Alert to real estate industry


There are a number of different ways US parties in real estate can undertake due diligence to help ensure that they do not engage in transactions with blocked companies and persons under the Office of Foreign Assets Control's (OFAC) recently expanded rules (for further details please see "Effect of US sanctions against Russia on commercial real estate documentation").

Recently, the Financial Crimes Enforcement Network (FinCEN) issued two alerts to help parties remain vigilant against efforts to evade US sanctions:

  • a first alert issued on 7 March 2022 to alert financial institutions; and
  • a second alert issued on 16 March 2022, alerting financial institutions on the importance of identifying suspicious transactions involving, among other things, real estate.

The FinCEN is a bureau of the US Department of the Treasury whose mission is to:

  • safeguard the US financial system from illicit use;
  • combat money laundering; and
  • promote national security through the collection, analysis and dissemination of financial intelligence and strategic use of financial authorities.

This article focusses on the FinCEN's second alert.

Alert to real estate industry

The FinCEN's second alert of 16 March 2022 was issued specifically with respect to the real estate industry, noting that sanctioned Russians may seek to evade sanctions through the purchase and sale of commercial or high-end residential real estate. According to the alert, real estate lends itself to storing wealth due to its high value, potential for appreciation and use of layered transactions that could potentially hide a property's ultimate beneficial owner. The FinCEN warns that sanctioned Russians may purchase or maintain real estate through shell companies or trusts, or they may liquidate real estate owned in countries that have imposed sanctions on Russian individuals. The FinCEN notes several red flags for the real estate industry to consider:

  • the purchase, sale, donation or legal ownership transfer of high-value real estate in the name of a foreign legal entity, shell company, or trust;
  • the use of legal entities or arrangements that may have a connection to sanctioned Russian individuals to hide the ultimate beneficiary or the origins or source of the funds;
  • changes to the transaction patterns of a firm located in a country other than the United States, Russia, Belarus and Ukraine, where the new transactions involve convertible virtual currency and Russian-related investments or firms;
  • whether a Russian individual or entity requests a wire transfer from a non-US (particularly non-Russian) bank to pay for an all-cash purchase;
  • the dilution of equitable interest held in real property by sanctioned Russian individuals, by the addition of, or the transfer of real estate to, an individual not affiliated with the buyer or seller; and
  • the maintenance, purchase or termination of real estate insurance by persons with a known connection to sanctioned Russian individuals.


The FinCEN's issuance of two alerts within a period of two weeks that identify the potential for evasion of sanctions by Russian individuals highlights the need for parties to real estate transactions to conduct diligence concerning the exact identity of a transacting party (including the beneficial owners of such party), so as to not inadvertently breach an OFAC representation made in real estate documents or reporting obligations required by the FinCEN.

Transacting with a party on an OFAC list can lead to criminal or administrative penalties, in addition to possible defaults under real estate documents that could have serious ramifications, such as a termination of lease, termination of property management services, joint venture buyout rights, a cash trap trigger or foreclosure. All parties to real estate transactions should keep the above evasion tactics in mind when conducting due diligence to ensure that they do not engage in transactions with blocked companies and persons under the recently expanded OFAC rules.

For further information on this topic, please contact Cameron Weil or Joseph J Dyer at Seyfarth by telephone (+1 (212) 218-5616) or email ([email protected] or [email protected]). The Seyfarth website can be accessed at