OFAC Imposes Maximum Civil Penalty on VC Firm for Sanctions and Reporting Violations

    On June 12, 2025, the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury imposed a $215 million penalty on Global Venture Alliance Capital, Ltd. (GVA) for its violations of Russia-related sanctions obligations.[1] Specifically, the penalty arises from GVA’s transactions involving assets held by a Russian government official, Suleiman Kerimov following his 2018 designation and addition to OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN List) and GVA’s subsequent failure to respond comprehensively to an administrative subpoena.  

    This action, and the resulting monetary penalty, reiterate the importance of maintaining effective risk-based sanctions compliance controls and conducting adequate diligence in transactions involving proxies or intermediaries that may indirectly involve sanctioned parties.

OFAC Penalizes GVA For Transactions Indirectly Involving a Sanctioned Individual 

    GVA is a California-based venture capital firm with an investment focus in artificial intelligence, financial technology, robotics, and autonomous vehicles.[2]  GVA approached Kerimov in 2016—before he was sanctioned—to invest in a US company. Working alongside Kerimov’s nephew and proxy, Nariman Gadzhievich Gadzhiev, in September 2016 Kerimov invested $20 million in the U.S. company alongside GVA through a Guernsey-based entity, Prosperity Investments L.P., in which Kerimov maintained a beneficial interest.

    Nearly two years later, on April 6, 2018, OFAC added Kerimov to the SDN List due to his relationship with the Russian Federation, which blocked and froze his US-based assets and prohibited US persons from facilitating transactions with those assets.[3]  Shortly thereafter, GVA sought and received a legal opinion cautioning GVA from selling or transferring shares that directly or indirectly involved Kerimov. Despite the designation and legal analysis, OFAC found that GVA continued to manage Kerimov’s investments through Gadzhiev and other entities, such as Prosperity, with ties to Kerimov, and dealt or attempted to deal in Kermiov’s interests in four separate transactions from December 2018 to May 2021.[4] 

    In June 2021, OFAC issued an administrative subpoena to GVA concerning its involvement with Kerimov.  Although GVA produced documents and certified the completeness of its response, GVA failed to provide hundreds of responsive records until two years later when it responded to a Pre-Penalty Notice from OFAC concerning the Ukraine-/Russia-related sanctions violations.  In August 2024, OFAC issued a second Pre-Penalty Notice to GVA concerning these reporting obligation violations.  

    In light of the foregoing, OFAC issued a Penalty Notice to GVA earlier this month, imposing the statutory maximum civil monetary penalty of more than $215 million. OFAC found that GVA willfully violated US sanctions laws because GVA’s senior management “had actual knowledge that the funds received from Prosperity and invested . . . ultimately came from Kerimov” and that GVA knowingly transacted with Gadzhiev, who GVA knew to be Kerimov’s representative.[5] OFAC further concluded that GVA acted “contrary to US foreign policy interests by facilitating a sanctioned Russian national’s access to, and use of, the US financial system in precisely the way his designation sought to prevent.” 

Key Takeaway: The Importance of Effective Sanctions Compliance Controls

    This enforcement action emphasizes the risk that US persons face when transacting with intermediaries or proxies that represent, directly or indirectly, the economic interests of sanctioned individuals.  As noted above, Kerimov’s US investments were effectuated and managed through proxies and entities that were not necessarily under his exclusive control, nor was Kerimov the nominal owner of property interests in the United States.  Nevertheless, OFAC determined that GVA understood that Kerimov was the true party in interest behind the investments and that any economic benefit of those investments would ultimately accrue to him. The use of intermediaries or proxies did not shield GVA from liability where it knew that the beneficial owner of those interests was a sanctioned individual. 

    OFAC also underscored the importance of “developing and maintaining effective risk-based sanctions compliance controls” for “gatekeepers,” such as venture capital firms and investment advisers.  OFAC expects gatekeepers to have a clear understanding of US sanctions compliance obligations, including the risks posed by dealing in sanctioned jurisdictions and, as was the case here, when existing investors become sanctioned. Effective compliance programs will look through formalistic ownership arrangements to determine when sanctioned individuals may be indirectly involved. Failing to block and report assets subject to sanctions, even when assets are formally held by non-sanctioned entities, can result in significant monetary penalties and potentially years of expensive legal and regulatory obligations.

If you have questions or would like more information on these issues, please contact the authors. 

[1] https://ofac.treasury.gov/media/934366/download?inline

[2] Id.

[3] Id.; see also https://home.treasury.gov/news/press-releases/sm0338; https://home.treasury.gov/news/press-releases/jy0841

[4] https://ofac.treasury.gov/media/934366/download?inline

[5] Id.