How to Obtain OFAC Authorization to Pay Legal Fees from Blocked Funds
No standalone “OFAC license for legal fees” exists. Legal fee payment from blocked funds requires a specific license under 31 CFR § 591.507, even though providing legal services is generally authorized under 31 CFR § 591.506(a). Our legal team has prepared OFAC specific license applications for counsel payment across fifteen sanctions programs, securing authorization for release of blocked assets to pay defense costs in administrative proceedings, district court litigation, and appellate matters.
OFAC specific license — case-by-case written authorization issued by the Office of Foreign Assets Control Licensing Division permitting a transaction otherwise prohibited under U.S. sanctions law, including payment of professional fees from blocked funds when no alternative funding source is available.
Key Takeaways
- Providing legal services to sanctioned individuals is generally authorized; receiving payment from blocked funds requires a specific license application to OFAC Licensing Division
- OFAC caps licensed legal fees at $14,000 per administrative proceeding or district court case, $10,000 per appellate case, with $125 hourly rate ceiling — doubled in extraordinary cases
- Total legal costs beyond attorney fees are capped at $15,000 for all counsel across all proceedings combined
- Specific license applications must demonstrate no alternative funding exists and include detailed fee breakdown, engagement letter, and evidence of blocked account status
- Electronic filing through OFAC’s online licensing portal is the preferred submission method, with processing times varying by sanctions program complexity
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What Are the Sanctions Compliance and Recordkeeping Obligations?
OFAC replaced reporting requirements with recordkeeping mandates. Under 31 CFR § 591.506 and parallel rules across sanctions programs, U.S. persons using general licenses must keep transaction records for five years from the transaction date.
For legal services under general license authority, keep:
- Client intake documents and engagement letters
- Time records (date, attorney name, task description, hours)
- Billing statements and invoices
- Payment records for non-blocked fund payments
- Correspondence about sanctions status and authorization
Specific license transactions—payments from blocked funds under an approved license—require expanded records:
- Your specific license and any amendments that followed
- Transaction records proving you followed the license terms
- Evidence showing where the payment money came from (blocked account documentation)
- Confirmations from your bank or wire service
- Any emails or letters you exchanged with OFAC about the license
Keep records in English, or provide certified translations. Digital files work if you can actually access them later. Here’s the critical part: OFAC can demand these records anytime, and if you can’t produce them, that’s a separate violation on its own—regardless of whether the original transaction was authorized.
| Authorization Type | Recordkeeping Period | Required Documentation | Reporting Obligation |
|---|---|---|---|
| General license (legal services) | 5 years from transaction date | Engagement letter, time records, billing statements | None (recordkeeping only) |
| Specific license (fee payment) | 5 years from transaction date | License copy, payment records, transaction evidence, OFAC correspondence | None unless license specifies reporting |
| No license (prohibited transaction) | 10 years (violation records) | All documentation of blocked transaction | Mandatory blocking report within 10 days |
What this means: You’ve traded away some reporting headaches in exchange for keeping meticulous files. The compliance obligation didn’t disappear—it just shifted to your filing cabinet. OFAC wants five years of complete transaction records, and they’ll ask for them.
What Records Must Be Kept for OFAC-Licensed Legal Fee Payments?
Beyond the baseline five-year retention period, your specific license almost certainly demands additional documentation. Check your license terms closely. Most require:
Payment documentation. Wire transfer confirmations. ACH receipts. Check images. Any proof that money actually moved from the blocked account named in your license to your trust account or operating account—the exact account you identified in your application.
Fee detail. Itemized billing statements showing the date, attorney name, task description, hours worked, and hourly rate for each entry. Separate out legal costs and attach vendor invoices. OFAC wants granular billing, not lump sums.
Compliance certification. Some licenses require you to sign a statement—either annually or when the matter closes—confirming three things: all payments stayed within the authorized cap, no funds went to unauthorized uses, and you satisfied every license condition.
Unspent funds handling. If OFAC authorized more than you actually spent, the license likely requires you to either return the surplus to the blocked account or re-block it in a new account. Document the return transaction.
Law firms juggling multiple OFAC matters should set up internal systems: a centralized license log, billing software that prevents over-billing against each license cap, quarterly internal audits, and one designated person responsible for OFAC compliance. Firms working regularly with sanctioned clients—especially larger practices—should consider hiring a third-party sanctions compliance specialist to pressure-test their controls.
Enforcement consequences are severe. Civil penalties reach $356,579 per violation or twice the transaction value, whichever is greater. Willful violations trigger criminal prosecution. State bars can discipline you. OFAC publishes every enforcement action on its website, and a violation follows your firm’s reputation. Clean recordkeeping and strict adherence to license terms are your insurance policy.
Our team provides ongoing sanctions legal counsel throughout your license term—including compliance monitoring and amendment applications if your case circumstances change.
Frequently Asked Questions
Can foreign lawyers receive payment under OFAC general licenses?
OFAC’s definition of “U.S. person” includes U.S. citizens, green card holders, U.S. corporations, and anyone physically present in the United States. Foreign lawyers working entirely outside U.S. borders are not directly bound by OFAC rules. But here’s the catch: U.S. banks will not move money from a blocked account to anyone without explicit license approval. If payment travels through American banking channels, your foreign counsel needs OFAC authorization whether they’re technically a U.S. person or not.
Foreign lawyers can sidestep OFAC licensing in three ways: accept payment from unblocked accounts, work for free, or arrange payment through non-U.S. financial institutions that never touch American territory. The third option carries secondary sanctions risk depending on which sanctions program applies. Coordinating with experienced OFAC attorney expertise helps foreign counsel navigate these cross-border payment puzzles.
What happens if legal fees exceed OFAC license caps?
You have three paths forward: eat the excess as pro bono work, request a license amendment from OFAC, or stop representing the client (subject to ethics rules requiring orderly withdrawal). OFAC considers amendment requests when case complexity increased unexpectedly, but approval isn’t guaranteed.
Budget conservatively within your licensed cap. Request an “extraordinary circumstances” designation at application time if your case profile suggests higher fees will be inevitable. Once the license issues with standard caps, OFAC expects you to prove that unforeseen procedural twists materialized—not just that the case grew more complicated than you initially estimated. Contingency fees or variable arrangements conflict with OFAC’s rigid hourly rate and total fee ceilings.
For matters that outgrow their licensed amounts, OFAC representation services specialists can help you extract maximum value from existing licenses while respecting statutory limits.
Do OFAC license requirements apply to all sanctions programs?
No. Haiti’s sanctions regulations (31 CFR part 591) contain the template that OFAC copied into Venezuela, Russia, Belarus, and Burma programs. Counter-terrorism sanctions work differently. Some older programs lack explicit legal services authorization at all, forcing counsel to request ad hoc licenses without the benefit of published fee caps. Designations under various authorities may permit or forbid licensed legal payments.
Don’t assume your program fits the standard model. Consult OFAC’s Licensing Division or OFAC license duration and extension specialists before assuming general license coverage applies to your situation.
Can OFAC revoke a specific license after it has been issued?
Yes. OFAC explicitly reserves the right to modify, suspend, or revoke any license anytime. Standard license language gives OFAC authority to pull authorization if circumstances shift, policy changes, or your application contained material falsehoods. Revocation is rare but possible if OFAC discovers the blocked property was misidentified, the client’s sanctions status changed, or you violated license terms.
If your license is revoked, stop accepting payments from blocked accounts immediately. Payments you made before revocation—so long as they complied with the license while it existed—don’t retroactively become violations. OFAC sends written notice with an effective date. You can request reconsideration or apply for a replacement license if conditions support it.
How do OFAC legal fee caps compare to other jurisdictions?
OFAC’s hourly and total fee caps are distinctly American. The European Union, United Kingdom OFSI, Canada, and most other countries impose no statutory caps. EU regulations authorize payment from frozen funds for “basic needs,” including legal services, without specifying maximum amounts.
This gap creates real incentives for sanctioned clients to seek authorization wherever possible. Counsel with international practices should compare licensing terms across jurisdictions. If your client has frozen assets in both the U.S. and EU, consider seeking EU authorization for legal fees to avoid OFAC’s $125 hourly ceiling—provided your work doesn’t require a U.S. person to be involved.