Key Holding, LLC OFAC Settlement: $608.8K (2025)

Key Logistics Colombia S.A.S. ("Key Colombia"), Key Holding, LLC's Colombian subsidiary, had operated in Colombia since 2011 and was acquired by Key Holding U.S. in December 2021. At the time of acquisition, Key Holding U.S. had no OFAC sanctions compliance program covering its non-U.S. subsidiaries, and Key Colombia lacked any such program itself. Key Colombia's management was unaware that it was subject to the Cuban Assets Control Regulations (CACR), 31 C.F.R. part 515.

Following the acquisition, between January 24, 2022 and July 31, 2023, Key Colombia managed the logistics for 36 freight shipments to Cuba with a total value of $3,056,264, sourced from 13 suppliers in Colombia, Spain, China, and Panama. For each transaction, Key Colombia arranged shipments from the suppliers to consignees in Cuba. Thirty-three of these shipments consisted of foodstuffs that were not eligible to be licensed by OFAC; the remaining three involved safety-related oil well machinery components, towels, and electric forage choppers. The safety-related oil well machinery components were shipped via Comercial Cupet S.A., a company majority-owned by the Cuban government authorized to handle imports of oil machinery.

Key Holding U.S. learned of Key Colombia's shipments to Cuba in January 2024 while conducting due diligence for its pending sale. Because Key Holding U.S., a person subject to U.S. jurisdiction under the CACR, acquired Key Colombia in December 2021, Key Colombia also became a person subject to U.S. jurisdiction. Key Colombia's conduct resulted in 36 apparent violations of the CACR, § 515.201.

The statutory maximum civil monetary penalty applicable in this matter is $4,007,088. OFAC determined that Key Holding U.S. voluntarily self-disclosed the Apparent Violations and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines ("Enforcement Guidelines"), 31 C.F.R. part 501, app. A, the base civil monetary penalty equals the sum of one-half of the transaction value for each apparent violation, which is $1,217,651. The settlement amount of $608,825 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case highlights the importance of ensuring that newly acquired subsidiaries, including entities organized outside the United States, are aware of and comply with their obligations under the CACR, which extends to entities owned or controlled by U.S. persons, such as foreign subsidiaries. Because the CACR extends to foreign subsidiaries, their business activity, including as related to exports from third countries, may nonetheless be subject to U.S. jurisdiction.

To help prevent sanctions violations, companies should consider implementing systems and escalation protocols to ensure the careful review of all shipping documents such as air waybills, bills of lading, and certificates of origin. Employee trainings and education that provide employees guidance on the applicability of U.S. sanctions regulations are essential to an effective sanctions compliance program. U.S. persons are also encouraged to evaluate the sanctions risk associated with newly acquired foreign subsidiaries and ensure that those subsidiaries adopt and maintain the compliance controls necessary to mitigate any such risk.

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