OFAC Fines Firm for Managing Assets of Sanctioned Russian Official

The US Treasury Department's Office of Foreign Assets Control ("OFAC") fined a US-based venture capital firm for managing a $20 million investment tied to a sanctioned official of the Russian government.

According to the OFAC Enforcement Release, during the relevant period, the firm managed the investment, knowing that the individual was on OFAC’s Ukraine-/Russia-related sanctions list. OFAC found that the investment was originally made through an offshore vehicle controlled by the individual and that senior executives had met with the sanctioned person at a private estate in Europe to secure the funding and later dealt with the person's close relative to coordinate the investment.

OFAC found that the firm received a notice warning that any transaction involving the investment could violate sanctions law. Despite this, the firm attempted on at least three occasions to sell or distribute the investment or its proceeds. These efforts included an internal transfer, several attempted sales and preparations to distribute shares after a lock-up period expired. OFAC stated that had the distribution occurred, the sanctioned individual stood to benefit by at least $18.5 million.

In addition, the firm failed to fully comply with an investigative subpoena. It initially produced fewer than 200 documents and claimed to have completed its response, but nearly two years later disclosed over 1,300 additional records. This delay resulted in 28 separate violations of federal reporting regulations.

OFAC imposed the maximum civil penalty allowed under law, $215,988,868.