Financial crime risk in the investment sector has been thrust into the spotlight following the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announcement of a record $215,988,868 penalty against GVA Capital Ltd. The case provides an instructive example of how even sophisticated financial actors can falter in meeting regulatory expectations around sanctions compliance, due diligence, and reporting obligations. The enforcement is particularly significant given its focus on Russia-related sanctions and the role of investment professionals in facilitating illicit financial flows, a risk identified repeatedly in both the public and private sectors.

OFAC Penalty against GVA Capital: Unpacking the Enforcement Action

OFAC’s penalty against GVA Capital stemmed from the firm’s willful violations of Ukraine/Russia-related sanctions. GVA Capital, a venture capital firm headquartered in San Francisco but registered in the Cayman Islands, managed U.S. investments on behalf of sanctioned Russian oligarch Suleiman Kerimov. Despite explicit legal obligations and ongoing regulatory scrutiny, the firm continued to manage Kerimov’s assets—both directly and via proxies—after his designation on the OFAC Specially Designated Nationals (SDN) list in 2018.

This enforcement action against GVA Capital not only resulted in the largest possible statutory penalty but also underscores the critical compliance vulnerabilities that can arise when financial firms overlook their gatekeeper responsibilities, especially when servicing clients with high sanctions risk profiles.

Anatomy of the Sanctions Violations: How GVA Capital Facilitated a Sanctioned Oligarch

GVA Capital’s problems began with its solicitation and management of investments from Suleiman Kerimov, a Russian billionaire and government official who was sanctioned by OFAC in 2018 for his ties to the Russian state. The firm’s involvement with Kerimov began in 2016, when senior management sought investment from him for a U.S.-based portfolio company. To secure the funds, GVA Capital’s top executives traveled to France to meet Kerimov personally, ultimately arranging for $20 million to be invested in a Delaware special purpose vehicle, GVA Auto LLC.

Following Kerimov’s designation by OFAC, all U.S. property or interests belonging to him, or controlled through proxies, were subject to blocking and reporting requirements. GVA Capital, however, continued to interact with Kerimov via his nephew Nariman Gadzhiev, who was later sanctioned himself for acting as a proxy. Communications, investment decisions, and attempts to liquidate or distribute assets routinely involved Gadzhiev, whose role was well understood by GVA Capital’s management.

OFAC determined that after the April 2018 designation, GVA Capital engaged in multiple prohibited dealings, including the attempted transfer and sale of assets, and the provision of investment management services benefiting Kerimov. The regulatory framework, specifically the Ukraine-/Russia-Related Sanctions Regulations (URSR) under 31 CFR part 589, prohibits U.S. persons from dealing in the property or interests of blocked individuals. Despite having sought legal counsel, GVA Capital pressed ahead with transactions that either directly or indirectly conferred economic benefit to the designated party.

Beyond the core issue of asset management, OFAC also cited GVA Capital for failure to fully and timely comply with an administrative subpoena. The firm’s initial document production was found incomplete, with over 1,000 relevant documents withheld for nearly two years, further compounding the seriousness of the violations.

The Regulatory Backdrop: OFAC, SDN List, and Reporting Expectations

OFAC’s authority under U.S. law to impose asset freezes and block dealings with designated parties forms a central plank in the government’s sanctions enforcement strategy. For U.S. persons and entities, the key requirements are clear:

• All property and interests in property belonging to an SDN must be blocked and reported to OFAC.
• Any direct or indirect transaction with the SDN or involving their property is prohibited, unless authorized.
• Timely and complete response to administrative subpoenas and requests for information is mandatory under the Reporting, Procedures, and Penalties Regulations (31 CFR part 501).

Failure to meet any of these obligations can trigger significant civil penalties, especially when conduct is found to be egregious or willful. In the GVA Capital case, OFAC concluded that the firm’s violations were egregious due to senior management’s knowledge and active involvement, as well as their disregard for legal guidance specifically warning of the sanctions risks.

Kerimov’s property interests were often layered through legal entities such as Heritage Trust and Prosperity Investments, but OFAC made clear that such arrangements do not absolve firms from compliance obligations when the beneficial ownership or effective control remains with a blocked party. The use of proxies or shell entities is a well-known method for sanctions evasion, and U.S. regulators expect financial institutions to see through such arrangements.

Compliance Failures and Their Consequences: Lessons for Gatekeepers

The GVA Capital enforcement is a textbook example of what can go wrong when investment professionals fail to integrate sanctions compliance into their business processes. Several key failures contributed to the record penalty:

1. Inadequate Due Diligence and Ongoing Monitoring
Although GVA Capital initiated legal review after Kerimov’s designation, the firm failed to implement effective controls to block or report assets, instead relying on formalistic interpretations of ownership. OFAC expects firms to conduct substantive due diligence, identifying not only the nominal owners but also anyone exercising control or receiving benefit from investments.

2. Active Facilitation of Sanctions Evasion
The continued management of assets for Kerimov through his nephew and the attempts to sell or distribute assets despite clear prohibitions illustrated willful misconduct. OFAC specifically cited management’s ongoing communications with the proxy, and their disregard for legal warnings, as aggravating factors in calculating the penalty.

3. Subpoena Non-Compliance and Transparency Failures
The delayed and incomplete production of documents during the OFAC investigation significantly increased the gravity of the case. Regulators rely on timely and transparent cooperation from firms under investigation; lapses in this area often signal broader compliance weaknesses and can turn an otherwise manageable issue into a major enforcement action.

4. Undermining of U.S. Foreign Policy
By allowing a designated Russian national to benefit from investments in the U.S. financial system, GVA Capital’s actions were found to directly undermine the intent of U.S. sanctions policy, which aims to restrict the economic reach of sanctioned individuals and entities.

The Enforcement Process and Penalty Calculation

OFAC’s enforcement guidelines, as outlined in 31 CFR part 501, provide for significant discretion in setting civil penalties, considering factors such as the willfulness of the conduct, prior compliance history, cooperation, and the degree of harm to sanctions programs. In this case, the statutory maximum penalty was imposed, reflecting the seriousness of the violations and the lack of mitigating factors.

The $215,988,868 penalty comprised $214 million for sanctions violations and nearly $2 million for reporting failures, a figure that serves as a clear deterrent for other non-bank financial institutions, investment advisers, and gatekeepers in the financial system.

Industry Implications: Sanctions Compliance as a Core Risk Management Priority

This case holds major implications for the broader investment and venture capital community, as well as for law firms, accountants, and other professionals who may be drawn into the orbit of sanctioned individuals and entities.

Non-bank financial institutions are expected to:

• Maintain robust, risk-based sanctions compliance programs, consistent with the principles outlined in OFAC’s Framework for OFAC Compliance Commitments.
• Conduct continuous screening of clients, beneficial owners, and related parties against updated sanctions lists.
• Implement escalation and blocking procedures when red flags arise, including changes in the sanctions status of existing investors.
• Respond promptly and comprehensively to regulatory inquiries, ensuring all relevant documentation is made available.

Gatekeepers, by virtue of their access and influence, are particularly exposed to legal and reputational risks if they become conduits for sanctions evasion, even unwittingly. The GVA Capital case demonstrates that personal relationships, legacy business ties, or formalistic ownership structures will not shield professionals from liability if they enable the flow of funds or confer economic benefits to designated persons.

Recent Trends and Global Enforcement Context

The GVA Capital case fits within a broader pattern of escalating sanctions enforcement, especially since the Russian invasion of Ukraine in 2022. The United States and its allies have significantly expanded the SDN list and imposed sweeping measures targeting Russian elites, state actors, and facilitators. Increasingly, these enforcement actions target not just banks, but also non-bank financial institutions, lawyers, trust companies, and other enablers.

Recent publications, including the 2024 National Money Laundering Risk Assessment, have highlighted the vulnerabilities created by professionals who fail to scrutinize their clients’ backgrounds or challenge complex ownership arrangements. The GVA Capital penalty echoes these warnings and is likely to drive renewed focus on sanctions risk management across the financial sector.

Whistleblower programs have also been expanded, offering financial incentives to individuals who provide actionable intelligence on sanctions violations, further raising the stakes for compliance.

Strengthening Controls: Practical Takeaways for Compliance Teams

For compliance officers and risk managers, the lessons from GVA Capital are clear:

• Treat all client relationships as dynamic; the risk profile can change overnight if a beneficial owner is designated.
• Go beyond nominal ownership—look for effective control, influence, or indirect benefit to blocked parties.
• Document decisions and communications thoroughly, especially when legal advice is sought or internal disagreements occur.
• Never delay or minimize responses to regulatory subpoenas or requests for information.
• Review and update sanctions screening, escalation, and blocking procedures regularly, particularly after major geopolitical events.

Adopting a risk-based approach, as outlined by OFAC and international bodies such as the Financial Action Task Force (FATF), can help institutions avoid the costly mistakes made in this case.

Conclusion: GVA Capital Penalty as a Watershed Moment for Sanctions Compliance

The record OFAC penalty imposed on GVA Capital marks a critical moment for sanctions compliance in the global investment industry. It underscores the far-reaching obligations of gatekeepers, the pitfalls of inadequate due diligence, and the dangers of treating sanctions risk as a formality. Firms that fail to implement strong controls, adapt to evolving risk profiles, or cooperate transparently with regulators face not only legal exposure but also severe reputational and commercial consequences.

As sanctions regimes become more complex and enforcement more aggressive, investment professionals, advisers, and compliance teams must prioritize sanctions compliance as an essential element of their risk management strategy. The GVA Capital case stands as a powerful reminder: when it comes to sanctions, ignorance, delay, or formalism can prove extraordinarily costly.

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Related Links

• OFAC Civil Penalties and Enforcement Information
• OFAC Specially Designated Nationals (SDN) List
• OFAC Framework for Compliance Commitments
• 2024 National Money Laundering Risk Assessment (U.S. Treasury)
• Reporting, Procedures and Penalties Regulations (31 CFR part 501)

Other FinCrime Central Articles About Sanctions Against Russia

• U.S. Probes $530 Million Money Laundering and Russian Sanctions Evasions via Evita Crypto Payment Firm
• Miami Real Estate Broker Pleads Guilty to Violating U.S. Sanctions
• Dmitrii Ovsiannikov, Ex-Governor of Sevastopol, on Trial for Breaching UK Sanctions

Source: OFAC (PDF)

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