The U.S. Department of the Treasury’s Office of Foreign Assets Control imposed a $4.67 million civil monetary penalty on an unidentified U.S.-based individual (“Person-1”) who “willfully” dealt in real estate transactions involving property owned by a person blocked under OFAC’s Russia sanctions. OFAC reported that, between April 2023 and March 2024, Person-1 acted through Georgia-based real estate investment company King Holdings LLC to handle real estate transactions, including the mortgaging, renovating and selling of real property for a person sanctioned under Executive Order 14024. EO 14024 prohibits transactions with numerous Russian elites and their family members for supporting the Russian Federation and its ongoing invasion of Ukraine. OFAC indicated that the statutory maximum penalty was imposed in this case and that the amount of the penalty reflected OFAC’s determination that the individual’s violations were egregious and not voluntarily self-disclosed.
According to OFAC, the residential real property at issue in this case was owned by a family member of a Russian oligarch whose name was added to the sanctions list in March 2022. The designated family member allegedly owned the Georgia-based property directly and in their own name. Shortly after OFAC issued a notice informing county officials in Georgia that the property was blocked and subject to transfer restrictions in September 2022, the property went into foreclosure in or around October 2022. King Holdings reportedly purchased the property at a public auction in January 2023, and Person-1, who allegedly planned to renovate and sell the property through King Holdings, did not realize at the time that the property was subject to sanctions restrictions. However, in April 2023 after the learning of the property’s transfer, OFAC informed Person-1 that the property was blocked and could not be transferred without first obtaining a license from OFAC. Despite having notice of these prohibitions, Person-1 never applied for an OFAC license, according to OFAC, and proceeded to apply for a mortgage, complete renovations, and list the property for sale in August 2023. In December 2023, Person-1 also allegedly agreed to sell the property to an unwitting third-party buyer for $1.4 million, without informing the buyer, closing law firm, and other parties of the property’s blocked status. According to OFAC, Person-1 also led the buyer to believe that the seller was conveying “good and marketable title” and attested in mortgage documentation that the loan was in compliance with OFAC regulations.
In February 2024, before the property was sold, OFAC issued King Holdings a cease-and-desist order and an administrative subpoena confirming the sanctions prohibitions on the property and instructing the company to stop violating sanctions immediately. On March 5, 2024, King Holdings reportedly responded to the subpoena and certified its compliance with the cease-and-desist order, while Person-1 also certified the “accuracy and completeness” of the subpoena response that allegedly failed to mention the listing and pending sale of the property. Eight days later, Person-1 allegedly closed on the sale of the property and made approximately $478,000 for King Holdings from the sale.
According to OFAC, this enforcement action demonstrates how sanctions risks can affect real estate transactions, and the importance of determining whether real property is blocked before transactions occur. OFAC also cautioned that, unlike the current case, the blocked party’s name may not appear on the deed or other transactional documents and might require one to research previous property owners’ names in order to identify the sanctioned individual. OFAC also emphasized that all parties involved in real estate transactions, including brokers, title insurers, registrars and county authorities, should have compliance controls in place to prevent them from dealing in blocked property.
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