The OFAC Recent Actions notice included the following Enforcement Release, simplified and reimagined:

What Happened

A U.S. individual, referred to as “U.S. Person-1,” has agreed to pay a settlement of $1,092,000 to resolve civil liability for alleged violations of sanctions related to Ukraine and Russia.

• Who: The individual is an attorney and former U.S. government official.
• When: The violations occurred between 2018 and 2022.
• What: U.S. Person-1 served as the fiduciary (a person entrusted to manage assets) for a family trust belonging to a sanctioned Russian oligarch.
• The Issue: By managing this trust, the individual provided services and dealt in property linked to the sanctioned oligarch, which is prohibited under U.S. sanctions laws.

The Penalty

The total settlement amount is $1,092,000. The maximum possible penalty for these violations was over $6.2 million, but the final amount was determined by analyzing specific aggravating and mitigating factors.

Aggravating and Mitigating Factors

• Aggravating Factors (Reasons the penalty was higher):
  • Ignoring Warning Signs despite Legal Advice:
    • General Factor: Reckless Disregard / Reason to Know
    • Explanation: Although the individual sought legal advice, they should have realized that the continued involvement of the oligarch’s “Proxy” meant the oligarch still controlled the trust. Relying on legal advice was not a sufficient excuse when obvious signs of control were present.
  • Undermining the Purpose of Sanctions:
    • General Factor: Harm to Sanctions Objectives
    • Explanation: The individual’s actions allowed a sanctioned Russian oligarch to continue accessing the U.S. financial system. This gave the trust an “air of legitimacy” and allowed its assets to grow significantly, directly countering the goal of the sanctions.
• Mitigating Factors (Reasons the penalty was lower):
  • Clean Disciplinary Record:
    • General Factor: No Prior OFAC Actions
    • Explanation: The individual had not received a penalty or finding of violation from OFAC in the five years leading up to these events.
  • Helping the Investigation:
    • General Factor: Cooperation
    • Explanation: The individual provided “substantial cooperation” to OFAC during the investigation.

Penalty Basis

The final penalty amount reflects OFAC’s decision that while the violations were not voluntarily self-disclosed (the person didn’t turn themselves in), the case was non-egregious (not the most serious type of violation).

What are the Takeaways?

• Gatekeepers are at High Risk: Professionals who manage money or legal structures—like attorneys, accountants, and investment advisors—are “gatekeepers.” They are at high risk of being used by sanctioned individuals to hide assets and evade the law.
• Paperwork isn’t Enough: Sanctions laws look at the “practical and economic realities,” not just legal formalities. Even if a trust looks independent on paper, if a sanctioned person really controls it, it is blocked.
• Strict Liability: You can be fined even if you didn’t intend to break the law. “Well-meaning” professionals can inadvertently break sanctions if they don’t guard against these risks carefully.
• Know Your Risk: U.S. persons in the trust and corporate services industry must thoroughly understand sanctions risks. If a sanctioned person is (or was) involved in a structure, extra caution is required.

The usual “Other resources”

• OFAC Resources: The Office of Foreign Assets Control provides guidelines, FAQs, and search tools (like the SDN List) to help individuals and businesses check if they are dealing with sanctioned parties.
• Contacting OFAC: If you are unsure about a transaction or a client’s status, you can contact OFAC directly for guidance or apply for a specific license to authorize certain activities.