OFAC Slaps $215 Million Penalty on GVA Capital for Russia Sanctions Violations

Key Takeaways

• $215 Million Penalty: GVA Capital Ltd. has been fined $215,988,868 by OFAC for violating U.S. sanctions and failing to comply with a subpoena.
• Sanctions Violations: GVA Capital continued managing investments for Russian oligarch Suleiman Kerimov, even after he was sanctioned in 2018, working through his proxy, Nariman Gadzhiev.
• Failed to Comply with Subpoena: The firm took over two years to fully respond to an OFAC subpoena, resulting in 28 separate violations.
• Egregious Violations: OFAC determined that GVA Capital knowingly violated U.S. sanctions, with senior management aware of Kerimov’s involvement in the investments.
• Gatekeepers’ Role: Investment professionals, accountants, and attorneys must remain vigilant in preventing sanctions evasion by properly vetting transactions and clients.

Deep Dive

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued a hefty penalty of $215,988,868 against GVA Capital, a San Francisco-based venture capital firm. The firm is being held accountable for knowingly managing investments linked to Suleiman Kerimov, a Russian oligarch already under sanctions, and for failing to respond properly to an OFAC subpoena. This is a case that underscores the immense risks involved when gatekeepers like venture capital firms fail to uphold sanctions compliance.

Between April 2018 and May 2021, GVA continued managing investments for Kerimov, after the Russian official had been added to the U.S. sanctions list. Despite knowing that Kerimov had been sanctioned, the firm worked through his nephew, Nariman Gadzhiev, who acted as a proxy, allowing Kerimov to benefit from these investments.

GVA Capital’s actions were far from incidental, they were deliberate. In 2016, GVA Capital’s senior management even traveled to Kerimov’s estate in France to discuss the investment. After Kerimov’s formal designation in 2018, GVA Capital failed to take appropriate action, continuing to work through Gadzhiev to manage investments for Kerimov, thus violating U.S. sanctions.

Despite receiving legal guidance cautioning them against any involvement in the blocked assets, GVA Capital continued trying to push the boundaries. The firm attempted to sell or distribute shares tied to Kerimov's investments on multiple occasions—from 2018 to 2021—even after being warned that such actions were prohibited under U.S. law.

In fact, GVA Capital made at least four attempts to move these assets, including trying to liquidate shares in a U.S. company. Each time, the firm engaged in discussions with Gadzhiev, all while knowing that Kerimov was behind the scenes pulling the strings. This is exactly the kind of behavior U.S. sanctions were designed to prevent.

The Subpoena Drama

As if violating sanctions wasn’t enough, GVA Capital also found itself in hot water for failing to respond properly to an OFAC subpoena. In 2021, OFAC issued the firm a subpoena as part of its investigation into the sanctions violations. GVA Capital initially provided a partial response, submitting just 173 documents, but it took over two years—and the discovery of thousands of additional documents—before the firm finally complied fully. This extended delay led to 28 separate violations of reporting requirements, which only added to the firm’s troubles.

After a thorough investigation, OFAC decided to hit GVA Capital with the statutory maximum penalty: $215,988,868. The breakdown is as follows: $214 million for violating U.S. sanctions and nearly $2 million for failing to comply with the subpoena. According to OFAC, GVA Capital’s violations were “egregious,” especially considering the firm’s management knew full well that they were facilitating sanctions evasion by continuing to work with Kerimov’s assets.

Why It Matters

This case isn’t just about one firm getting caught in the web of international sanctions; it’s a warning to all firms that work in financial services, venture capital, and beyond. Gatekeepers (whether they’re attorneys, accountants, or investment managers) hold significant power when it comes to preventing sanctions evasion. When they fail to properly vet their transactions, the consequences can be severe.

For GVA Capital, the penalty is a painful reminder that sanctions are not just theoretical; they have real-world consequences. The firm’s failure to comply with the law undermines the broader goals of U.S. foreign policy, which aims to block individuals like Kerimov from accessing the U.S. financial system.

But this case also highlights a key lesson for others in the industry: ensuring compliance with U.S. sanctions isn’t just about checking boxes or reading the fine print—it’s about taking proactive steps to protect the financial system from exploitation. Had GVA Capital taken appropriate measures to ensure that they weren’t inadvertently dealing with blocked individuals or their proxies, they might have avoided this hefty penalty.

For other firms in the venture capital and financial services sectors, this enforcement action is a cautionary tale about the importance of maintaining robust sanctions compliance programs. The risks of dealing with sanctioned individuals or entities are far too great, and the penalties for non-compliance are severe.

Firms should not only make sure they understand the full scope of their U.S. sanctions obligations but should also develop effective systems to track and report their dealings. The case of GVA Capital shows how important it is for investment firms and financial professionals to understand the full risks they’re facing when working with clients who may have connections to sanctioned individuals.

Compliance isn’t optional, it’s a critical responsibility that protects the broader financial system.

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