, a payment processor, or a third party. The designated person, or their proposed counsel, submits an application directly to OFAC's Licensing Division. OFAC then reviews the application on its merits, may request supplemental information, and issues either an authorisation (often with conditions) or a denial. A denial can be reviewed, but there is no automatic right of administrative appeal; the designated person's recourse is to submit additional information or, in appropriate cases, to seek judicial review.
This is not a rubber-stamp process. OFAC treats legal-fees applications with the same scrutiny it applies to any other specific licence. The burden is on the applicant to demonstrate that the proposed fees are reasonable, that the recipient of the funds (counsel) is not itself a blocked person or entity, and that the payment will be applied solely to legal services in connection with the described proceedings.
How does the OFAC legal-fees licence application process work in practice?
The application process runs in four stages: preparation and drafting; submission to OFAC; the review and query period; and, if successful, ongoing administration of the licence conditions. Each stage carries its own risks and timelines, and the aggregate elapsed time can run from several weeks to several months depending on the complexity of the designation and the completeness of the initial submission.
Stage one: preparation. The application must identify the designated person with precision, describe the nature of the proceedings in which representation is sought, identify proposed counsel, and set out the proposed fee arrangement in sufficient detail for OFAC to assess reasonableness. A compelling submission addresses, proactively, the questions OFAC is likely to ask: Is the proposed scope of representation proportionate to the matter? Has the fee been negotiated at arm's length? Is there any connection between counsel and any sanctioned person that could create a secondary concern?
Stage two: submission. The application is submitted electronically through OFAC's licensing portal, together with any supporting exhibits. The completeness of the submission on day one materially affects the timeline. OFAC does not publish binding processing times for specific licences. In our experience, well-prepared legal-fees applications typically receive an initial response within a matter of weeks, but complex cases – where the designation is contested, where the programme involves heightened scrutiny, or where the fee structure is non-standard – can take considerably longer.
Stage three: queries and supplemental information. OFAC frequently issues requests for supplemental information. These are not denials; they are pauses. Each request resets the effective clock. Prompt, complete responses to supplemental requests are critical. An incomplete response, or one that introduces new ambiguity, prolongs the process and may damage the relationship with the reviewing analyst.
Stage four: licence conditions and administration. If OFAC issues the licence, it will contain conditions. Standard conditions typically include a cap on the total fees authorised, a requirement that the funds be paid directly to counsel (not to the designated person), restrictions on the use of funds (legal services only, no expenses that the licence does not cover), and a reporting or notification requirement. Breach of any licence condition is itself a sanctions violation. Calder & Vance assists clients in establishing internal controls to administer the licence conditions and to document compliance for the record.
If a transaction has already been flagged, a filing has been refused, or an existing licence has lapsed, an early review can preserve options that narrow with time. Contact us at info@caldervance.com.
How does the OFAC position compare with the UK OFSI and EU regimes?
For clients facing parallel designations – under OFAC, OFSI, and an EU Council regulation simultaneously – the legal-fees licensing question must be addressed in each regime independently. The regimes do not accept each other's licences, do not co-ordinate on timing, and apply different legal tests. Getting the OFAC licence does not authorise the same payment under OFSI rules, and vice versa.
Under the UK regime, OFSI (the Office of Financial Sanctions Implementation, the UK authority for financial-sanctions licensing) has a licensing category that covers legal fees and legal services. OFSI's approach shares some features with OFAC's: it is case-by-case, requires a detailed application, and imposes conditions on any licence granted. One important difference is that OFSI applies an ownership and control test (the UK test for whether a non-listed entity is caught through a listed person). A UK law firm that is not itself designated may nevertheless need comfort that it is not indirectly caught through its own ownership structure or that receiving funds from a designated person's account is not itself a prohibited transaction without a licence.
Under the EU regime, the relevant Council regulations governing the applicable programme also contain a legal-fees licensing category. Competent authorities at the member-state level (not the Council directly) issue these licences. This creates a jurisdiction question for EU-based counsel: which member state's competent authority is the right licensing body? The answer depends on where the funds are located and, in some cases, where the relevant legal services are being provided. In our cross-border practice, we regularly advise on the sequencing of parallel applications to OFAC, OFSI, and the relevant EU competent authority to minimise the gap in coverage and ensure that the designated client is represented throughout.
A structural divergence worth noting: under OFAC, the legal-fees licence is a specific licence and there is no standing general authorisation that covers fees in all circumstances. Under some EU programme regulations, there is a recognised derogation for legal fees that operates more automatically – but the conditions and caps vary by programme, and the relevant member-state authority may still require advance notification. Practitioners advising on parallel EU matters should never assume that the more permissive EU position mirrors or supersedes the OFAC requirement.
What are the main risk flags in a legal-fees licence matter?
Legal-fees licence applications carry several specific risks that do not arise in standard licensing work. Understanding them before submitting is essential.
Counsel as an inadvertent sanctions nexus. Where the law firm or barrister instructed by the designated person has any business, employment, or financial relationship with another designated person, OFAC will almost certainly raise a concern. The screening obligation on proposed counsel is therefore a precondition to the application, not an afterthought. We advise proposed counsel to document their own screening before the application is filed.
Fee arrangements that look disproportionate. OFAC will not authorise fees that appear excessive relative to the scope of the matter. Retainers set without reference to the market, or arrangements with unusual payment structures, will attract scrutiny. A clear, market-referenced fee letter strengthens the application.
Scope creep in the licence conditions. The licence will define the proceedings it covers. If the matter expands – a new regulatory investigation is opened, a civil claim is added, or new counsel is retained – the existing licence may not cover the incremental fees. A failure to apply for an amendment when the scope changes is a compliance risk. OFAC views licence conditions as strict; there is no informal tolerance for out-of-scope payments.
Expiry without renewal. Specific licences are time-limited. Counsel who continues to receive fees after the licence has expired is receiving blocked property without authorisation. Monitoring the licence expiry date and initiating the renewal application in advance is a basic but frequently overlooked control. See our service on licence amendment and renewal for the procedural steps.
Secondary-sanctions risk for third-party counsel. Where the designated person is subject to a US sanctions programme with secondary-sanctions reach, non-US law firms receiving fees from blocked assets – even under a valid OFAC licence – should consider whether that transaction creates any exposure under the secondary-sanctions provisions. This analysis is jurisdiction-specific and counsel-specific; it is not resolved by the existence of the OFAC licence alone.
The myth of pre-designation protection. A common misunderstanding is that a licence application filed before any formal designation has been imposed offers the applicant some form of immunity or early approval. It does not. OFAC does not issue pre-emptive licences. The licence process starts on or after the designation date, and the freeze applies from that moment. Acting quickly once a designation is issued – not before – is the correct approach.
What are the documentation requirements for a legal-fees licence application?
A complete application requires a defined package of supporting documents. The precise requirements vary by programme, but a well-prepared submission will typically include the following elements.
- A formal cover letter identifying the designated person, the relevant programme, and the nature of the authorisation sought.
- Documentary evidence of the designation (the SDN List entry or the relevant notice).
- A description of the legal proceedings or matter for which representation is sought, with sufficient factual context for OFAC to assess the scope.
- The proposed fee agreement or a draft of it, showing the rate, the estimated total, and the billing arrangements.
- Evidence that proposed counsel is not itself a blocked person or entity, and that no blocking concern arises from counsel's ownership structure.
- A description of the blocked assets from which payment is proposed to be made, and the financial institution holding them.
- Any prior OFAC correspondence on the matter or related matters.
- Where applicable, a statement addressing how the payment will be structured to comply with OFAC's conditions (direct payment to counsel; no intermediate accounts held by the designated person).
The absence of any of these elements does not cause the application to be automatically rejected – OFAC will request the missing item – but each supplemental-information round adds elapsed time. In proceedings where the client needs representation urgently, the time cost of an incomplete submission is often the most significant risk. We have acted for clients in time-critical matters where the gap between a complete and an incomplete submission translated directly into weeks of unrepresented exposure.
For questions about the documentation package for your specific programme or matter, contact Calder & Vance at info@caldervance.com.
How does the frozen-asset context interact with broader account management?
A legal-fees licence does not exist in isolation. It sits within a broader frozen-asset position that typically also involves day-to-day account management questions: Can the designated person pay rent? Meet payroll? Purchase food and medicine? These are separate licensing categories, and they require separate applications. The legal-fees licence authorises only legal fees and costs; it does not authorise any other payment from the blocked account.
The interaction between the legal-fees licence and the broader account management position matters for two reasons. First, where multiple licensing applications are pending simultaneously, OFAC may treat them together or one application may trigger scrutiny of the other. Sequencing and co-ordinating the applications is therefore a strategic decision. Second, the financial institution holding the blocked assets has its own compliance obligations. The bank or custodian must see a copy of the licence before it will release funds; it will not accept verbal assurances. The licensed payment pathway must therefore be communicated to the institution in advance and in writing, with a clear protocol for what documentation the institution requires before it will execute the transfer.
Our service on frozen account management addresses the broader asset-management licensing questions that arise alongside legal-fees applications. For complex matters involving both a legal-fees licence and day-to-day maintenance authorisations, we advise managing both tracks concurrently to avoid gaps.
Where a legal-fees licence is in place and a substantive delisting application or annulment action is also being pursued, the legal-fees licence directly supports the delisting work. The licence enables counsel to do the delisting work; the delisting work aims to end the need for the licence. These are complementary processes, not alternatives. See our related service on OFAC legal-fees licensing: advanced considerations for how this intersection affects application strategy.
A common misconception: the licence application is straightforward
In our experience, clients and their proposed counsel frequently underestimate the procedural and substantive demands of a legal-fees licence application. The assumption – sometimes stated, more often implicit – is that because the purpose of the licence is beneficial (ensuring access to legal representation), OFAC will process it quickly and leniently.
That assumption is incorrect. OFAC applies the same analytical standards to legal-fees applications as to any other specific licence category. It scrutinises reasonableness, screens counsel, checks for secondary concerns, and imposes conditions that must be administered precisely. An application filed on the assumption that OFAC will "wave it through" is often incomplete. It generates supplemental-information requests, delays, and occasionally a denial that a better-prepared submission would have avoided.
The practical implication is that specialist preparation is not a luxury in this category – it is a precondition to a timely outcome. We regularly advise both designated persons and their proposed legal counsel on preparing these applications, managing the OFAC query process, and putting in place the internal compliance structure needed to administer the licence conditions.
Related practices
- Frozen account management – licensing strategy for day-to-day access to blocked assets alongside legal-fees applications.
- OFAC legal-fees licensing: advanced considerations – strategic sequencing and licence conditions in complex, parallel-regime matters.