The Context
On 24 November 2025, the US Office of Foreign Assets Control (OFAC) imposed a $4,677,552 civil penalty on a US individual investor. The individual, acting through a real estate company, knowingly mortgaged, renovated, and sold a blocked property owned by a Russian-sanctioned person. Treasury called it the largest penalty to date against an individual. This is not a story about a rogue corporation; it is a direct, personal financial evisceration of an investor who ignored a public sanctions list. The strategic angle is clear: high-level political encouragement of Russian business ventures is a trap, creating catastrophic exposure for anyone who treats compliance as a secondary concern.
The Risk
The liability is personal and cannot be outsourced. Treasury’s statement that “all U.S. persons, including individual investors and real estate professionals, must comply” is a warning shot across the bow of every director and principal. For a New Zealand director, this creates potential exposure under Section 131 of the Companies Act 1993 (duty to act in good faith and in the company’s best interests) and Section 138 (reckless trading). Knowingly engaging in transactions that violate international sanctions regimes may indicate a failure of that duty, exposing the company to crippling fines and reputational collapse. Directors may be personally liable if they authorise or turn a blind eye to such activity, as the corporate veil offers no protection against willful misconduct. Your personal wealth is now the collateral for geopolitical gambits.
The Control
You must treat sanctions compliance as a primary, board-level strategic risk, not a back-office function. This requires a formal, documented framework that actively screens all counterparties, beneficial owners, and transactions against real-time sanctions lists—including those of the US, UK, EU, and NZ. The framework must have direct escalation to the board and the authority to veto any deal, regardless of its perceived strategic value. Assume any political encouragement lacks legal indemnity.
The Challenge
These are the critical questions you should be raising at the board table:
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Does our sanctions compliance framework have the documented authority to unilaterally stop any transaction, and is that authority known and respected by the executive team? |
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When was the last time we independently audited the beneficial ownership of our major partners and investments, specifically for exposure to sanctioned Russian individuals or their networks? |
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What is our explicit, minute-by-minute process for monitoring changes to global sanctions lists, and who is personally accountable to the board for its failure? |