OFAC’s Seven-Figure Warning to Sanctions Gatekeepers

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has announced a substantial settlement of $1,092,000 with an individual identified only as U.S. Person-1, an attorney and former government official, to resolve civil liability arising from 122 apparent violations of U.S. sanctions related to Russia. The violations occurred while the attorney acted as a fiduciary for a U.S.-based family trust connected to a Russian oligarch who was designated a Specially Designated National (SDN) in 2018. The enforcement action underscores the pivotal role that professional gatekeepers play in the financial system and highlights the acute anti-money laundering (AML) risks posed by trusts and other complex ownership structures that sanctioned individuals may use to conceal and preserve their assets. The case reinforces the necessity of robust and ongoing compliance measures, even where legal advice suggests that an arrangement may be technically permissible, particularly when high-risk individuals and their intermediaries are involved. It also serves as a clear reminder that U.S. sanctions operate on a strict liability basis, carrying severe financial consequences for non-compliance.

At the heart of the matter is the way in which fiduciary authority was leveraged to keep blocked assets operational, effectively enabling prohibited services for a sanctioned oligarch. U.S. Person-1 served as the fiduciary of a trust that was almost entirely funded by the oligarch, who was formally placed on the SDN list in April 2018 as part of Russia-related sanctions. Despite a long-standing personal and professional relationship with the oligarch and clear awareness of the designation, U.S. Person-1 continued to manage and authorize trust activities from 2018 through 2022. These activities included approving transfers of trust assets, authorizing payments to service providers, and taking other substantive actions on behalf of the trust. OFAC determined that these actions constituted dealings in blocked property or the provision of prohibited services to an SDN. By continuing to operate the trust, the attorney not only facilitated the oligarch’s indirect access to the U.S. financial system but also lent the arrangement a veneer of legitimacy, which may have led other U.S. persons to believe that providing services to the trust was lawful. The use of trusts in this manner reflects a well-established money laundering technique, allowing beneficial owners to obscure their interests through layers of legal formality, a method particularly effective for sanctions evasion.

The case also exposes the structural weaknesses inherent in trusts when it comes to identifying and freezing the property of sanctioned persons. Although the trust was established in the United States and presented as a separate legal entity, OFAC concluded that it remained blocked property because the oligarch retained a continuing property interest. This interest was exercised through the active participation of a family member, referred to as the “Proxy,” who regularly communicated with investors and fiduciaries on the oligarch’s behalf and had no independent source of income apart from the oligarch. While U.S. Person-1 sought and obtained outside legal advice that initially indicated the trust was not blocked, OFAC found that the ongoing and substantive involvement of the Proxy should have made it evident that the oligarch maintained ultimate control over significant trust decisions. This demonstrated that the formal legal structure of the trust could not override the reality of beneficial ownership and control. Over time, the 122 apparent violations allowed the trust’s assets to grow substantially in value following the oligarch’s designation, directly frustrating the objectives of the sanctions regime. The matter highlights the importance of a substance-over-form approach in AML and sanctions compliance, requiring professionals to look beyond documentation to assess actual control and benefit.

In determining the penalty, OFAC weighed a range of aggravating and mitigating factors, ultimately setting the settlement amount at roughly 17% of the statutory maximum of $6,245,136. Among the aggravating factors was U.S. Person-1’s failure to voluntarily self-disclose the apparent violations, a step that often significantly reduces penalties in sanctions cases. OFAC also found that the conduct ran counter to the goals of the Russia sanctions program by allowing a designated oligarch to continue making use of the U.S. financial system. The attorney’s ongoing fiduciary role helped sustain the trust’s operations and undermined the integrity of the sanctions framework. On the mitigating side, OFAC noted that U.S. Person-1 had no prior OFAC enforcement actions or findings of violation in the preceding five years. The individual also provided substantial cooperation during the investigation and agreed multiple times to toll the statute of limitations, facilitating OFAC’s review. While these factors reduced the overall penalty, the resulting seven-figure settlement remains a significant sanction for compliance failures. The case illustrates that for attorneys and fiduciaries, failing to self-disclose while actively enabling access to blocked property is viewed as a serious regulatory breach.

The enforcement action offers critical compliance lessons for professional gatekeepers, including lawyers, trust and corporate service providers, accountants, and investment advisers. These actors occupy a central position in the financial ecosystem and are therefore prime targets for exploitation by sanctioned individuals and money launderers seeking to obscure asset ownership and control. The case makes clear that initial reliance on outside legal advice does not absolve responsibility when subsequent facts or patterns of behavior, such as persistent engagement with a Proxy, indicate that a blocked person continues to exert control. Effective sanctions compliance requires continuous and adaptive due diligence, extending well beyond initial screening. Enhanced due diligence measures are especially vital when dealing with complex legal structures linked to Politically Exposed Persons (PEPs) or individuals from high-risk jurisdictions such as Russia. Professionals are expected to repeatedly reassess beneficial ownership and control using a risk-based approach to ensure that sanctioned persons do not benefit from or direct asset use. The matter reinforces that U.S. persons acting in fiduciary capacities are strictly prohibited from facilitating any transfer or use of blocked property, regardless of how sophisticated the legal arrangements may be.

This settlement forms part of OFAC’s broader and sustained campaign to enforce Russia-related sanctions and to hold accountable the professional enablers who make sanctions evasion possible. The action draws specific attention to the risks posed by trusts and corporate service providers that can allow blocked individuals to continue operating within the U.S. financial system. By imposing a significant penalty on an attorney and former government official, OFAC sends a clear signal that no profession is beyond the reach of strict liability sanctions enforcement. The regulator has made clear that it is closely examining the role of financial and legal gatekeepers who assist Russian oligarchs and elites in preserving wealth through opaque structures designed to disguise beneficial ownership. The overarching regulatory message is that combating money laundering and sanctions evasion remains a top priority, and compliance programs must directly address the sophisticated use of proxies and ostensibly unblocked family members to maintain control over assets subject to economic restrictions.

By fLEXI tEAM