OFAC Imposes $7.1 Million Penalty on Gracetown, Inc. for Sanctions Violations

On December 4, 2025, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) announced a $7,139,305 civil penalty against Gracetown, Inc., a New York-based property management company, for violations of Ukraine-/Russia-Related Sanctions regulations and reporting obligations. The enforcement action stems from Gracetown’s receipt of 24 payments between April 2018 and May 2020 on behalf of a British Virgin Islands entity, Baufinanz, ultimately owned by sanctioned Russian oligarch Oleg Deripaska. OFAC notified Gracetown expressly in April 2018 that dealings with Deripaska or his property were prohibited after OFAC added Deripaska to the Specially Designated and Blocked Persons (SDN) List. Gracetown, however, continued to process payments from Baufinanz and failed to report blocked property for over 45 months. Gracetown disclosed its dealings with Deripaska four years after the first violation. U.S. government officials, however, had already become aware of Gracetown’s dealings with Deripaska.

The $7.1 million penalty dwarfs the value of the underlying transactions — only $103,750 in blocked property. OFAC explained the reasoning behind the remarkably high penalty. First, because the violations were “egregious” and not voluntarily self-disclosed, OFAC imposed the statutory maximum as a base penalty. OFAC then found aggravating factors, including Gracetown’s willful or reckless conduct after receiving actual notice from OFAC; its continued dealings that benefited Deripaska after he was sanctioned; and its deficient remedial response. Meanwhile, OFAC deemed that the limited mitigating factors (Gracetown’s cooperation through a tolling agreement and an absence of any prior OFAC enforcement history) did not warrant any reductions in the penalty considering the totality of the circumstances.

Compliance Takeaways

The Gracetown enforcement action underscores the need to act promptly upon receiving OFAC notifications. Failing to block and report property — even for transactions of relatively modest value — can result in significant penalties. Finally, prompt voluntary self-disclosure remains a key factor in mitigation with OFAC; Gracetown’s disclosure, coming almost four years after the initial violation, did not cure the problem, given that government officials were already aware of the violation.

For questions about this enforcement action or other sanctions matters, contact the authors or any of their colleagues in Arnold & Porter’s Export Control & Sanctions practice group.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Blog post 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.