News

OFAC issues guidance on sham transactions and sanctions evasion

10 April 2026

Key takeaways

OFAC warns that transactions meant to hide and not truly sever a sanctioned person’s interest leave property blocked, regardless of formal equity percentages.

The guidance expands sanctions risk beyond the 50% rule, targeting indirect control through proxies, family members, trusts, and complex offshore structures.

Recent enforcement actions underscore that superficial ownership changes will not shield dealings from blocking, penalties, or designation.

On March 31, the Office of Foreign Assets Control (OFAC) at the Department of the Treasury issued a new sanctions advisory titled “Guidance on Sham Transactions and Sanctions Evasion.” The advisory highlights the sanctions risks arising from sham transactions used to evade U.S. sanctions and identifies specific red flags that businesses, financial institutions, and other persons should consider when evaluating whether property may be the subject of sanctions even if the sanctioned party does not have (or did not retain) a 50% equity interest. Given the increased scrutiny OFAC may engage in with respect to sham transactions, companies and financial institutions should reassess and strengthen their sanctions compliance programs.

OFAC guidance on sham transactions and sanctions evasion

OFAC’s recent advisory highlights sanctions risks that arise from sham transactions used to evade sanctions and identifies factors to consider when evaluating whether property may be the subject of a sham transaction. OFAC states that sham transactions occur when blocked persons, often operating through proxies or other intermediaries, effectuate transfers or establish arrangements that conceal (rather than genuinely extinguish) a continuing interest in property. Because OFAC implements functional definitions of “interest” and “property interest,” OFAC stresses that sham transactions do not terminate a blocked interest in property (even if the sanctioned party may hold less than 50% equity interest in the property), and that OFAC will continue to identify, prevent, and intervene against such conduct, including through enforcement and designation actions.

The advisory sets forth a non-exhaustive list of red flags that may indicate a sham transaction that include: commercially unreasonable transactions, transfer to family members or close associates, unclear purpose of transfer (e.g. where a transfer lacks an apparent business purpose), unduly complex corporate structures involving higher-risk jurisdictions, continued involvement of blocked persons, transfer near the time of designation, and evasive responses regarding a blocked person’s involvement. Effectively, OFAC is describing situations where a sanctioned party continues to retain, even indirectly, a property interest even though nominally it may not hold 50% (or more) of equity in a given entity; OFAC is also flagging concerns about indirect or residual property interest in complex structure such as trusts, where the “50% rule” that focuses on equity shareholding is not easily applied.

Finally, the advisory highlights several significant enforcement actions that illustrate OFAC’s willingness to take action against persons who deal in blocked property through sham transactions, including:

In June 2022, OFAC issued a Notification of Blocked Property to Heritage Trust, a Delaware-based trust, in which OFAC-designated Russian oligarch Suleiman Kerimov held a property interest through a series of legal structures and front persons.
In June 2024, the State Department designated Sentimare and four foundations through which Vladimir Potanin, a designated Russian oligarch, had transferred ownership to his minor children, concluding that Potanin retained an interest in the foundations.
In June 2025, OFAC imposed a $215,988,868 penalty on GVA Capital Ltd., a San Francisco-based venture capital firm, for knowingly managing an investment for a sanctioned oligarch through the oligarch’s nephew, who the firm knew served as a proxy for the blocked person.

Suggested diligence and investigative steps

When assessing whether a bona fide, arm’s length transfer of ownership has occurred, companies and financial institutions should consider undertaking enhanced diligence and investigative measures, including reviewing external resources. In addition to assessing ownership, parties may also need to assess potential control by a designated person to understand the risk involved with the transaction. In some cases, it may be necessary to assess whether the relevant individual or entity is subject to sanctions in other jurisdictions, such as the United Kingdom, which may independently affect risk exposure.

These investigative steps may include:

Conducting robust screening using reputable sanctions databases to identify potential connections to SDNs, blocked persons, or other high-risk individuals, including potential “shadow SDNs” or proxies acting on behalf of sanctioned persons.
Reviewing public statements, interviews, social media posts, or corporate disclosures made by an SDN or related parties to identify inconsistencies between public representations and transactional documentation that may warrant closer scrutiny.
Consulting information from non-U.S. authorities – particularly from the United Kingdom or the European Union – to provide additional context regarding ownership, control, or continuing involvement by a sanctioned individual.
Reviewing press releases, advisories, enforcement actions, and other public statements by OFAC or other U.S. government agencies to identify indications of arrangements being used to evade sanctions.
Assessing the presence and role of legal counsel for the parties to the transaction to ascertain the legitimacy of the transaction and the willingness of the parties to provide credible explanations and documentation.
Evaluating the transparency and quality of information provided by parties when responding to diligence requests and disclosing beneficial ownership or governance information.
Engaging with OFAC or other relevant U.S. government authorities to seek clarity regarding sanctions exposure.

Taken together, these steps may assist companies and financial institutions in identifying whether a transaction genuinely extinguishes a sanctioned person’s ownership or control interests, or whether the transaction presents facts or circumstances suggesting a sham transaction that could result in enforcement and designation actions by OFAC.

Please reach out to any of the listed contacts if you have questions regarding OFAC guidance or sanctions compliance more generally.

Authored by Beth Peters, Aleksander Dukic, and Elizabeth Shneider.

Next steps

Where companies and financial institutions encounter information indicating that a blocked person previously held an interest in property, they should review available information to determine if any of the above red flags are present. This review will help determine whether the property previously held by the blocked person remains blocked (i.e., whether the blocked person's property interest had been extinguished). Where information demonstrates that a blocked person retains an interest in property in the United States or within the possession or control of any U.S. person, the property must be blocked and reported to OFAC. If the property is not in the United States and is not within the possession or control of any U.S. person, persons required to comply with U.S. sanctions should refrain from directly or indirectly dealing in the property without OFAC authorization. In addition, such non-U.S. persons may also want to consider secondary sanctions and other requirements.