OFAC Assesses $7M Civil Monetary Penalty Against Property Management Company For Willful Sanctions Violations

Washington, D.C. (December 19, 2025) - On December 4, 2025, the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) assessed a $7,139,305 penalty against a New York-based property management company, Gracetown, Inc., for violating OFAC's Russia-related sanctions and "for failing to file reports of blocked assets."

The Enforcement Release notes that Gracetown received 24 payments between April 2018 and May 2020 on behalf of a company owned by sanctioned Russian oligarch Oleg Deripaska. In imposing the near-maximum assessment, OFAC determined that Gracetown's violations "were egregious and were not voluntarily self-disclosed."

Deripaska was the ultimate beneficial owner of Gracetown from 2006 until 2018, when "a relative and known associate of Deripaska became the ultimate beneficial owner." During this time, Gracetown employed a property manager who managed Gracetown's bank accounts on instruction from the Russian-based stakeholders.

In 2013, a British Virgin Islands company, Baufinanz, also owned by Deripaska, entered into a settlement agreement with an unrelated U.S. person over a loan dispute, pursuant to which Gracetown was to receive regular monthly payments owed to Baufinanz from the U.S. individual. On December 19, 2013, Gracetown's property manager, on instruction from Deripaska's relative and known associate, began receiving and depositing the payments to Gracetown's bank account as a loan from Baufinanz.

Deripaska was added to OFAC's Specially Designated and Blocked Persons (SDN) List on April 6, 2018 "for acting as or on behalf of a senior official of the Government of the Russian Federation and for operating in the energy sector of the Russian Federation economy." On the same day, OFAC issued a Notification of Blocking to Gracetown, notifying Gracetown that its former owner, Deripaska, was designated and that, as a result, "all property and interests in property of Deripaska were blocked." Despite this notification, Gracetown continued to receive regular monthly payments under the arrangement with Baufinanz until the terms of the settlement were fulfilled in May 2020.

On January 11, 2022, nearly four years after receiving notification from OFAC, Gracetown reported an accumulated $103,750 debt to Baufinanz as blocked property and submitted a disclosure to OFAC.

The following aggravating factors were considered in the $7 million dollar penalty:

1. Gracetown willfully, or at a minimum, recklessly, violated U.S. sanctions from April 2018 to May 2020, when it continued to receive monthly payments due to Baufinanz while knowing that Deripaska, a blocked person, owned Baufinanz, and after receiving actual notice from OFAC that dealings involving Deripaska were prohibited.
   
2. Gracetown was aware that it continued to receive, process, and account for monthly transactions due to Baufinanz after OFAC notified Gracetown of Deripaska's designation on April 6, 2018. The same Gracetown property manager, who also served as Baufinanz's point of contact at Gracetown, received all subject payments from 2013 to 2020 and implemented the arrangement for Gracetown to use the funds as a loan from Baufinanz. Gracetown's new owner, speaking on behalf of both Gracetown and Baufinanz, directed these actions of the Gracetown property manager.
   
3. Gracetown acted contrary to U.S. sanctions when it continued to fulfill its arrangement with Baufinanz, which became a blocked entity after Deripaska's designation. Gracetown's conduct benefited Deripaska by collecting and securing a debt on Baufinanz's behalf.
   
4. Gracetown's remedial response was deficient. Considering Gracetown's close relationship with Baufinanz through common management and Deripaska's joint ownership until 2019, and despite receiving actual prior notice from OFAC upon Deripaska's designation in 2018 which reminded Gracetown of its compliance obligations, Gracetown continued its unauthorized dealings and failed to report blocked property in its possession or control for over 45 months.

OFAC considered the following mitigating factors:

1. Gracetown signed a Tolling Agreement with OFAC and provided additional information to the agency.
   
2. Gracetown has not received a Penalty Notice of Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the Violations.

OFAC's actions in this case indicate the seriousness of sanctions violations and serve as a reminder that the U.S. government will impose harsh penalties for willful, knowing, or reckless violations of sanctions. This case underscores the importance of understanding the nuances of OFAC sanctions and regulations to ensure compliance, especially of the 50% rule, which subjects entities that are at least 50% owned by a sanctioned individual or entity to those same sanctions. It also signals the continuing focus OFAC is placing on real estate matters (also see this previous Lewis Brisbois alert). Businesses and individuals should seek legal advice in areas concerning transactions with companies with tangential ownership ties to countries under sanctions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.