Penalties Imposed on a New York Property Management Company for Dealings with Entity Owned by Sanctioned Russian Oligarch
On December 4, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a civil penalty of $7,139,305 against Gracetown, Inc., a New York–based property management firm.[1] The enforcement action stemmed from Gracetown’s willful violations of U.S. sanctions regulations by processing transactions for entities owned by sanctioned Russian oligarch Oleg Deripaska. OFAC’s authority derives from the International Emergency Economic Powers Act (IEEPA) and related regulations,[2] which prohibit U.S. persons from engaging in transactions with individuals or entities on the Specially Designated Nationals (SDN) List, to which Deripaska was added on April 6, 2018, for acting as or on behalf of a senior Russian government official, and for operating in the Russian energy sector.
Between April 2018 and May 2020, Gracetown processed 24 payments totaling $31,250 for a British Virgin Islands entity ultimately owned by Deripaska. Despite receiving explicit notice from OFAC in April 2018, the company failed to block or report these transactions[1] for over 45 months.
OFAC considered the violations egregious due to aggravating factors, including the company’s willful conduct of continued dealings following explicit notice, deficient remediation by blocking and reporting the transactions, and the failure to voluntarily self-disclose. Mitigating factors included eventual cooperation, including the execution of a Tolling Agreement, and lack of prior OFAC enforcement history in the preceding five years.
OFAC ultimately imposed a civil monetary penalty of $7,139,305, a slight reduction from the statutory maximum penalty of $8,906,358, after taking into account its General Factors under the Enforcement Guidelines.[1]
This action underscores OFAC’s strict liability standard and its willingness to impose significant penalties even for relatively low-value transactions when aggravating factors are present. It also highlights the significant risk U.S. persons face when dealing with entities formerly or currently associated with sanctioned individuals. Important measures to keep in mind include: (1) implementation of immediate response protocols upon receiving OFAC notices, including halting prohibited transactions and blocking assets; (2) timely submission of blocked property reports within 10 business days, as required by OFAC regulations; (3) enhanced due diligence on beneficial ownership to identify indirect ties to SDNs; (4) development of escalation pathways for voluntary self-disclosure to mitigate penalties; (5) regular staff training on OFAC compliance obligations and enforcement case studies; and (6) integration of automated screening tools to monitor transactions and counterparties in real time.
[1] OFAC Enforcement Release, https://ofac.treasury.gov/recent-actions/20251204_33, December 4, 2025.
[2] 50 U.S.C. §§ 1701-1707, International Emergency Economic Powers Act (IEEPA).
[3] Reports of blocked, unblocked, or transferred blocked property, 31 C.F.R. § 501.603.
[4] OFAC Civil Penalties and Enforcement Information, https://ofac.treasury.gov/civil-penalties-and-enforcement-information.