Trust Issues

Have you ever wondered which industry files the greatest number of suspected sanctions breach reports?

Most likely, you guessed it right. Financials services.

How about second highest?

According to the UK's Office of Financial Sanctions Implementation (OFSI), it is the country’s legal services sector. Legal professionals have always operated in grey zones, navigating nuance, risk, and high-stakes discretion.

Except now, they’ve moved from behind-the-scenes advisors to front-line gatekeepers of the UK’s sanctions regime. And here’s how.

In its most recent Threat Assessment Report, the OFSI highlights that it is not about who they advise, but also how they are used. In particular, members of the community, including solicitors, barristers, trust and company service providers (TCSPs) are vulnerable to becoming enablers of elaborate asset preservation schemes.

Some knowingly. Others, not quite.

The report highlights a number of red flags, including:

• A “low-profile” UK firm being approached by a family member of a Russian designated person

• A client refusing to disclose the trust deed, or declining to identify the settlor

• Transactions that neatly dodge license caps or land just days after expiry

• Complex structures where the ownership of a Belgravia townhouse leads, oddly enough, to a holding company in Cyprus, managed by someone with a golden passport

Tucked into the report is a fictional case study featuring a BVI trust, a below-market sale to a new UK company, and a solicitor approached by a charming European intermediary. The punchline? The trail leads straight back to a sanctioned Russian banker, whose name had simply been removed from the trust deed post-designation.

So where does this leave the legal sector?

Caught in the crosshairs.

No longer just interpreters of regulation, legal professionals are now expected to detect, flag, and report activity that may even remotely breach the UK’s financial sanctions regime.

OFSI is urging firms to conduct “lookback exercises,” report early, and treat complex structures with the skepticism they often deserve.

The message is clear:
When law firms become conduits for evasive manoeuvres, intent matters less than oversight. In sanctions enforcement, quiet knowledge can be costly.

Source: Report 

Thanks for reading and feel free to reach out if you would like to discuss!

Alexey