Gracetown, Inc. OFAC Penalty Notice: $7.1M (2025)

Gracetown was established in 2006 to manage three luxury real estate properties in New York and Washington, D.C. that Deripaska purchased through various legal vehicles. From 2006 to early 2018, Deripaska was the ultimate beneficial owner of Gracetown; in the months before his designation, a relative and known associate became the ultimate beneficial owner. Throughout all relevant times, Gracetown employed a property manager who managed its bank accounts based on instructions from Russia-based stakeholders.

In 2013, Baufinanz, a British Virgin Islands-based company also owned by Deripaska, entered into a settlement agreement with an unrelated U.S. person over a loan dispute. Under the agreement, Gracetown would receive regular monthly payments from the U.S. person that were due to Baufinanz, accounting for them as a loan from Baufinanz and using the funds to manage the properties. Gracetown's property manager received and deposited the payments beginning December 19, 2013.

On April 6, 2018, OFAC added Deripaska to the SDN List and issued Gracetown a Notification of Blocking via certified mail, received by Gracetown's registered agent on April 10, 2018. The Notification informed Gracetown that Deripaska had been designated, that all of his property and interests in property were blocked, that unauthorized dealings would be unlawful and may result in a monetary penalty, and that Gracetown was obligated to block and report any Deripaska-linked property within 10 business days. Because Deripaska was the ultimate beneficial owner of Baufinanz, all of Baufinanz's property and interests in property became blocked as well.

Despite receiving this Notification, Gracetown continued receiving monthly payments on Baufinanz's behalf until May 2020. At the time of designation, Gracetown already owed Baufinanz $72,500 — a debt that became blocked property requiring reporting upon Deripaska's designation. From April 24, 2018, to May 7, 2020, Gracetown received 24 additional payments totaling $31,250, increasing the accumulated debt to $103,750. Gracetown's new owner, speaking on behalf of both Gracetown and Baufinanz, directed these actions of the Gracetown property manager. Gracetown did not report the blocked property until January 11, 2022 — over 45 months after receiving actual notice — by which time OFAC or another federal government agency had already become aware of the violative conduct.

OFAC determined that each of the 24 payments constitutes a violation of the Ukraine-/Russia-Related Sanctions Regulations (URSR), 31 C.F.R. §§ 589.201, and that Gracetown's failure to timely submit a blocking report constitutes a violation of section 603(b) of the Reporting, Procedures and Penalties Regulations (RPPR), 31 C.F.R. § 501.603(a)-(b); 31 C.F.R. part 501 app. A(IV)(B).

The statutory maximum civil monetary penalty applicable in this matter is $8,906,358, comprising $8,835,264 with respect to the URSR violations and $71,094 with respect to the RPPR violations. OFAC determined that Gracetown did not voluntarily self-disclose the violations and that the violations constitute an egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 CFR part 501, app. A, the base civil monetary penalty equals the statutory maximum of $8,906,358. The final penalty of $7,139,305 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

Entities formerly owned by a blocked person or that otherwise continue to work closely within the network of a blocked person are taking substantial risk in doing so. This enforcement action highlights the importance of closely monitoring and following OFAC-issued guidance, particularly when a U.S. person receives notice due to its close relationship to a sanctioned individual, as violations of U.S. sanctions can result in substantial monetary penalties.

This action also highlights that all U.S. persons are subject to certain reporting requirements involving blocked property and rejected transactions through the OFAC Reporting System. OFAC regulations define the terms "property" and "property interest" to include, among others, assets, funds, indebtedness, contracts of any nature, or interest therein, present, future, or contingent. OFAC requires the timely reporting of blocked property to avoid sanctions violations and late reporting penalties.

OFAC encourages anyone who may have violated any OFAC-administered sanctions programs or is aware of potential violations to disclose the apparent or potential violation to OFAC promptly. Voluntarily self-disclosing apparent violations to OFAC will result in a reduction in the base amount of any proposed civil penalty.

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