Do Law Firms Need to Run OFAC Checks? Sanctions Screening for Attorneys and Legal Practices

Do Law Firms Have to Do OFAC Screening?

Yes. OFAC's sanctions rules bind every "US person," a category that includes individuals, companies, and professional practices located in or organized under the laws of the United States. A law firm does not get a pass because it provides legal services rather than financial services. If your firm accepts a client, takes a fee, or moves funds on someone's behalf, and that someone turns out to be a sanctioned party, you have a problem regardless of your practice area. So attorneys need to check their clients, and the other parties to a matter, against OFAC's Specially Designated Nationals (SDN) List, the same core list a bank screens against.

This surprises a lot of attorneys, because law firms sit outside the Bank Secrecy Act. You are not a "financial institution" under BSA rules in the way a bank or credit union is, so you do not have a mandated AML program, and you are not filing Suspicious Activity Reports. But BSA/AML and OFAC are different bodies of law with different triggers. BSA obligations attach to financial institutions. OFAC obligations attach to US persons, full stop. Being outside one regime tells you nothing about your status under the other. See how BSA/AML and OFAC programs work together for the fuller distinction.

Can a Lawyer Represent a Sanctioned Person?

Sometimes, but not by default, and not without paperwork. OFAC's regulations generally prohibit US persons from providing services, including legal services, to a Specially Designated National or other blocked person. Several sanctions programs carry a general license covering a narrow slice of legal work, most commonly legal advice about US sanctions requirements themselves and representation in certain judicial or administrative proceedings. Outside that narrow lane, providing legal services to an SDN typically requires a specific license from OFAC.

Payment is a separate question from representation. Receiving payment from blocked funds, meaning funds in which the sanctioned client has an interest, is prohibited without a license even when the underlying legal work itself is authorized. A firm that ends up representing a blocked person (for example, defending against the sanctions designation itself) may need one license to do the work and a second authorization, or a specific license, to get paid for it, depending on where the funds originate. If you find yourself here, this is not a DIY situation; it calls for sanctions counsel and, where required, a formal license application to OFAC before you proceed.

High-Risk Practice Areas

Some parts of a general practice carry meaningfully more sanctions exposure than others. If your firm touches any of these, your screening should be more than an afterthought:

• Real estate closings. You are disbursing funds to a seller and often representing a buyer entity whose beneficial owners you may not know at intake.
• M&A and corporate transactions. Counterparties, target companies, and their ultimate owners all need to clear before you close.
• Trusts and estates with foreign parties. Fiduciary roles are a well-documented enforcement target: a trustee who manages assets for a sanctioned beneficiary or grantor is dealing in blocked property, even if the trustee never meets the sanctioned person directly.
• International arbitration. Parties, arbitrators, and even the entities funding a claim can be sanctioned nationals or their instrumentalities.
• Immigration. Clients with cross-border business or political exposure are more likely to intersect with a designation than a typical domestic caseload.

If your practice touches real estate closings specifically, pair this with the OFAC guidance written for the closing table: OFAC screening for title companies and real estate.

Your Trust Account Is a Hidden Exposure Point

IOLTA and other client trust accounts are where firms get caught off guard. The moment your firm accepts funds from or on behalf of a blocked person into trust, those funds become blocked property. You cannot simply return them to the client, disburse them, or move them to your operating account. They freeze in place, and you now hold blocked assets with reporting obligations attached. This is true even for something as routine as a retainer or a settlement deposit. Screening the payor before funds land in trust, not after, is the only way to avoid this.

What a Proportionate Firm Program Looks Like

You do not need a compliance department to do this reasonably. A workable program has three checkpoints:

• Screen at intake. Every new client and every individual with a controlling interest in a new entity client, run before you open the matter or accept a retainer.
• Screen opposing parties and payors in transactional matters. Anyone your firm will be paying, receiving funds from, or disbursing to on a closing, deal, or settlement, not just your own client.
• Rescreen long-running matters. OFAC adds names to its lists continuously. A matter that has been open for a year should be rescreened periodically, and especially before a closing, distribution, or fee payment.

How Solo and Small Firms Can Comply Without a Budget Line for It

You do not need enterprise compliance software to clear this bar. Two practical options fit a law practice at any size:

• Run a name through the free sanctions search at OFACScreen during intake. It checks all eight major sanctions and denied-party lists (OFAC SDN, OFAC Non-SDN Consolidated, BIS Denied Persons, UN Consolidated, EU FSF, UK OFSI, Canada SEMA, and Swiss SECO), returns full results, and requires no signup.
• When a closing, deal, or opposing-counsel demand calls for documented proof rather than a quick check, generate a $9.99 audit-ready PDF report and drop it straight into the matter file. It is a cleaner answer to "show me you screened" than a screenshot.

Firms with higher transaction volume, multiple offices, or a practice management system they want screening wired into will want to move beyond one-at-a-time checks. See API integration for OFAC screening for wiring checks into an intake system, and batch screening best practices for clearing a client roster in bulk.

Real Enforcement Context

Enforcement reaches attorneys directly, not just the institutions they advise. Lawyers who have helped sanctioned parties hold, maintain, or move US assets, for example by using client or firm accounts to keep property owned by a sanctioned oligarch running, have faced both civil sanctions liability and criminal prosecution by the Justice Department. The pattern is consistent: fiduciary and gatekeeper roles, exactly the kind of work trusts-and-estates and closing lawyers do routinely, sit squarely within OFAC's enforcement focus, and a trustee who manages blocked property or a lawyer who moves blocked funds is exposed even without any intent to evade sanctions. For the range of penalties OFAC can impose and how the agency treats voluntary disclosure, see OFAC penalties and enforcement.

There is a genuine tension here with legal ethics. A lawyer's duty of confidentiality and, in some circumstances, the obligation to zealously represent a client sit uneasily next to a federal obligation to freeze assets, decline representation, or report a blocked-property situation. State bar guidance generally treats compliance with federal law as compatible with, not overridden by, the duty of confidentiality: you can decline a representation or a transaction on sanctions grounds without breaching your ethical obligations to a client you never took on. Where a firm discovers a sanctions problem mid-representation, that is a conversation for outside compliance or sanctions counsel, not something to resolve informally.

Intake Checklist

Bolt this onto the conflicts check your firm already runs on every new matter:

• Screen the named client (individual or entity) against the sanctions lists before opening the matter.
• For entity clients, identify and screen anyone with a significant ownership or controlling interest, not just the entity name.
• In transactional matters, screen the opposing party, the payor, and anyone your firm will disburse funds to.
• Screen before accepting any funds into your trust account, not after.
• If a match returns, do not proceed, disburse, or discuss the match with the party involved. See how to handle an OFAC match before taking any next step.
• Save the screening result, dated, in the matter file. A one-time PDF report is enough for most matters.
• Rescreen before closing, before final disbursement, and periodically on any matter open longer than a few months.

None of this needs to slow down intake. A name check takes under a minute, and it is far cheaper than explaining to OFAC after the fact why your firm didn't run one.