OFAC has imposed a significant penalty of $4,677,552 on an individual ("U.S. Person-1") for willfully violating Russia-related sanctions and failing to comply with an administrative subpoena. The individual, acting through King Holdings LLC, purchased a residential property at a foreclosure auction that was previously owned by a sanctioned Russian person and therefore remained "blocked" property. Despite receiving a direct notice from OFAC that the property was blocked, the individual proceeded to mortgage, renovate, and eventually sell the home to an unsuspecting third party for $1.4 million. Aggravating the situation, the individual concealed the impending sale by certifying a false response to an OFAC subpoena. OFAC deemed the case egregious because the individual acted willfully after actual notice, concealed their conduct, and caused significant economic harm to the third-party buyer and financial institutions involved.
Compliance lessons for business
This action serves as a critical reminder to the real estate sector that property rights do not override federal sanctions:
a foreclosure does not automatically "cleanse" a property of its blocked status
real estate professionals and investors must conduct thorough due diligence, including researching prior ownership history to identify any sanctioned interests
if your business receives a warning or subpoena from OFAC, you must stop the prohibited activity immediately and provide completely truthful responses
concealment or providing false certifications to regulators are severe aggravating factors that will dramatically increase penalties
companies should ensure their compliance programs include screening for both direct and indirect property interests of blocked persons to avoid similar liabilities
finally, this case proves that sanctions liability applies strictly to individuals as well as corporate entities
Practical due diligence checklist designed to help real estate professionals and investors flag potential blocked property risks:
Identify All Parties: Obtain the full legal names of the current seller, the previous owner (especially in foreclosure or auction scenarios), and any beneficial owners if the seller is an entity (LLC, trust, etc.).
Screen Against Sanctions Lists: Run all identified names against OFAC SDN List and other relevant sanctions lists.
Check for Name Variations: Use "fuzzy logic" or manual review to check for name variations, aliases, or alternative spellings that might match a sanctioned individual.
Review Chain of Title: specifically look for past owners who are known foreign elites, oligarchs, or politically exposed persons (PEPs), even if they are not the current seller.
Investigate Foreclosures: If buying at auction or post-foreclosure, confirm whether the property was seized from a sanctioned individual. Note: Foreclosure does not extinguish OFAC blocking requirements.
Check County Records for OFAC Notices: Search local land records for any "Blocking Notices" or liens filed by OFAC or the Department of Justice against the specific parcel.
Apply the "50% Rule": If the property is owned by an entity, determine if that entity is 50% or more owned by a sanctioned person. If so, the property is blocked.
Scrutinize Complex Structures: Be wary of opaque ownership structures (e.g., shell companies, offshore trusts) often used to hide the interests of blocked persons.
Watch for "Renovation Loans": Be cautious if financing is sought for a property with a clouded sanctions history, as mortgaging blocked property is a violation.
Verify "Good Title" Warranties: Do not rely solely on a seller's warranty that they have good title; verify it independently, as sellers may conceal blocked status.
React to OFAC Warnings Immediately: If OFAC contacts you regarding a property, cease all activity immediately. Do not attempt to sell, transfer, or renovate the property.
Self-Disclose Issues: If you discover a sanctions nexus after the fact, initiate a voluntary self-disclosure to OFAC rather than attempting to conceal it