Marina Lebedeva
Senior Analyst, Infospectrum
On 31 March 2026, OFAC issued its "Guidance on Sham Transactions and Sanctions Evasion" advisory. This advisory essentially moves the burden of proof from "ultimate beneficial ownership" to actual/significant control, unifying the OFAC's approach with those of the UK and EU.
What this means in practice is that counterparties with a US nexus are now required to look beyond 50% ownership, and investigate ownership transfers by blocked persons to related parties in order to identify whether these qualify as sham transactions and sanctions evasion.
In particular, OFAC is highlighting instances where blocked persons have employed opaque legal structures (including trusts), proxies, straw owners, and front businesses, among other mechanisms, to conceal their continuing interest in a variety of types of property, such as investment vehicles, bank accounts, real estate holdings, private jets, yachts, and companies.
Our Infospectrum Analyst team is valued for its standard setting research into ultimate beneficial ownership and significant control. Here are a few examples of sham transactions that we have encountered during the course of our research in recent years:
- Blocked persons transferring ownership of the business to their spouses and relatives;
- Transfer of ownership around the time of the issuance of sanctions;
- The use of a complex web of offshore-registered entities ending in a trust managed by legal professionals presented as decision-makers;
- Blocked persons transferring ownership of the business to long-term business associates and their relatives;
- Legal professionals or investment advisors of blocked persons emerging as the new managers of the assets previously associated with the blocked persons;
- A sanctioned entity reincorporated under a different name with new nominal owners while continuing the sanctioned entity’s operations;
- Manager of a sanctioned entity setting up allegedly unaffiliated businesses to engage in a specific activity, like vessel purchasing, to support the operations of the sanctioned entity;
- The ownership of a key subsidiary of a sanctioned entity transferred to a newly incorporated entity sharing management and staff with the sanctioned entity;
- An entity with perceived links to a sanctioned entity pledging its shares to a sanctioned entity in return for finance;
What you can watch out for now:
- Check whether the transfer of property in which a blocked person held an interest appears commercially reasonable, adequately considered and/or fulfils an apparent business purpose
- If ownership of the property of a blocked person has been transferred to family members or close associates, might these be acting as a proxy, facilitator, money manager, or agent for the sanctioned individual?
- Does the individual taking on the ownership of the property of the blocked person have relevant experience or expertise with respect to the transferred property?
- Does the presence of complex legal structures (involving multi-layered limited liability companies, partnerships, or trusts in higher-risk jurisdictions) fulfil a discernible legitimate purpose?
- Are there any facts or circumstances that may suggest that a blocked person remains involved in the use, management, or disposition of property (including through proxies or intermediaries)?
- Did the transfer of ownership take place immediately before or after a designation?
While this list is not exhaustive, it provides indications of sham transactions, which may apply individually or at the same time, and should prompt further investigation.
Providing evasive or vague responses, or failure to respond to questions regarding a blocked person’s involvement in property may also suggest an intent to conceal a continuing interest of a blocked person in property.
As compliance requirements intensify to include identifying proxies and complex, opaque ownership transfers, expert investigation is required to uncover hidden interests.
For professional due diligence and identification of actual/significant control, discover Seasearcher Counterparty Risk, powered by Infospectrum.
