Guidance on Sham Transactions and Sanctions Evasion
March 31, 2026
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing this advisory[1] to highlight sanctions risks arising from sham transactions used to evade sanctions and to identify factors to consider when evaluating whether property may be the subject of a sham transaction. Sham transactions occur when blocked persons,[2] often operating through proxies or other intermediaries, effectuate transfers or establish arrangements that conceal—rather than genuinely extinguish—a continuing interest in property. In other words, blocked persons give up their property on paper only, in an attempt to evade sanctions, while their interests in property remain unchanged. Because OFAC implements functional definitions of “interest” and “property interest” that look beyond legal formalities to underlying practical and economic realities, sham transactions do not terminate a blocked interest in property.
[1] This advisory is explanatory only...
1) BACKGROUND
On August 13, 2014, OFAC introduced the notion of a “sham transaction” in FAQ # 402, which specifies that in the context of a blocked person divesting ownership of a non-U.S. entity that brings the ownership percentage below 50%, “[s]ufficient due diligence should be conducted to determine that any purported divestment in fact occurred and that the transfer of ownership interests was not merely a sham transaction.” OFAC never elaborated defined or elaborated on what it mean by “sham transaction,” and this guidance (the “Sham Transactions Guidance”) now addresses that question in the context many different categories of divestments of assets In the interim between the issuance of FAQ # 402 and the issuance of this guidance, OFAC issued a number of enforcement actions and other actions, some of which are referenced in the guidance and others which are not, that...