OFAC Issues Guidance On Sham Transactions And Sanctions Evasion

Overview

On March 31, 2026, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Guidance on Sham Transactions and Sanctions Evasion (the Guidance), underscoring its “substance-over-formality” approach to policing sham transactions designed to circumvent sanctions. Although not precedential, the Guidance represents a rare instance where OFAC articulates concrete analytical factors that are intended to inform sanctions compliance assessments.

The Guidance begins with some illustrative examples of sham transactions drawn from OFAC’s enforcement experiences, highlighting scenarios where blocked persons employed opaque legal structures—including trusts, proxies, straw owners, and front businesses—to conceal their continuing interests.¹ Building on these examples, the Guidance sets out seven red flags that may indicate a transaction is a sham, including commercial unreasonableness, intra-family transfer, unclear transfer purpose, overly complicated