U.S. Person-1 OFAC Penalty Notice: $4.7M (2025)

The violations arose from U.S. Person-1's willful dealings in the blocked U.S. residential real property of a Russian oligarch's family member, designated in March 2022 pursuant to Executive Order 14024, "Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation." At all relevant times, this blocked person owned the Atlanta, Georgia-area residential property directly and in their own name. The March 2022 designation blocked all U.S. property of the SDN, including the Atlanta property, prohibiting all dealings such as transfer, sale, or foreclosure. In September 2022, OFAC issued a notice to Fulton County of the property's blocked status; the county recorded the document in October 2022. The property went into foreclosure around this time, culminating in King Holdings' purchase at public auction in January 2023.

OFAC learned of the foreclosure and purported transfer in April 2023 and immediately contacted U.S. Person-1, explaining that the property remained blocked and could not be dealt in without OFAC authorization. Neither U.S. Person-1 nor King Holdings applied for a license or sought further authorization. Ten days after OFAC's outreach, on April 13, 2023, U.S. Person-1 signed, on behalf of King Holdings, for an $872,338 mortgage against the property to finance renovation, attesting in a declaration that all related payments were compliant with OFAC's regulations. King Holdings listed the property for sale in August 2023.

In December 2023, U.S. Person-1 executed, on behalf of King Holdings, an agreement to sell the property to an unwitting third-party buyer. Despite the agreement's warranty of "good and marketable title," U.S. Person-1 did not inform the buyer, the closing law firm, or any other party of OFAC's communications regarding the property's blocked status. On February 1, 2024, OFAC sent King Holdings a cease-and-desist order and administrative subpoena. U.S. Person-1 certified under penalty of perjury the accuracy and completeness of a subpoena response that described renovation work but omitted the listing and pending sale. Several days later, King Holdings certified through counsel its compliance with the cease-and-desist order. On March 13, 2024, U.S. Person-1 closed on the sale of the blocked property for $1.4 million, in violation of OFAC's regulations and the cease-and-desist order, making at most $478,000 for King Holdings.

The conduct resulted in two violations of § 587.201(a) of the Russian Harmful Foreign Activities Sanctions Regulations and one violation of § 501.602(a) of the Reporting, Procedures and Penalties Regulations.

OFAC determined, under the Enforcement Guidelines, 31 C.F.R. part 501, Appendix A, that U.S. Person-1 did not voluntarily self-disclose the violations and that the violations constitute egregious cases. Accordingly, the base civil monetary penalty applicable to U.S. Person-1 equals the statutory maximum of $4,677,552. The final penalty of $4,677,552 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This enforcement action underscores the sanctions risks that can arise in the real estate sector, particularly with respect to blocked persons. While blocked persons may have a direct, readily apparent interest in real property through ownership in their own name, blocked property interests may also be indirect, and the blocked party's name may not appear on relevant deeds or transactional documents. At the time of the foreclosure in this case, the blocked person's name appeared directly on the property title, and after the foreclosure, researching the previous property owners' names would have identified the SDN.

All parties involved in real estate transactions, including financial institutions, brokers, agents, title insurers, law firms, registrars, and county authorities, should exercise appropriate caution and conduct risk-based due diligence to avoid dealing in blocked property. Standard compliance controls such as screening parties against the SDN List can serve as a crucial part of such compliance efforts, regardless of whether OFAC has issued a notice related to a specific parcel of real property. Proactive compliance efforts are likely to be particularly beneficial to real estate market participants in light of the nullification of unauthorized transfers of blocked property that may occur under many OFAC sanctions programs, which can affect third-party claims to the property.

OFAC also reminds real estate sector actors of their obligations to block and report all property in which a blocked person has an interest. The responsibilities for blocking and reporting, and attendant civil liability for failure to do so, may fall equally upon multiple parties, including agents, brokers, title insurers, and attorneys. County authorities or other local officials that record real property blocking notifications should ensure that any notifications from OFAC are properly linked to relevant parcels in electronic and paper records. Failure to block and report blocked property can result in a penalty even where no further sanctions violation has occurred.

All U.S. persons, regardless of size, sophistication, or expertise in sanctions-related matters, must timely and fully comply with administrative subpoenas and orders issued by OFAC.

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