• In 2025, a notable trend in enforcement activity by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) was the focus on asset managers and activities involving violations of U.S. sanctions on Russia.
• Three OFAC enforcement actions in particular from the past year provide important lessons for asset managers and other firms regarding sanctions risks and OFAC’s sanctions compliance expectations.

In the second Trump administration, regulatory enforcement actions and penalties have dropped markedly. A notable exception has been sanctions enforcement by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). In 2025, OFAC issued fourteen public settlements or civil monetary penalties, a similar pace of enforcement activity as in prior years.

One notable difference from past years is OFAC’s enforcement focus on investment managers and other firms managing assets. These OFAC enforcement actions, which each involved violations of U.S. sanctions against Russia, follow on the Biden Treasury Department’s finding that investment advisers have served as an entry point into the U.S. market for billions of dollars ultimately controlled by sanctioned persons, including sanctioned Russian oligarchs and their associates.

We summarize below three notable OFAC enforcement actions from 2025 relevant for asset managers and key sanctions compliance lessons learned from these cases.

Notable 2025 OFAC Enforcement Actions

• In June 2025, OFAC issued a penalty of nearly $216 million to a U.S. venture capital firm (the “VC Firm”) in connection with the VC Firm’s management of an investment for the sanctioned Russian oligarch Suleiman Kerimov (“Kerimov”). Before Kerimov’s sanctions designation in April 2018, the VC Firm had managed Kerimov’s investment in a U.S. company. Kerimov’s investment was structured through a U.S. trust that held and maintained Kerimov’s U.S. assets and an offshore investment vehicle in which Kerimov had an interest.
  
  

  Following Kerimov’s designation, the VC Firm obtained a legal opinion regarding the applicability of U.S. sanctions to the Kerimov-related investment; the opinion concluded that the investment vehicle in which Kerimov had an interest was not sanctioned because it was not nominally owned 50 percent or more by a person on the Specially Designated Nationals (“SDN”) List. OFAC disagreed with this conclusion, which it found to be “belied by evidence collected throughout OFAC’s investigation.” In addition, OFAC noted the legal opinion cautioned that any sale or transfer of the portfolio company shares should not directly or indirectly involve Kerimov, which advice OFAC believed was ignored by the VC Firm. Rather, the firm continued to manage the investment it knew was made by Kerimov, including liaising with Kerimov through his nephew, who the firm knew represented Kerimov in investment matters. OFAC determined the VC Firm’s sanctions violations were egregious and imposed the statutory maximum penalty.

• In December 2025, OFAC settled for approximately $11 million with a U.S. private equity firm (the “PE Firm”) also in connection with the PE Firm’s management of investments for Kerimov. Prior to Kerimov’s designation, Kerimov had invested in a fund managed by the PE Firm that made certain data center related investments. Kerimov’s investment in the fund similarly was structured through Kerimov’s U.S. trust and a different offshore vehicle in which Kerimov had an interest.
  

  
  Shortly after Kerimov’s designation, the PE Firm also consulted with outside counsel regarding its sanctions compliance obligations. Counsel concluded that there was no blocking obligation because, although Kerimov was the initial source of funds for the investment into the PE Firm’s vehicle, he did not have a role in the management of those funds. Outside counsel took the view that it was not necessary to inquire further about the source of funds and “did not flag risks associated with indirectly dealing with Kerimov.” As with the case above, OFAC criticized the basis for this advice, noting that the PE Firm did not reveal to its outside counsel all of the pertinent relationships, including its dealings with Kerimov’s personal representative.

  At the suggestion of outside counsel, the PE Firm sought and obtained an attestation that the amounts invested in the fund were not for the benefit of or related in any way to the activities of a person subject to any OFAC sanctions program or named on the SDN List. According to OFAC, the PE Firm had reason to know that the attestation was inaccurate, including because it knew Kerimov was the original source of the invested amounts. The PE Firm continued to deal indirectly with Kerimov through his representative and issued capital calls and distributed profits to, and collected management fees from, Kerimov’s offshore vehicle, in violation of U.S. sanctions. OFAC determined the PE Firm’s sanctions violations were non-egregious.

• In December 2025, OFAC issued a penalty of approximately $7 million to a U.S. property management company (the “Property Manager”) for receiving payments due to a company ultimately owned by the sanctioned Russian oligarch Oleg Deripaska (“Deripaska”). Before Deripaska’s designation as an SDN in April 2018, the Property Manager had been owned by Deripaska and was established to manage Deripaska’s U.S. real estate properties.
  
  After Deripaska’s designation, although the Property Manager was no longer owned by Deripaska, it continued to receive monthly payments on behalf of an offshore vehicle owned by Deripaska, which payments it failed to block or report, in violation of U.S. sanctions. The Property Manager engaged in the violative conduct despite receiving explicit prior notice from OFAC that direct and indirect dealings with Deripaska were prohibited after his designation. OFAC determined the Property Manager’s sanctions violations were egregious and imposed a penalty equal to approximately 80 percent of the statutory maximum penalty.
  
  On January 12, 2026, the Property Manager filed a complaint in U.S. federal court challenging OFAC’s penalty under the Administrative Procedure Act and the U.S. Constitution.

Key Lessons for Asset Managers

The three enforcement actions present important lessons for asset managers and others regarding OFAC’s sanctions compliance expectations.

Firms should, as a matter of priority, ensure they understand and manage their sanctions risks.

The Biden Treasury Department had signaled a focus on the financial crime and sanctions risks presented by the asset management industry. Although the Trump administration has stepped back to some extent from this posture (having, for example, delayed the effective date of the anti-money laundering rule for investment advisers), OFAC’s enforcement actions in 2025 indicate that the industry must remain focused on complying with applicable sanctions requirements.

In its actions against the VC Firm and PE Firm, OFAC described the firms’ activity as facilitating Kerimov’s access to and use of the U.S. financial system “in precisely the way” that U.S. sanctions seek to prevent. In the VC Firm’s case, following Kerimov’s designation, the firm attempted to provide Kerimov access to significant amounts of money from returns on his investment; in the PE Firm’s case, the firm received capital from, and made distributions to, Kerimov even after his designation. OFAC is clear that it views investment management activities that enable sanctioned persons to participate in investments and grow their wealth as undermining the integrity of U.S. sanctions and U.S. sanctions policy objectives.

Consequently, firms that have potential exposure to sanctioned persons, whether direct or indirect, should ensure they have taken appropriate steps to meet their sanctions compliance obligations, such as appropriately segregating and reporting property of sanctioned parties. OFAC has not provided clear guidance on the steps necessary to effect such blocking in private fund situations, and firms may need to make judgment calls on how to satisfy sanctions compliance obligations within the contours of their funds and asset management structure.

Asset managers should maintain robust know-your-customer (“KYC”) processes to mitigate sanctions risks.

OFAC has warned that investment professionals and other “gatekeepers” to the U.S. financial system should be vigilant against their services being used by sanctioned parties. The vigilance extends to monitoring for risks that sanctioned parties or their proxies may engage in sanctions evasion activities or otherwise seek to obscure their interests in assets.

Accordingly, and notwithstanding the fact that formal U.S. anti-money laundering compliance requirements have been delayed for investment advisers registered with the U.S. Securities and Exchange Commission and other covered entities, firms should ensure they have appropriately robust KYC controls in place. Those controls should enable sanctions screening, as appropriate on a risk basis, not only of direct counterparties but also of underlying beneficial owners.

Importantly, as OFAC enforces sanctions on a strict liability basis, a firm may be held liable whether it knowingly or unwittingly engages in prohibited dealings with sanctioned persons or their assets. Thus, effective KYC measures are important to enable firms to identify and protect against potential exposure to sanctioned persons.

Opaque ownership structures may present sanctions risks and such structures should not thwart diligence to identify links to sanctioned persons.

Both the VC Firm and the PE Firm failed to assess correctly the fact that Kerimov, after his designation, continued to retain property interests in the offshore vehicles through which he had initially invested. As a result, OFAC highlights the risks presented by “formalistic ownership arrangements” and “opaque legal structures,” which may obscure a sanctioned person’s interests or involvement in an investment.

As part of firms’ KYC processes, firms should not allow complex or opaque legal structures to thwart KYC efforts. OFAC cautions that, where circumstances indicate a sanctioned person may be involved in an investment, firms should not rely solely on legal formalities as to the ownership of an entity. Rather, OFAC urges firms to be cognizant of “underlying practical and economic realities” and consider indicators that a sanctioned person may have control or influence over an entity or investment in determining the extent of risk-based diligence.

Although these admonitions seem to contradict OFAC’s numerical application of its 50 percent rule, this guidance reinforces OFAC’s long-standing warning to industry participants to be cautious when dealing with non-blocked entities that may be controlled by sanctioned persons.

Proxies acting on behalf of investors may present sanctions risks and merit further diligence.

Similarly, OFAC cautions firms that indirect dealings with a sanctioned person through a proxy acting for the sanctioned person may violate sanctions. Both the VC Firm and the PE Firm engaged indirectly in prohibited dealings with Kerimov through his proxy or representative for investment-related matters. In the case of the Property Manager, the entity acted on instructions from Deripaska’s relative and known associate in connection with receiving payments on behalf of Deripaska’s offshore vehicle.

In all of these cases, the firms appeared to have been aware of these arrangements and the link to the underlying SDN. OFAC urges firms generally to be watchful of dealings with proxies that could involve indirect dealings, even unknowingly, with sanctioned persons or blocked property. Accordingly, firms should ensure their KYC processes appropriately consider sanctions risks presented by proxies and tailor diligence measures in such scenarios accordingly.

Firms cannot rely on legal advice regarding applicable sanctions obligations if they are aware of contrary relevant facts.

Following Kerimov’s designation, both the VC Firm and the PE Firm sought legal advice as to the applicability of U.S. sanctions to Kerimov’s investment vehicles. In both cases, OFAC asserts that the firms had actual knowledge of their ongoing dealings with Kerimov and his proxy and Kerimov’s involvement in the relevant investments after his designation that belied the conclusions of the advice. These facts appear not to have been fully disclosed by the firms in seeking legal advice.

OFAC warns that firms should ensure sanctions legal and compliance advice they receive is based on a full and complete understanding of all material information. Legal advice may not effectively help a firm to protect itself against sanctions violations, particularly where the firm fails to disclose all pertinent information about its dealings with sanctioned persons or their interests.

Firms should respond promptly and appropriately to OFAC notices and inquiries and timely comply with reporting requirements.

In all three OFAC enforcement actions, the firms exhibited serious deficiencies in their responses to OFAC notices or inquiries. The VC Firm was subject to additional penalties for non-compliance with an OFAC administrative subpoena due to its failure to produce all responsive records in its initial response to OFAC. The PE Firm failed initially to cooperate satisfactorily with OFAC’s investigation but, after retaining new counsel and re-engaging with OFAC, improved its cooperation. Nevertheless, OFAC limited the firm’s mitigating credit for cooperating with OFAC because of the firm’s substantial delay in doing so. Finally, the Property Manager, despite receiving actual notice from OFAC that dealings involving Deripaska were prohibited, continued its violative conduct and failed to report blocked property as required for over 45 months. Although the Property Manager eventually submitted a self-disclosure to OFAC, its violations had already become known to OFAC or another federal agency and it did not receive mitigating credit for its disclosure.

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.