U.S. Person-1 OFAC Settlement: $1.1M (2025)

U.S. Person-1 is an attorney and former U.S. government official who, while in private practice, developed a professional and occasional social relationship with SDN-1, a Russian oligarch, prior to SDN-1's designation. U.S. Person-1's law firm represented SDN-1 in various legal matters. Prior to SDN-1's designation, U.S. Person-1 agreed to serve in a fiduciary capacity for a U.S.-based trust funded almost entirely by SDN-1 ("the Trust"). This role assigned U.S. Person-1 broad authority, including authority to appoint or remove other fiduciaries, make decisions about how and where to invest the Trust's assets, and make or withhold distributions to or for the benefit of the Trust's beneficiaries.

Two of SDN-1's family members maintained roles with respect to the Trust. One served as grantor and had no occupation or source of income other than from SDN-1 directly. Another family member, referred to as "the Proxy," maintained no formal authority over the Trust but frequently liaised with investors and fiduciaries on SDN-1's behalf and served as SDN-1's interlocutor in dealings with U.S. persons in investment-related matters.

OFAC added SDN-1 to the SDN List on April 6, 2018. Following the designation, U.S. Person-1 consulted outside counsel experienced in U.S. sanctions, which concluded that the Trust did not appear to be blocked property. OFAC has reason to believe this opinion was predicated, at least in part, on the understanding that the Proxy had no substantive role in the Trust's management or operations, notwithstanding the Proxy's history of acting on SDN-1's behalf. The Proxy's substantive role persisted well after this point, however, allowing SDN-1 to retain control over decisions made related to the Trust and indicating that SDN-1 maintained a property interest in the Trust. U.S. Person-1 should have known this based on their personal knowledge of working with SDN-1 and their network.

U.S. Person-1 continued to play a key role in authorizing the Trust's day-to-day activities after SDN-1's designation, including authorizing the transfer of assets between entities owned or controlled by the Trust, authorizing payments made by or on behalf of the Trust, executing agreements on the Trust's behalf, liquidating related entities, and opening or closing accounts. U.S. Person-1 ultimately resigned from their fiduciary position in mid-2022. Over the course of U.S. Person-1's time as fiduciary, between 2017 and 2022, these activities resulted in a total of 122 apparent violations of the Ukraine-/Russia-Related Sanctions Regulations, 31 C.F.R. part 589 (URSR).

OFAC determined that U.S. Person-1 did not voluntarily disclose the Apparent Violations, and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A, the base civil monetary penalty applicable in this matter equals the applicable schedule amount per apparent violation, which in this case totals $6,245,136. The settlement amount of $1,092,000 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This enforcement action highlights the risks that arise when gatekeepers, professionals such as investment advisors, accountants, attorneys, and providers of trust and corporate services, fail to properly understand and mitigate the risks associated with the provision of their services. Gatekeepers occupy crucial financial and legal positions that place them at particular risk of being used by blocked persons to evade the effects of U.S. sanctions. Gatekeepers can provide an air of legitimacy and provide comfort to other similarly situated U.S. persons where, as here, U.S. Person-1's continued provision of services allowed others to feel more comfortable in their own roles. Given that they often occupy positions of trust, gatekeepers are also often better positioned than others to monitor for and identify ways in which a blocked person may retain an interest in property.

This enforcement action also demonstrates the importance for U.S. persons operating in the trust and corporate services sector of developing and maintaining a thorough understanding of sanctions-related risks. OFAC implements broad definitions of "interest" and "property interest" that look beyond legal formalities to underlying practical and economic realities. U.S. persons operating in this industry should exercise caution when engaging in activities in which a sanctioned party is or was involved. In particular, U.S. persons operating in this sector should understand the sanctions risks present where an existing client is added to the SDN List. OFAC is aware of numerous instances where, as here, complex legal structures have been used to conceal rather than extinguish a blocked person's interest in property. U.S. persons serving in the trust and corporate services sector who encounter the involvement of a blocked person, including a person who later becomes blocked, should assess any continuing role or influence a blocked person may have with respect to property in considering whether it is blocked. Because OFAC sanctions may be enforced on a strict liability basis, failing to properly guard against these risks could cause even well-meaning U.S. persons to inadvertently act as gatekeepers for sanctioned individuals.

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