OFAC fines Gracetown $7.1 million for Russia-related sanctions violations

The Treasury Department’s Office of Foreign Assets Control said it issued a penalty notice imposing a $7,139,305 penalty on Gracetown Inc., a New York property management company, for violations of OFAC’s Ukraine-/Russia-Related Sanctions Regulations and for failing to file required reports of blocked assets.

According to OFAC, between April 2018 and May 2020, Gracetown received 24 payments totaling $31,250 on behalf of a company ultimately owned by sanctioned Russian oligarch Oleg Deripaska, despite having received notice from OFAC that direct and indirect dealings with Deripaska were prohibited.

OFAC said Gracetown also failed to report blocked assets in its possession or control for more than 45 months. OFAC stated the penalty amount was near the statutory maximum and reflected its determination that the violations were egregious and were not voluntarily self-disclosed.

OFAC said Deripaska was added to the Specially Designated Nationals and Blocked Persons (SDN) List on April 6, 2018. OFAC also sent Gracetown a notification of blocking that day, which OFAC said Gracetown’s registered agent received April 10, 2018. The notification, OFAC said, explained that unauthorized dealings with Deripaska, his property or interests in property, or other blocked persons would be unlawful and could result in a monetary penalty, and that Gracetown had an obligation to block and report relevant property within 10 business days.

OFAC said that, despite receiving the notification, Gracetown continued an arrangement to receive regular monthly payments on behalf of Baufinanz, a British Virgin Islands-based company OFAC said was owned by Deripaska during the relevant period. OFAC said that as of April 6, 2018, Gracetown had already received and spent $72,500 and therefore owed Baufinanz that amount, which OFAC said became blocked property upon Deripaska’s designation. OFAC said Gracetown later reported to OFAC on Jan. 11, 2022, an accumulated debt to Baufinanz of $103,750 as blocked property and submitted a disclosure the same day.

OFAC said the statutory maximum civil monetary penalty applicable in the matter was $8,906,358, and that the $7,139,305 final penalty reflected consideration of general factors under OFAC’s enforcement guidelines.

In the press release, Treasury Under Secretary for Terrorism and Financial Intelligence John K. Hurley said, “Treasury will act firmly against those who ignore our sanctions and aid our adversaries.”