OFAC Hits Venture Capital Firm With Maximum Penalty for Russia Sanctions Violations, Signaling Scrutiny of Investment Advisers

On June 12, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $215,988,868 civil penalty against GVA Capital, Ltd. (GVA), an early-stage venture capital firm based in San Francisco and focused on areas including artificial intelligence, financial technology, robotics, and autonomous vehicle technology. The penalty — the statutory maximum — reflected OFAC’s determination that GVA did not voluntarily self-disclose the apparent violations, and that GVA’s conduct was egregious. This enforcement action highlights the Treasury Department’s increasing focus on venture firms and other registered investment advisers, which will also be subject to full anti-money laundering (AML) controls under the Bank Secrecy Act (BSA) as of January 1, 2026.

Background

The enforcement action against GVA stems from the firm’s long-running dealings with Suleiman Kerimov, a Russian oligarch who OFAC first added to its list of Specially Designated Nationals and Blocked Persons (the SDN List) in 2018 for being an official of the Russian government, pursuant to Executive Order (EO) 13661.¹ According to OFAC’s press release, in 2017, Kerimov — a member of the Russian Federation Council — allegedly laundered hundreds of millions of euros through the purchase of villas in France, including by “transporting as much as 20 million euros at a time in suitcases,” without reporting the money to French tax authorities and ultimately “failing to pay 400 million euros in taxes related to villas.”² In June 2022, following an extensive enforcement investigation, OFAC issued a Notification of Blocked Property to Kerimov-related Heritage Trust (the Heritage Notice), a Delaware-based entity, which — as of June 30, 2022 — held assets valued at over $1 billion.³ OFAC’s investigation revealed that “Kerimov used a network of relatives, advisers, and opaque legal entities to invest in the United States and utilized a complex series of legal structures and front persons to obscure his interest in Heritage Trust.”⁴

Indeed, it was GVA Capital’s dealings with Heritage Trust that led OFAC to issue the Heritage Notice in 2022. Specifically, in April 2021, OFAC learned of an upcoming transfer of shares in an unnamed U.S. company. OFAC’s subsequent investigation revealed that the ultimate owner of those shares was Heritage Trust; that Heritage Trust was created specifically to hold and maintain the U.S. assets of Kerimov; and that Kerimov retained an interest in the trust, even after his designation in 2018. Accordingly, OFAC issued the Heritage Notice, preventing “the imminent liquidation and flight of the entirety of Heritage Trust’s assets out of the United States.” At the same time, OFAC also opened an investigation into GVA Capital, which was managing the shares noted above, to assess GVA’s relationship with Kerimov. Ultimately, OFAC determined that, in its dealings with Kerimov, GVA Capital knowingly violated U.S. sanctions against Russia, as well as OFAC’s Reporting, Procedures and Penalties Regulations (RPPR).

GVA’s Apparent Violations of Russia-Related Sanctions and the RPPR

According to OFAC, in 2016, before Kerimov was added to the SDN List, GVA began actively soliciting an investment from Kerimov in the U.S. company. On multiple occasions, GVA’s senior management traveled to meet Kerimov in person at his estate in France to discuss the investment opportunity, including showing Kerimov a series of the U.S. company’s prototypes and explanatory materials. After these meetings, Kerimov ultimately agreed to invest $20 million in the U.S. company and instructed GVA to work with Nariman Gadzhiev, Kerimov’s nephew and primary financial facilitator, to effectuate the investment.⁵ According to OFAC, GVA understood that Gadzhiev spoke for Kerimov in investment-related matters, for example referring to Kerimov as “the Investor” in relaying guidance to and requesting information from GVA.

Ultimately, on September 13, 2016, the investment was finalized through a subscription agreement between Prosperity Investments, L.P. (Prosperity) — a “Guernsey-based entity in which Kerimov retained an interest at all relevant times” — and GVA Auto LLC, a Delaware-based special purpose vehicle established by GVA Capital to make, hold, and dispose of direct or indirect investments in the U.S. company. GVA continued to manage these investments, primarily through Kerimov’s nephew, despite being fully aware of Kerimov’s addition to the SDN List in April 2018.

OFAC rejected GVA’s reliance on a legal opinion, dated May 15, 2018, regarding the applicability of U.S. sanctions to the Kerimov-related investments. According to OFAC, the legal opinion — which concluded that Prosperity was not itself blocked property because it was not nominally owned 50% or more by a person on the SDN List — was “belied by evidence collected throughout OFAC’s investigation, which concluded that Kerimov does, in fact, retain a property interest in Prosperity through his property interest in Heritage Trust.” Moreover, although the legal opinion cautioned GVA that any investment activity could not directly or indirectly involve Kerimov, between April 2018 and May 2021, GVA continued to manage the investments on Kerimov’s behalf.

More specifically, on four occasions, GVA dealt or attempted to deal in the property or interests in property of, or provided a prohibited service to, Kerimov, via Kerimov’s interest in Prosperity, including (1) assigning Prosperity’s interest in GVA Auto to Definition Services, Inc., a British Virgin Islands-based entity that owned Prosperity, in 2018; (2) GVA’s attempt to sell Definition’s interest in GVA Auto for $20 million in 2019, a sale that ultimately fell through; (3) another failed attempt, in August 2020, to sell Definition’s interest in three GVA Capital-managed investments — GVA Auto, as well as two other investments held by Definition — for $50 million; and (4) GVA’s attempt to distribute the shares of the U.S. company in kind, including to Definition and to GVA Capital itself, in April and May 2021, after the U.S. company went public — which was ultimately blocked when OFAC issued the Heritage Notice in June 2022.

In its Enforcement Release, OFAC stated that the 2018 assignment constituted a prohibited dealing in blocked property under Section 589.201(a)(3) of OFAC’s Ukraine-/Russia-Related Sanctions Regulations, 31 C.F.R. part 589 (the URSR), as well as a prohibited provision of services under Section 589.201(b)(1) of the URSR. OFAC further determined that the attempted sales in 2018 and 2019, as well as the attempted distribution in 2019, constituted prohibited attempts to deal in the property or interest in property of Kerimov under Section 589.213(a) of the URSR.

When OFAC sought information from GVA regarding these activities, GVA failed to fully and timely respond to an OFAC subpoena over a period of 28 months, resulting in 28 violations of Section 501.602 of the RPPR.

OFAC’s Enforcement Action: Analysis

In imposing the maximum statutory penalty against GVA, OFAC identified two aggravating factors. First, OFAC found that GVA’s violations were willful, noting that GVA’s “senior management had actual knowledge that the funds received from Prosperity and invested in GVA Auto ultimately came from Kerimov, and that Kerimov retained a property interest in that investment” through the Heritage Trust. In addition, OFAC found that GVA’s activity was particularly harmful to U.S. foreign policy interests “by facilitating a sanctioned Russian national’s access to, and use of, the U.S. financial system in precisely the way that his designation sought to prevent.” At its peak in April 2021, Kerimov’s investment was valued at $436,280,510, which GVA attempted to provide to Kerimov on multiple occasions following his April 2018 designation. While OFAC acknowledged that GVA had no prior violations — a mitigating factor — it determined that no reduction in penalty was warranted. GVA also did not voluntarily disclose the apparent violations and thus did not receive any voluntary self-disclosure credit.

In issuing the penalty, OFAC also highlighted several important compliance takeaways, including the importance of sanctions compliance for gatekeepers such as investment advisers, accountants, and attorneys, among others. Sanctioned parties may seek to use these gatekeepers’ professional services to conceal a property interest or otherwise evade OFAC sanctions. Therefore, it is critical that gatekeepers remain vigilant against such activity and understand that a sanctioned party’s ownership through proxies, trusts, or other indirect structures can still result in a “blocked interest” under OFAC regulations — even if the nominal owner of that property is someone other than the sanctioned individual. Through this enforcement action, OFAC has made clear that parties cannot rely on “formalistic ownership arrangements that obscure the true parties in interest behind an entity or investment, without sufficiently considering factors such as control or influence over that investment.”

OFAC also highlighted the importance of this enforcement action to non-bank financial institutions, including venture capital firms and investment advisers. Going forward, it is critical for parties operating in these industries to develop and maintain effective, risk-based sanctions compliance controls and to understand the sanctions risks present where an existing investor becomes sanctioned. As OFAC made clear here, “[f]ailing to properly block and report assets subject to sanctions, and continuing to transact or deal in those assets, can result in significant monetary penalties for U.S. persons.”

AML Program Controls for Venture Capital and Private Equity Firms

Registered investment advisers — called out by OFAC in its enforcement action against GVA Capital — will also soon be subject to AML program requirements under the BSA, which go into effect on January 1, 2026.

On August 28, 2024, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a final rule to add “investment adviser” to the definition of “financial institution” under the regulations implementing the BSA. This will require covered investment advisers to take steps to have appropriate policies and controls in place, including with respect to a risk-based AML and countering the financing of terrorism program. The AML rule is especially relevant here, given that both OFAC and FinCEN have increasingly focused on non-bank actors like GVA. Over the next seven months, venture capital and private equity firms will need to develop and implement AML compliance programs designed to prevent against the types of risks demonstrated in the action taken against GVA. For more information, read Arnold & Porter’s September 2024 Advisory on the upcoming AML requirements for investment advisers.

For questions about export controls, sanctions matters, or anti-money laundering controls, contact the authors or any of their colleagues in Arnold & Porter’s White Collar Defense & Investigations, Export Control & Sanctions, or Financial Services groups.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.