Treasury Flags ‘Sham Transactions’ as a Growing Sanctions Risk

Key Takeaways

• Hidden Ownership Risks: Office of Foreign Assets Control (OFAC) is warning that sanctioned individuals are disguising continued control of assets through sham transactions.
• Reality Over Documentation: Even when ownership appears to change, assets may still be considered blocked if the sanctioned party retains a practical interest.
• Common Warning Signs: Transfers to family members, opaque structures, and continued involvement by sanctioned individuals are key red flags.
• Trusts Under the Microscope: Trust arrangements are increasingly used to obscure beneficial ownership and evade sanctions.

Deep Dive

There’s nothing particularly new about trying to hide ownership on paper. What’s changing, according to the U.S. Treasury’s Office of Foreign Assets Control, is how frequently, and how creatively, it’s being done.

In fresh guidance issued this week, OFAC takes aim at so-called “sham transactions,” where sanctioned individuals appear to give up assets while quietly holding on to them in practice. The mechanics are often simple. Ownership is transferred to a spouse, a trust, or a network of companies. The paperwork checks out. But the control, the benefit, and the decision-making remain exactly where they were before.

For compliance teams, that distinction is everything.

When a Sale Isn’t Really a Sale

The advisory leans heavily on a principle that risk professionals know well but don’t always operationalize: substance matters more than form.

A transaction that looks legitimate )complete with contracts, valuations, and legal structures) can still fall foul of sanctions rules if it doesn’t reflect a genuine transfer of ownership. OFAC makes clear that it evaluates “interest” in property based on practical and economic realities, not just legal titles.

That means a private jet placed into a family trust but still used by a sanctioned oligarch doesn’t suddenly become compliant. Nor does a bank account in a spouse’s name, if the sanctioned individual continues to direct how the funds are used.

The paperwork may change. The risk does not.

The Patterns Compliance Teams Should Recognize

Rather than presenting a rigid checklist, OFAC sketches out patterns, signals that something about a transaction doesn’t quite add up. Some are obvious in hindsight. Transfers to close family members or long-time associates. Deals that don’t make commercial sense. Ownership structures that stretch across jurisdictions for no clear reason.

Others are more subtle. A sanctioned individual who no longer “owns” an asset but is still involved in its management. A company that reappears under a different name with the same operations. A transaction that happens just before or after a sanctions designation.

On their own, these signals might not prove anything. Taken together, they start to tell a story.

Trusts, Proxies, and the Illusion of Distance

Trust structures feature prominently in the guidance, and for good reason. They sit at the intersection of legitimacy and opacity. Used properly, they’re a routine part of financial planning. Used creatively, they can blur the line between ownership and control.

OFAC points to cases where fiduciaries and intermediaries continued to act on behalf of sanctioned individuals, sometimes without fully appreciating the exposure. In these situations, the presence of layers (foundations, shell companies, family beneficiaries) creates distance on paper, but not in substance.

For firms, that raises a more uncomfortable question. It’s not just whether a sanctioned individual appears in the ownership chain. It’s whether they are still pulling the strings behind it.

Enforcement Is Following the Pattern

The warning isn’t theoretical. It lands alongside enforcement actions that show how these risks play out in practice.

OFAC highlights a case where a U.S.-based venture capital firm continued managing investments linked to a sanctioned oligarch through a proxy, resulting in a penalty exceeding $215 million. In another, a private equity firm maintained relationships tied to sanctioned funds for years, despite signals about the underlying source of capital.

The common thread is not ignorance of the rules. It’s a failure to look beyond the surface.

A Shift in What ‘Good’ Compliance Looks Like

Traditional controls (name screening, ownership thresholds, documentation checks) still matter. But they are no longer enough on their own. What OFAC is pushing toward is a more investigative posture, one that asks how a transaction works in practice, not just how it is structured on paper.

That has implications across the board. Third-party risk programs. Investment due diligence. Transaction monitoring. Even governance over trust and fiduciary relationships.

Because in the end, the risk isn’t in the paperwork. It’s in the gap between what the paperwork says and what’s actually happening.

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