OFAC Advisory on Sham Transactions and Sanctions Evasion

April 9, 2026

OFAC Issues Advisory to Highlight Sanctions Risks Arising from Sham Transactions

Brian Maloney, Bruce Paulsen Seward & Kissel LLP + Follow Contact LinkedIn Facebook X Send Embed

On March 31, 2026, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) released a sanctions advisory entitled Guidance on Sham Transactions and Sanctions Evasion (the “Advisory”) to highlight sanctions risks where blocked persons attempt to evade sanctions in sham transactions. OFAC describes sham transactions as involving transfers or arrangements of blocked property that are structured to conceal, rather than genuinely extinguish, a continuing interest in such property. OFAC’s advisory details factors to consider when assessing whether property may be the subject of a sham transaction, along with relevant compliance considerations.

The Advisory also provides examples of the kinds of property that OFAC has found to be involved in a sham transaction involving blocked persons or entities, highlighting the use of opaque legal structures (including trusts), proxies, nominees, straw owners or front businesses, and different kinds of property such as investment vehicles, bank accounts, real estate holdings, private jets, yachts, and companies.

While this guidance does not have the force of law, it underscores OFAC’s commitment to police sham transactions in order to ensure compliance with OFAC’s asset and property blocking sanctions regime. All persons subject to U.S. jurisdiction should evaluate their compliance and due diligence processes to ensure that they are adequately mitigating these risks.

**** Red Flags: Indicia of Sham Transactions

The Advisory outlines a non-exhaustive list of “red flags” to consider when determining whether a transaction may be a sham designed to evade sanctions, namely:

1. Commercially unreasonable transactions – Transfers lacking adequate consideration or that are not indicative of arm’s-length dealings;
2. Transfers to family members or close associates – Often where transferees may act as nominees, proxies or agents for a blocked person;
3. Transfers with an unclear business purpose – Often where transferees may be individuals with little or no relevant expertise in the transferred property;
4. Unduly complex corporate structures – Multi-layered LLCs, partnerships, or trusts, especially involving higher-risk jurisdictions or jurisdictions with little connection to the property in question;
5. Continued involvement of a blocked person – Facts that suggest a blocked person retains, directly or indirectly, an interest in the relevant property;
6. Timing – Transfer completed close in time to a sanctions designation;
7. Evasive responses – Evasive or vague responses from counterparties or intermediaries to inquiries regarding a blocked person’s involvement in the relevant property. OFAC recommends a functional approach that considers the totality of circumstances, noting that no one factor in its non-exhaustive list is dispositive.

Key Compliance Considerations

The Advisory emphasizes that OFAC expects enhanced due diligence in situations where information suggests a blocked person had previously held an interest in property. While OFAC does not seek to interfere with lawful transactions undertaken in good faith, industry participants must look beyond legal title and assess the economic and practical realities of any proposed transfer before proceeding with certain transactions. Indeed, the Advisory highlights recent enforcement actions to illustrate that the consequences of failing to scrutinize such transactions can be substantial. Participants who engage, even unwittingly, in transactions involving property that remains blocked face enforcement exposure. In addition to civil monetary penalties 1, those who knowingly serve as proxies, nominees, or facilitators for blocked persons face the risk of designation themselves. Accordingly, commercial participants should review their existing due diligence frameworks to ensure current procedures adequately account for the red flags and compliance considerations identified in this Advisory.

Finally, OFAC emphasizes that where information shows a blocked person retains an interest in property in the United States or within the possession or control of a U.S. person, that property must be blocked and reported to OFAC. And, if the property is not in the United States or within the possession or control of any US person, persons that are required to comply with U.S. sanctions should refrain from directly or indirectly dealing in that property absent authorization from OFAC.

1 For example, among other enforcement actions, the Advisory notes that in June 2025, OFAC imposed a $215,988,868 civil monetary penalty on a U.S. based venture capital firm that knowingly managed an investment for a sanctioned Russian oligarch while aware of his blocked status.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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