A designated individual or entity receives a blocking notice. Within days, their legal team faces an acute problem: the assets needed to pay defence counsel are frozen. Every dollar sitting in a blocked account is unavailable. The clock on any enforcement response keeps running. Without a legal-fees licence from OFAC, retained counsel cannot lawfully receive a single payment from those funds.
A legal-fees licence (a specific authorisation permitting payments from blocked funds to cover reasonable legal expenses and court costs) is the primary mechanism under OFAC's regulatory regime that allows a designated person to fund their own legal representation. The governing authority is OFAC, which issues the licence under its IEEPA or TWEA powers. Without an active authorisation, any transfer from blocked assets to pay counsel constitutes a prohibited transaction and exposes both the payor and the recipient to civil liability.
This page covers how the legal-fees licence process works, what distinguishes it from other OFAC-specific licensing categories, where the procedure intersects with UK and EU rules, and what a business or individual should do before the first billing cycle lands.
What is a legal-fees licence and why does it matter?
A legal-fees licence is a specific authorisation that OFAC issues on a case-by-case basis, permitting payments from blocked funds to meet reasonable attorney fees and related legal costs. Without it, every payment from a blocked account – however small – is itself a prohibited transaction under the applicable programme regulations.
The stakes are direct. A designated party facing an enforcement action, a delisting petition, or a commercial dispute cannot instruct, retain, or pay counsel from blocked assets without first obtaining OFAC's written authorisation. Counsel who accept payment from an unlicensed blocked account run their own exposure. In practice this means that the moment a designation is imposed, the designated party and their legal team must move simultaneously on two tracks: building the substantive legal strategy and securing the licence that makes payment lawful.
OFAC does not apply a single published fee cap across all programmes. The reasonableness of the fees requested is assessed by reference to the scope of the legal work, the complexity of the matter, and, in some programmes, a separately published fee schedule. Applicants who submit fee estimates that appear out of proportion to the stated scope will face additional questions from OFAC's licensing staff, slowing the process. Getting the estimate right at the outset is as important as the application's legal basis.
The legal-fees licence category also interacts with the due-process considerations that have made courts receptive to challenges where blocked persons cannot afford counsel. That dynamic shapes how OFAC evaluates applications. In our experience, demonstrating that a specific legal matter is already under way – rather than hypothetical – materially strengthens the application and reduces the risk of OFAC requesting further information.
The governing legal basis and OFAC's authority
OFAC's authority to impose asset freezes and to grant exceptions for legal fees flows from two principal statutes: IEEPA and, in narrower cases, TWEA. Each programme has its own set of implementing regulations. The legal-fees mechanism is typically available either through a published general licence covering ordinary legal expenses up to a programme-specific threshold, or through a specific-licence application when expenditure exceeds that threshold or no general authorisation applies.
Where a general licence (a standing authorisation permitting a defined category of transactions without a separate application) exists in the relevant programme, it typically covers a defined monthly or transactional limit on legal fees. Expenditure within that limit can proceed without prior approval. Anything above the limit requires a specific licence. Not every OFAC programme publishes a general licence for legal fees. Practitioners advising on OFAC matters note that the first step is always to read the programme-specific regulations to confirm whether a general licence exists and, if so, what its scope is.
OFAC's licensing division reviews specific-licence applications and may issue, deny, or issue with conditions. OFAC can also request additional information – a so-called "return without action" – suspending the review clock until the applicant responds. This administrative flexibility means that a poorly prepared application does not necessarily fail; it delays, which for a designated party defending enforcement proceedings or a litigation deadline can be equally damaging.
The position above covers the standard case under a single programme. Your facts – the designation programme, the nature of the legal matter, the identity of the recipient counsel, and the structure of the fee arrangement – change the analysis in ways that can shift the outcome from a general-licence self-authorisation to a multi-month specific-licence process.
For parties whose assets are also subject to UK or EU measures, the OFAC legal-fees licence operates in parallel, not in lieu, of separate OFSI and EU licensing requirements. Cross-border licensing is not automatically aligned. OFAC may grant an authorisation that OFSI declines, or vice versa, leaving the party with a fragmented ability to fund different elements of their defence. To discuss your exposure under a specific programme and whether a general licence applies, contact Calder & Vance at info@caldervance.com.
How does the application procedure work?
A specific-licence application for legal fees requires the applicant to set out the identity of the designated party, the nature of the legal proceedings for which the fees are needed, the identity and jurisdictional position of the legal services provider, and a fee estimate tied to specific work. OFAC scrutinises each of these elements.
The procedure typically follows a defined sequence:
- Programme identification: Confirm which sanctions programme applies and whether the designated party is on the SDN List (OFAC's list of Specially Designated Nationals and blocked persons) or subject to a sectoral or other targeted restriction.
- General-licence review: Check whether the programme regulations include a general licence for legal fees and whether the anticipated expenditure falls within its scope. If yes, document the self-authorisation and proceed. If no, or if fees exceed the threshold, proceed to a specific-licence application.
- Application preparation: Draft the application with a full description of the legal matter, detailed fee estimates by task or billing period, and identification of each payee (including any sub-retained experts or local counsel in the relevant jurisdiction).
- Submission and tracking: Submit via OFAC's online licensing portal. OFAC issues an acknowledgment with a reference number. The review period begins from receipt of a complete application.
- Responding to requests for additional information: If OFAC returns the application for additional information, the clock pauses. A swift, complete response is essential to protect deadlines in the underlying legal matter.
- Licence issuance or denial: OFAC issues the licence with conditions (permitted payees, purpose limitation, reporting obligations) or denies with a statement of reasons. A denial can be appealed through OFAC's administrative reconsideration process.
- Ongoing compliance: Once issued, the licence carries reporting requirements and, where required, record-keeping obligations. Licence conditions must be monitored throughout the period of the matter.
In our experience, applications that clearly separate the legal work into defined phases – with fee estimates attached to each – move through OFAC's review more efficiently than omnibus submissions. The structure helps OFAC's licensing analysts assess reasonableness without needing to come back to the applicant for clarification.
How does the UK and EU position compare?
For a designated party with assets in multiple jurisdictions, OFAC's legal-fees licensing process is only one part of the picture. Both OFSI in the UK and the competent authorities in EU member states operate their own licensing regimes, and their approach to legal fees differs in ways that create practical risks for cross-border matters.
Under OFSI, the legal basis for licensing payments to meet legal costs sits within the UK Sanctions and Anti-Money Laundering Act regime and the relevant thematic sanctions regulations. OFSI publishes licensing grounds that include a ground specifically covering legal fees and costs. The test OFSI applies requires the funds to be intended for reasonable professional legal services and associated costs, and the licence is programme-specific. OFSI has published guidance indicating that applications for legal-fees licences are assessed against whether the amounts are reasonable and whether the payee is a regulated legal professional.
The EU position is analogous in structure but differs in execution. EU member state competent authorities issue licences under the relevant Council regulation for the programme in question. The EU also operates a legal-fees exception directly in some regulations, permitting certain payments up to a defined limit without a prior licence. But the jurisdictional fragmentation of EU competent authorities means that a designated party with assets in multiple member states may need to apply to several authorities in parallel. There is no single EU-wide legal-fees licence.
What is the practical implication? A designated party whose assets are spread across the United States, the United Kingdom, and two or more EU member states may need three or four separate legal-fees licences running concurrently, issued by different authorities applying different procedural standards and different definitions of "reasonable fees." In our cross-border practice, we regularly advise on coordinating these parallel applications so that authorisations align in timing, scope, and the definition of eligible legal costs.
One further divergence worth noting: under OFSI and the EU regime, the ownership and control test (the mechanism by which a non-listed entity may still be caught because a listed person owns or controls it) can affect whether the party paying fees is itself subject to the freeze. Where the payor – rather than the designated individual – is the party seeking the licence, the analysis of who is actually caught by the freeze becomes a preliminary question. That question is handled differently under OFAC's mechanical 50 percent ownership rule and the OFSI and EU control tests.
What are the main risk flags in legal-fees licensing?
Several risk patterns arise consistently in legal-fees licence applications and, if unaddressed, can extend the review timeline, trigger licence conditions, or result in denial.
Recipient counsel in a restricted jurisdiction. If the legal services provider is itself subject to restrictions – for instance, because of an affiliation with a sanctioned entity or a jurisdictional connection that creates a compliance concern – OFAC will scrutinise the payee as carefully as the designated payor. Counsel must confirm their own clean position before accepting engagement.
Fee estimates that are incomplete or inconsistent. An application that describes "ongoing legal representation" without specifying the matter, the billing structure, and the period covered invites OFAC to ask for more information. Each request for additional information is a delay. In our experience, applications submitted with detailed phase-by-phase estimates and supporting engagement letters move materially faster.
Failure to track the general-licence ceiling. Where a general licence permits legal fees up to a defined limit, a party that exceeds that limit – even inadvertently – has made an unlicensed transaction. This is itself a potential violation. Firms must maintain running totals and apply for a specific licence before the general-licence ceiling is reached, not after.
Overlapping designations creating conflicting obligations. A party jointly designated by OFAC and OFSI who obtains an OFAC licence and then pays from a UK-held account without an OFSI licence has resolved one problem and created another. The licences must be aligned in scope and timing.
Post-licence reporting failures. Many legal-fees licences carry a reporting condition – the licensee must confirm to OFAC that payments were made within the authorised scope, by the specified deadline. Missing that report, or reporting a figure that differs from the licenced amount, can trigger an inquiry. It can also jeopardise renewal of the licence for subsequent billing periods.
If a transaction has already been flagged, or if a payment has been made from a blocked account before the licence was obtained, an early review of the position can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com to assess your current exposure.
Do you need specialist counsel for legal-fees licences under OFAC?
The legal-fees licensing process appears procedural at first. The application form exists; the licensing portal is publicly accessible; the process is documented. For parties who have dealt with OFAC before, or whose counsel has significant prior experience with the specific programme in question, a relatively contained matter may be manageable without a specialist sanctions adviser on the licensing aspect.
That assessment changes in several situations. Where the general-licence question is uncertain – because the programme regulations are recent, have been amended, or are written ambiguously – an error in either direction carries cost. Claiming a general licence that does not apply is a violation. Missing a general licence that does apply wastes time and money in a specific-licence process.
A common assumption is that the substantive defence counsel – criminal or civil, retained on the underlying matter – can also manage the OFAC licence that funds their own fees. In our experience, this creates a structural conflict that rarely serves the client well. Counsel focused on the underlying litigation have neither the OFAC licensing experience nor, in most cases, the incentive structure to manage the sanctions compliance aspect with the same rigour as a specialist. The licensing process requires separate, undivided attention.
For parties with parallel OFSI or EU designations, the case for specialist cross-border counsel is clear. The procedural requirements, the competent authorities, the reporting deadlines, and the definitions of eligible costs differ across regimes. A single point of coordination for all three licensing tracks is operationally efficient and reduces the risk of an error in one jurisdiction creating a compliance breach in another.
Our team regularly advises designated parties, their defence counsel, and financial institutions holding blocked assets on all aspects of the legal-fees licensing process. We assess eligibility, prepare and submit the licence application, manage the regulator's queries, and monitor post-licence reporting obligations.
How Calder & Vance approaches legal-fees licensing
We advise designated parties, financial institutions, and defence teams on legal-fees licences under OFAC and on the parallel authorisations required under OFSI and EU competent authorities. Our approach is structured around the practical decision points that determine whether a matter proceeds quickly or stalls.
At the outset of an engagement, we:
- Identify the applicable sanctions programme and confirm whether a general licence for legal fees exists and what its scope is.
- Review the ownership and control position to confirm which assets are actually blocked and which entities within a group structure are caught.
- Confirm the identity and jurisdictional position of all proposed recipients of licenced payments – counsel, experts, and any local professionals in the relevant jurisdiction.
- Prepare the specific-licence application with programme-appropriate fee estimates, a description of the underlying legal matter, and supporting engagement documentation.
- Coordinate parallel applications to OFSI, EU competent authorities, or other relevant regulators where the designated party's assets are held in multiple jurisdictions.
Once a licence is issued, we manage compliance: tracking payments against the authorised scope, maintaining the required records, and ensuring that post-licence reporting conditions are met on schedule. Where an application is denied or returned without action, we prepare the reconsideration submission or, where necessary, advise on the route to judicial or administrative challenge.
In a recent matter, a financial-services business whose key individual was designated under a US programme needed to fund the individual's legal defence from assets held at a US bank. The blocking order was broad and there was no general licence covering the relevant fees. We prepared and submitted the specific-licence application, coordinated with the institution holding the blocked account, and managed OFAC's information request within a tight litigation timeline. The licence was issued before the first defence filing was due. We state this as a description of the work, not as a guarantee of any particular outcome.
We have also acted for counsel who have been engaged by designated parties but need to confirm the licensing position before accepting payment. The receiving attorney's analysis is distinct from the designated party's application: counsel who accept payment without confirming there is a valid licence, or that a general licence applies, carry their own exposure.
Related practices
- Frozen account management under BIS/EAR – managing blocked-asset obligations and export-control freezes across US regulatory programmes
- Legal-fees licensing: procedure and compliance – detailed procedural guidance on preparing and managing OFAC legal-fees applications
- Legal-fees licences: cross-border coordination – parallel OFSI and EU licensing for designated parties with multi-jurisdictional asset holdings