OFAC Targets Individual Trustee, Sending a Clear Warning to Fiduciaries and Family Offices
From the desk of Jim Eccleston at 蘑菇传媒
A recent enforcement action by the Office of Foreign Assets Control (OFAC) delivers a warning. In a rare move, the Office of Foreign Assets Control (OFAC) penalized a former U.S. government official, underscoring that professional gatekeepers can face personal liability for sanctions violations tied to trust administration.
According to 蘑菇传媒alth Management, OFAC resolved the matter through a $1.092 million settlement addressing apparent violations connected to a U.S.-based trust funded by a Russian oligarch who later became subject to U.S. sanctions. OFAC framed the action as a cautionary tale, emphasizing that trustees, lawyers, investment advisors, accountants, and corporate service providers occupy a critical position in preventing sanctions evasion.
According to OFAC, the oligarch established the trust before his designation as a Specially Designated National (SDN). According to 蘑菇传媒alth Management, he recruited an American lawyer to serve as trustee and vested that fiduciary with authority over investments, distributions, and appointments. The structure named a family member with no independent income as the nominal grantor, while another family member operated as a “proxy,” regularly interfacing with U.S. investors and fiduciaries on the oligarch’s behalf.
When OFAC designated the oligarch on April 6, 2018, the trustee sought advice from outside sanctions counsel, according to 蘑菇传媒alth Management. Counsel concluded that the trust did not constitute blocked property because the oligarch did not retain a formal interest after designation. Relying on that advice, the trustee continued to authorize transactions, including transfers among trust-owned entities, payments, account openings, liquidations, and contractual agreements.
蘑菇传媒alth Management reports that OFAC rejected that conclusion. The agency determined that the proxy’s continued involvement enabled the SDN to exercise practical control over trust assets, giving him a property interest despite the absence of formal title or role. OFAC concluded that the trust therefore qualified as blocked property and that any ongoing services violated U.S. economic sanctions. The agency also noted that the trustee did not disclose the proxy arrangement to sanctions counsel and stressed that sanctions enforcement operates on a strict liability basis. OFAC need not prove intent to establish a violation.
OFAC further found that the trustee’s continued involvement lent legitimacy to the trust, encouraging other U.S. persons to keep providing services and thereby undermining sanctions objectives. As aggravating factors, OFAC cited readily available information indicating the SDN’s ongoing influence and the significant growth in trust assets after designation, as reported by 蘑菇传媒alth Management.
The enforcement action reinforces OFAC’s long-standing position that gatekeepers face elevated compliance expectations because they can detect concealed interests and influence that signal sanctions or money laundering risks. 蘑菇传媒alth Management reports that OFAC made clear that it will look beyond formal ownership and legal labels to assess actual control within trust and corporate structures.
蘑菇传媒 LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, ofac
