Last week, The Hill reported that lobbyists representing the interests of Russian President Vladmir Putin in the United States have breathed a collective sign of relief that Mr. Putin has not yet been caught up in the sanctions designations that have been applied to some individuals close to him. The article particularly points out notable law firm Alston & Bird and public relations firm Ketchum as being amongst those lobbyists who could be impacted if Mr. Putin soon finds himself on the United States Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List, the list containing the names of those parties targeted by U.S. economic sanctions.

The article notes that that while Putin hasn’t been designated yet, if he is those representing him as lobbyists may have to obtain a license from Treasury to do so. While this is true–and indeed since no general license for legal services has been issued yet, so even those providing legal representation to those designated under the new Russia sanctions would need licenses to offer those services–I don’t believe those lobbying licenses will be issued. My experience informs me that OFAC has a policy of denying license applications seeking authorization to provide lobbying services to parties on the SDN List, and there is nothing readily apparent from the current situation with Russian which would make me think that policy would change.

What may be more worrisome for these lobbyists, however, is not only the fact that these lobbyists may have to cease their activities until, and if, a license is issued, any funds they are holding in retainer for a designated party will also have to be blocked. Again, my prior experience informs me that once assets belonging to an SDN are blocked within the U.S. OFAC will not license the unblocking of those funds for either their return to the designated party, or for payment for the provision of services, except in limited circumstances, and very limited amounts, for legal representation of designated parties seeking their removal from the OFAC SDN List. In other words, the banks utilized by these lobbyists holding funds in retainer on behalf of SDNs will have to block those funds, and I believe there is very little hope that OFAC will allow the unblocking of those funds, even if their policy changes and they allow for the provision of the lobbying services to those SDNs.

This could be a big problem for lawyers and lobbyists representing Russian oligarchs, senior government officials, and those individuals and entities tied to Russia’s key economic sectors. If those law and lobbying firms are holding on to large sums of funds in retainer for representation of a Russian party that is a potential sanctions target, they should take steps now to resolve the situation in order to avoid trouble down the road. If not, they may get stuck with unpaid fees, have to deal with blocked accounts, and put serious strain on their relations with these clients who will be out money because their lawyer or lobbyist didn’t act with foresight as to the potential consequences of the SDN designation.