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OFAC Assesses Penalty Against GVA Capital

Washington, D.C. (June 26, 2025) - On June 12, 2025, the Office of Foreign Assets Control (“OFAC”) announced a $215,988,868 penalty on California-based venture capital firm GVA Capital, Ltd. (“GVA”) for knowingly managing an investment for a sanctioned Russian oligarch. This penalty, the statutory maximum, is one of the highest yet imposed and “reflects OFAC’s determination that GVA Capital's conduct was egregious and not voluntarily self-disclosed.” OFAC’s announcement highlights the necessity of strong compliance protocols for international dealings, especially for intermediary parties such as professional services providers.

Factual Background

GVA provides early-stage investment in areas such as artificial intelligence and technology. In 2016, GVA leadership met with Russian oligarch Suleiman Kerimov (“Kerimov”) on multiple occasions and secured funding for a U.S. company. That same year, Kerimov’s investment was transferred to GVA for management via a trust in which Kerimov held an interest (“Heritage Trust”).

In 2018, OFAC added Kerimov to the List of Specially Designated Nationals and Blocked Persons (“SDN List”), broadly prohibiting U.S. persons from transacting with Kerimov directly or indirectly. Despite receiving legal advice that any sale or transfer of the U.S. company’s shares could not directly or indirectly involve Kerimov, GVA assigned the investment interest to another entity owned by Heritage Trust and attempted to sell the shares in 2019 and 2020. In 2021, GVA prepared to distribute the shares after the U.S. company went public but was halted by an OFAC Notification of Blocked Property issued against Heritage Trust in 2022.

GVA received an administrative subpoena from OFAC in 2021. In response, GVA produced 173 documents and certified that its response to the subpoena was complete. However, OFAC sent GVA a Pre-Penalty Notice in 2023 related to the sanctions violations and GVA produced an additional 1,300 documents that were responsive to the 2021 subpoena.

Applicable Law and Penalties

OFAC issued a $214 million penalty against GVA pursuant to Ukraine-/Russia-Related Sanctions Regulations (“URSR”), 31 C.F.R. § 589.101, et seq. OFAC reported in its Enforcement Release that the assignment of the shares to a new entity after Kerimov’s listing constituted a prohibited dealing in blocked property under § 589.201(a)(3) and that the attempted sale and distribution of the shares constituted prohibited attempts to deal in property of Kerimov under § 589.213(a).

OFAC also fined GVA $1,988,868 for committing reporting violations in response to the agency’s administrative subpoena. OFAC determined that the “prolonged failure to produce responsive records” constituted multiple reporting violations under 31 C.F.R. § 501.602 of the Reporting, Procedures and Penalties Regulations (RPPR).

Aggravating and Mitigating Factors

In making penalty assessments, OFAC weighs “aggravating factors” (which favor higher penalties), against “mitigating factors” (which favor penalty reductions). Here, OFAC applied the statutory maximum because it determined GVA’s conduct was egregious and no mitigating factors warranted penalty reductions.

OFAC deemed GVA’s actions egregious due to two aggravating factors: GVA’s willfulness in the management of Kerimov’s investment and Kerimov’s benefit from the investment. First, OFAC determined GVA’s actions were willful and knowingly illegal because there was a “communication channel [that] continued well after OFAC sanctioned Kerimov in 2018” with Kerimov’s nephew, whom GVA “knew to be Kerimov’s representative on investment-related matters.” Additionally, GVA received legal advice in 2018 and was on notice that any sale or transfer of shares that directly or indirectly involves Kerimov would violate applicable sanctions regulations. Nonetheless, GVA continued to transact with entities and property in which Kerimov held a direct or indirect interest. Second, Kerimov benefitted from the management of this investment because the value of his shares appreciated over time. GVA also attempted to sell or distribute Kerimov’s shares, which would have conferred additional benefits.

The only mitigating factor cited by OFAC was that GVA did not receive a previous penalty notice or Finding of Violation from OFAC. However, given the totality of the circumstances, OFAC determined no reduction in penalty was warranted.

Compliance Considerations

Companies should consider the following key takeaways with respect to OFAC compliance.

  • First, GVA’s steep penalty highlights the importance of intermediary parties’ understanding of the risks of intentionally or unintentionally working with sanctioned entities. In its Enforcement Release, OFAC cautioned that “gatekeepers” such as “investment professionals, accountants, attorneys, and providers of trust and corporate formation services, among others,” must be aware of the risk of introducing sanctioned actors into the U.S. economy. Professional services providers are sometimes best positioned to identify the underlying parties in dealings and prevent sanctions violations.
     
  • Second, it is critical for businesses to develop and maintain effective policies for assessing sanctions compliance, including blocking and reporting transactions that are subject to sanctions. If dealings with sanctioned entities or people are not blocked or disclosed in a timely manner, businesses risk substantial monetary penalties. For suggestions from OFAC, see the Framework for OFAC Compliance Commitments.
     
  • Third, formalistic transfers of ownership in funds do not protect businesses from penalties if sanctioned parties maintain control or influence. Companies should look beyond owner names and determine who has control or an interest in an entity as a part of compliance review.
     
  • Last, OFAC can impose penalties for incomplete or delayed document production in response to administrative subpoenas. For this reason, companies should maintain records pertinent to compliance with sanctions regulations to assist with any potential subpoenas.

Lewis Brisbois’s attorneys are actively engaged in the wide range of legal issues in this area and are advising clients on managing legal and business risk as events continue to develop at an accelerated pace. Visit our Ukraine Conflict, International Trade, Export, Import and Investment Controls & National Security Practice page for additional alerts in this area.

Author:

Courtney Clark, Summer Associate

Editors:

Andrew Pidgirsky, Partner and Chair of Ukraine Conflict, International Trade, Export, Import and Investment Controls & National Security Practice

Jane C. Luxton, Co-Managing Partner - Washington, D.C.

George Leahy, Associate

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