OFAC’s $7.1m Deripaska-linked fine on New York firm — key lessons for Jersey, Mauritius and other IFCs

A small New York property management company formerly tied to sanctioned Russian oligarch Oleg Deripaska is contesting a near-maximum civil penalty of $7,139,305 imposed by the U.S. Treasury’s Office of Foreign Assets Control (OFAC).

Gracetown, Inc. argues that the fine is excessive, that the underlying conduct was non-wilful, and that it was improperly denied mitigation credit as a first-time offender.

The enforcement action

• On 4 December 2025, OFAC announced the penalty against Gracetown for violations of Ukraine-/Russia-Related Sanctions Regulations and reporting rules.

• Gracetown was established in 2006 to manage three luxury properties in New York and Washington, D.C., which Deripaska acquired through various vehicles.

• Deripaska was its ultimate beneficial owner until early 2018, when ownership transferred to a relative and associate.

• He was designated an SDN on 6 April 2018; OFAC simultaneously served Gracetown with a Notification of Blocking (received around 10 April) warning that dealings involving him or his property were prohibited and that blocked property must be reported.

• Despite the notice, Gracetown continued an arrangement begun in 2013 under which it received monthly instalments (typically ~$1,250) from a U.S. debtor that were due to Baufinanz, a British Virgin Islands company owned by Deripaska.

• Between April 2018 and May 2020, it accepted 24 payments totalling $31,250, treating them as a loan from Baufinanz for property expenses.

• It also failed to report blocked property (an accumulated debt to Baufinanz reaching ~$103,750) for more than 45 months, disclosing it only in January 2022—after U.S. authorities already knew of the activity.

• OFAC treated the case as egregious and not voluntarily self-disclosed. The base penalty equalled the statutory maximum (~$8.9 million).

• Limited credit was given for later cooperation (including a tolling agreement) and the absence of prior OFAC enforcement history, but OFAC declined further “first violation” reduction under its guidelines, citing the totality of the circumstances (continued conduct after actual notice, benefit to Deripaska, and deficient remediation).

• The final penalty was $7,139,305.

The challenge

• Gracetown sued in the U.S. District Court for the Southern District of New York in January 2026 (case 1:26-cv-00257), seeking to vacate the penalty.

• It contends the conduct was an inadvertent administrative oversight by a small or unsophisticated entity, that it is a first-time offender entitled to mitigation (guidelines generally allow up to 25% reduction where there has been no prior Penalty Notice or Finding of Violation in five years), and that the fine is grossly disproportionate under the Excessive Fines Clause.

• Additional claims allege due-process, equal-protection and jury-trial violations. As of late September 2026 the parties were exchanging summary-judgment and dismissal briefs; the case remains pending.

Lessons for International Financial Centres (Jersey, Mauritius and similar)

The case is directly relevant to IFCs because the payments flowed for the benefit of a BVI company (Baufinanz) owned by an SDN, and because OFAC’s reach is extra-territorial.

Jersey and Mauritius firms, service providers, banks, trust companies and property/asset managers should note the following:

1. OFAC applies via any U.S. nexus
   Even pure offshore entities can face OFAC exposure through USD clearing, U.S. persons, U.S. assets, correspondent banks or U.S. property. Jersey FSC guidance and equivalent Mauritius materials already flag OFAC’s extraterritorial effect;

This case shows how modest passive receipts involving a U.S. property manager and a BVI vehicle produced a multi-million-dollar outcome.

2. The 50% rule and “network” risk
   An entity need not be named on the SDN List to be blocked if it is 50% or more owned (directly or indirectly, in aggregate) by an SDN.

Continued close association with an SDN’s network after designation—even after formal ownership has transferred to a relative—creates substantial risk.

Former ownership plus ongoing instructions from the same circle was treated as aggravating.

3. Notice is decisive; first-offender credit is discretionary
   Receipt of an OFAC notification or equivalent warning sharply raises the stakes. Continuing the activity can convert ordinary violations into “egregious” ones and strip discretionary mitigation.

The guidelines say first-violation credit will “generally” be applied (up to 25%); OFAC declined it here on the totality of the facts.

IFC firms cannot assume small size, defunct status or lack of prior formal penalties will protect them.

4. Small values do not equal small risk
   $31,250 in post-designation payments produced a penalty more than 200 times that amount because of the post-notice conduct and failure to block/report.

Property-management, loan, dividend or fee arrangements that look routine can still trigger liability if they involve blocked property.

5. Prompt blocking, reporting and remediation are essential
   Gracetown’s 45-month delay in reporting blocked property was itself a violation and was treated as deficient remediation.

IFC service providers and intermediaries should have clear procedures to freeze, report and escalate as soon as an SDN interest appears (including under the 50% rule).

6. Beneficial-ownership and ongoing monitoring
   Structures involving BVI, Jersey, Mauritius or similar vehicles require continuous screening of ultimate beneficial owners, controllers and associated parties against OFAC, UK, UN and EU lists, plus monitoring for ownership changes or continued “network” links.

Passive receipt of funds is not a safe harbour once a blocking interest arises.

In short, IFCs that host company administration, real-estate holding, financing or asset-management vehicles linked to high-risk individuals face material OFAC exposure whenever a U.S. touchpoint exists.

Robust, ongoing sanctions screening that covers both named parties and the 50% rule, immediate action on any notice, and documented remediation are the practical defences.

Primary sources

• OFAC press release (4 Dec 2025): https://home.treasury.gov/news/press-releases/sb0328

• OFAC Enforcement Release (4 Dec 2025): https://ofac.treasury.gov/media/934796/download?inline=

• Arnold & Porter summary of the lawsuit (10 Feb 2026): https://www.arnoldporter.com/en/perspectives/blogs/enforcement-edge/2026/02/gracetown-inc-challenges-ofac

• Export Compliance Daily coverage of later motions (Oct 2026): https://exportcompliancedaily.com/article/2026/10/07/property-management-firm-challenges-nearmax-fine-for-first-sanctions-violation-2610060028

• Court complaint (CourtListener): https://storage.courtlistener.com/recap/gov.uscourts.nysd.656050/gov.uscourts.nysd.656050.1.0.pdf

• Jersey FSC sanctions guidance: https://www.jerseyfsc.org/industry/international-co-operation/sanctions/financial-sanctions-practical-guidance/

Figures and characterisations are taken from the OFAC documents and public court filings. The litigation is ongoing; outcomes may evolve.