Russie
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A record penalty under U.S. Russia sanctions

In a recent enforcement action, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) imposed a $7.1 million civil penalty on Gracetown Inc., a New York–based property management company, for violations of U.S. sanctions targeting Russian oligarch Oleg Deripaska, designated in April 2018.

The case illustrates OFAC’s strict approach to sanctions enforcement, including in sectors not traditionally associated with international trade or export control.

Transactions involving blocked property

Between 2018 and 2020, Gracetown received 24 payments totaling $31,250 on behalf of an entity owned by Oleg Deripaska. These transactions occurred after Deripaska’s designation, despite clear prohibitions on dealings with blocked persons and their property.

OFAC determined that these payments constituted prohibited transactions involving blocked property, even though the underlying business relationship predated the designation.

Failure to report blocked assets

In addition to the prohibited transactions, Gracetown failed to report blocked property for more than 45 months, in violation of OFAC’s reporting requirements. Under U.S. sanctions regulations, blocked assets must be reported annually and without delay.

This failure was treated as a separate and aggravating violation.

OFAC’s enforcement message

This case reinforces several core principles of U.S. sanctions compliance:

  • Strict liability applies, regardless of intent or sector.

  • Business relationships must be immediately suspended upon designation.

  • Reporting obligations are independent and mandatory.

  • Complex ownership structures do not reduce compliance responsibilities.

Key takeaway for companies

Historical relationships offer no protection under U.S. sanctions law. Once a person or entity is designated, compliance obligations apply immediately and without exception.

For companies operating in real estate, financial services, logistics, or international trade, this case underscores the importance of robust sanctions screening, escalation procedures, and internal controls.

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