GVA Capital Ltd. OFAC Penalty Notice: $215.99M (2025)

GVA Capital's violations spanned two regulatory frameworks: the Ukraine-/Russia-Related Sanctions Regulations (URSR), 31 C.F.R. part 589, and the Reporting, Procedures and Penalties Regulations (RPPR).

GVA Capital's senior management traveled to Kerimov's estate in France on at least two occasions, around June and August 2016, including via Kerimov's private aircraft, to secure his agreement to invest $20,000,000 in a U.S. company. After those meetings, GVA Capital was directed to communicate through Kerimov's nephew and financial facilitator, Nariman Gadzhiev. In September 2016, Prosperity Investments, L.P., a Guernsey-based entity in which Kerimov retained an interest at all relevant times, transferred $20,000,000 to GVA Auto LLC, a Delaware special purpose vehicle established by GVA Capital to hold the investment.

Following Kerimov's designation on April 6, 2018, GVA Capital obtained a legal opinion on May 15, 2018. Although the opinion incorrectly concluded Prosperity was not itself blocked, it explicitly cautioned that any sale or transfer of the shares that directly or indirectly involved Kerimov would violate OFAC sanctions. GVA Capital nonetheless dealt or attempted to deal in blocked property on four occasions:

(1) December 19, 2018 Assignment Agreement: GVA Capital, as general partner of GVA Auto, facilitated an agreement under which Prosperity transferred its interest in GVA Auto, valued at $18,500,000, to Definition Services, Inc., a British Virgin Islands entity that owned Prosperity. This constituted a prohibited dealing in blocked property under § 589.201(a)(3) and a prohibited provision of services under § 589.201(b)(1) of the URSR.

(2) 2019 Attempted Sale: Around June 2019, GVA Capital attempted to sell Definition's interest in GVA Auto for $20,000,000. GVA Capital maintained a formal channel with Heritage Trust's U.S.-based fiduciary and a separate informal channel with Gadzhiev, sending proposed sale terms to Gadzhiev to solicit Kerimov's feedback before the official proposal.

(3) 2020 Attempted Sale: Around August 2020, GVA Capital attempted to sell Definition's interest in GVA Auto and two other investments for $50,000,000, again working through Gadzhiev as Kerimov's representative.

(4) 2021 Attempted Distribution: Around April and May 2021, GVA Capital attempted to distribute the U.S. company's shares in kind to Definition and to GVA Capital itself, which would have conferred an economic benefit to Kerimov of at least $18,500,000. GVA Auto was valued at approximately $436,000,000 at that time.

The three attempted transactions constituted prohibited attempts under § 589.213(a) of the URSR.

Separately, OFAC issued an administrative subpoena on June 2, 2021, pursuant to 31 C.F.R. § 501.602. GVA Capital produced approximately 173 documents and certified compliance on October 11, 2021. After OFAC issued a Pre-Penalty Notice on September 13, 2023, GVA Capital disclosed it held additional responsive records, ultimately producing approximately 1,300 more documents and re-certifying compliance on February 23, 2024, over two years after its initial certification. This resulted in 28 months of non-compliance and 28 violations of § 501.602 of the RPPR.

OFAC issued a Pre-Penalty Notice on September 13, 2023, for the Ukraine-/Russia-related sanctions violations, and a second Pre-Penalty Notice on August 22, 2024, for the reporting violations. After considering GVA Capital's responses to both PPNs, OFAC issued a Penalty Notice pursuant to 31 C.F.R. § 589.703 and § 5(V)(A)(3) of OFAC's Economic Sanctions Enforcement Guidelines.

The statutory maximum civil monetary penalty applicable in this matter is $215,988,868: $214,000,000 for the Ukraine-/Russia-related violations and $1,988,868 for the reporting violations. OFAC determined that GVA Capital did not voluntarily self-disclose the violations and that the violations constitute an egregious case. Under the Enforcement Guidelines, the base civil monetary penalty therefore equals the statutory maximum of $215,988,868. OFAC imposed the full statutory maximum based on its consideration of the General Factors under the Enforcement Guidelines.

This enforcement action highlights the risks that arise when gatekeepers, such as investment professionals, accountants, attorneys, and providers of trust and corporate formation services, fail to properly understand the risks associated with the provision of their services. Gatekeepers occupy crucial financial and legal positions that place them at particular risk of knowingly or unwittingly furnishing access by illicit actors to the licit financial system. Given that they often occupy positions of trust, gatekeepers are also often better positioned than others to monitor for and identify ways in which a blocked person may retain an interest in property. Accordingly, gatekeepers should remain vigilant of the risk that unscrupulous actors, including sanctioned parties or their proxies, may seek to use professional services to conceal a property interest or otherwise evade OFAC sanctions.

This enforcement action also demonstrates the importance for non-bank financial institutions, including venture capital firms and investment advisers, of developing and maintaining effective, risk-based sanctions compliance controls. U.S. persons operating in these industries should have a clear understanding of their U.S. sanctions compliance obligations, as well as the risks posed by dealing with counterparties who are themselves sanctioned or who reside in sanctioned jurisdictions. Additionally, participants in these industries should understand the sanctions risks present where an existing investor becomes sanctioned. Failing 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.

This enforcement action also demonstrates the risk that U.S. persons face when relying 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. U.S. persons with knowledge that a sanctioned individual retains a property interest in an investment cannot claim ignorance even if the nominal owner of that property is someone other than the sanctioned individual.

Additionally, this enforcement action demonstrates the importance of fully and timely complying with administrative subpoenas issued by OFAC. U.S. persons who fail to do so risk exposure to significant monetary penalties, regardless of whether any other violation is alleged.

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