OFSI Threat Assessment: Sanctions Risks in the UK Property and Related Services Sector

In April 2025, the Office of Financial Sanctions Implementation (OFSI) published a Property and Related Services Threat Assessment Report, evaluating the risks to UK financial sanctions compliance within the real estate and property services sector.

Key Judgements

• Underreporting of Breaches: UK property and related services firms are almost certainly underreporting suspected financial sanctions breaches to OFSI, despite being involved in numerous high-risk transactions.
• Unlicensed Transactions: Russian designated persons (DPs) have breached sanctions by making property-related transactions without valid OFSI licenses or outside the scope of permitted exceptions.
• High-Risk Firms: Small-scale property firms and sole practitioners, particularly those with longstanding relationships with Russian DPs, are highly likely to have facilitated these breaches. 
• Complex Ownership Structures: Russian DPs use intricate corporate and trust-based structures to place assets under family or associate control, obscuring true ownership.
• Professional Enablers: UK property firms have almost certainly acted as enablers for sanctioned individuals, knowingly or unwittingly facilitating their continued access to UK property assets.

Threat Overview

Over 75% of UK financial sanctions designations since 2022 have targeted Russia. Russia accounts for 77% of all property-related suspected breach reports to OFSI. Other relevant regimes include Libya, Iran (nuclear), and the Global Anti-Corruption regime. Despite this, property firms account for just 1% of total breach reports, while being involved in 7% of reports submitted by other sectors.

Strengthening Compliance

Key compliance issues include:

• Failure to Report Suspicions: Property firms often delay identifying and reporting breaches or fail to report them entirely, even when engaged in licensing communications.
• Expired or Invalid Licences: Payments made after licences expire, to unapproved accounts, or outside licence conditions are common compliance failures.
• Weak Due Diligence: Poor assessment of sources of wealth, client relationships, and ownership structures.
• Unclear ownership or control: Failure to identify economic resources under asset freeze prohibitions, especially in high-value property portfolios.
• Evasion of ownership thresholds: Divestment of DP shares to just below 50% to bypass beneficial ownership screening and due diligence obligations.

Risk Indicators & Red Flags

OFSI has identified numerous red flags that should prompt enhanced due diligence:

• Clients from sanctioned jurisdictions (e.g., Russia, Belarus).
• Opaque ownership or beneficiary structures.
• Payments continuing for vacant properties.
• Disproportionate rent vs. declared income.
• Use of offshore trusts or shell companies.
• Firms with strike-off proposals or unregistered VAT status.
• Involvement of family members or associates of DPs in property management or ownership. 

Russian Designated Persons (DPs) & Enablers

OFSI distinguishes between:

• Professional Enablers: Estate agents, property managers, concierge firms, and brokers knowingly facilitating DP-related transactions.
• Non-Professional Enablers: Family members, ex-spouses, or associates of DPs used to mask ownership and bypass sanctions.

Common Evasion Methods:

• Subletting and Proxy Staffing: Letting properties to third parties or retaining live-in staff to avoid detection while continuing maintenance and payments.
•  Use of Trusts & Offshore Entities: Transferring ownership to companies or trusts based in other jurisdictions to obscure DP involvement
• Disguised Transactions: Payments for council tax, utilities, or renovation works made via family members or intermediaries.
• Ownership Manipulation: Reducing DP ownership stakes in property-holding companies to 49% post-designation, while retaining control through proxies.
• New Investments: Acquiring new UK properties via venture capital firms where DPs previously held interests but now operate behind layered structures.

Intermediary Countries

Over 22% of property-related breach reports involve intermediary jurisdictions, which often offer privacy or tax advantages. These include:

• Austria, Switzerland, Cyprus, UAE, Türkiye: Favoured for privacy, access to global markets, and real estate services.
• British Virgin Islands (BVI), Jersey, Guernsey, Luxembourg, USA: Frequently used in corporate structures tied to high-value property transactions and trusts.

Conclusion

The Property and Related Services Threat Assessment underscores the urgent need for reform across the UK property sector. From letting agents to property managers, all actors must strengthen due diligence, proactively assess ownership and funding sources, and ensure full compliance with financial sanctions obligations.

Read the full document here.