On February 12, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $1.72 million settlement with IMG Academy, LLC (IMG) arising from apparent violations of OFAC’s counternarcotics sanctions program. OFAC is the U.S. government agency with primary responsibility for administering economic sanctions.

The settlement is a useful reminder that sanctions risk is not confined to financial institutions, energy traders, or companies with obvious export footprints. Even organizations that view themselves as “domestic” can stumble into blocked dealings when they have international touchpoints and do not build appropriate sanctions screening into onboarding and payment processes.

Link to Payments were for enrollment at elite academic and athletic institution Payments were for enrollment at elite academic and athletic institution

IMG, which is headquartered in Florida, offers elite academic and sports training programs for U.S. and international student athletes. While the majority of students are from the United States, IMG also maintains recruiting offices or representatives in several countries, including Mexico.

According to OFAC, between 2018 and 2022, IMG entered into annual tuition enrollment agreements with two individuals who were Specially Designated Nationals (SDNs) under the Foreign Narcotics Kingpin Designation Act based on ties to a sanctioned Mexican drug trafficking organization. As a general matter, U.S. persons are prohibited from engaging in any transaction with an SDN.

The enrollment agreements were for the children of the SDNs (labeled by OFAC as SDN 1 and SDN 2) in IMG programs. The enrollment agreements obligated the SDNs to be responsible for payment of their children’s accounts, which included charges for tuition, lodging, and other ancillary fees and expenses.

Link to Multiple tuition payments made through non-designated accounts Multiple tuition payments made through non-designated accounts

OFAC stated that payments for the children’s accounts often came via wire from non-designated third-party individuals, primarily located in Mexico, and credit cards. OFAC concluded that, between 2019 and 2025, there were 89 instances in which IMG engaged in prohibited transactions with SDN1 and SDN2, including entering into multiple tuition enrollment agreements and processing dozens of related transactions.

Link to Settlement amount was based on a mix of aggravating and mitigating factors Settlement amount was based on a mix of aggravating and mitigating factors

The $1.72 million settlement amount reflected OFAC’s determination that the matter was non-egregious and not voluntarily self-disclosed, because OFAC had already initiated an investigation by the time IMG reported the conduct.

In explaining the determination under its Enforcement Guidelines, OFAC emphasized two principal aggravating factors.

For one, OFAC found reckless disregard based on IMG’s failure to conduct sanctions screening. This was despite the fact that IMG had full name details that matched SDN List entries during the application and contracting process. Similarly, IMG contracted directly with the SDNs, invoiced them by name, and communicated about payment mechanics and details. With this information, OFAC noted, IMG would have identified the sanctions issues with even minimal due diligence – whether at the outset of the relationship or at some point during the relationship.

Additionally, OFAC highlighted the policy harm, since IMG’s dealings with the SDNs allowed designated individuals tied to a sanctioned drug cartel to access U.S. services and the U.S. financial system, and to secure elite educational and athletic training for their children in the United States.

Mitigation turned largely on remediation and cooperation. OFAC cited IMG’s cooperation, including timely responses to OFAC inquiries and IMG’s agreement to toll the statute of limitations during the investigation. OFAC also acknowledged IMG’s post-discovery compliance buildout, including implementation of a risk-based sanctions compliance program, and the enhanced compliance role played by a new chief legal officer, who conducted a comprehensive compliance lookback.

Link to Lessons learned for educational institutions, other non-traditional targets of sanctions Lessons learned for educational institutions, other non-traditional targets of sanctions

The compliance message is straightforward – due diligence and especially screening are critical to prevent and detect sanctions violations. Most notable about this enforcement action is the target, which puts on notice other academic institutions as well as camps, clinics, membership organizations, and other service providers that accept international candidates. Many of these organizations rely on international students or other participants, and the potentially uncommon channels by which such participants make payments.

We would not be surprised if, at least before this matter, IMG and many similarly situated organizations did not have a process for screening parties who signed enrollment contracts unless payment was received directly from such parties. In that case, a bank involved in processing payment would have flagged the involvement of an SDN. We also would not be surprised if IMG (and again, many similarly situated organizations) relied on banks to identify sanctioned parties.

As the case of IMG demonstrates, full diligence and screening of parties to a financial transaction – particularly one involving non-U.S. parties – is an essential part of sanctions compliance. Conversely, merely relying on a bank that may have incomplete information about the source of funds is not adequate.

Please contact the authors if you have any questions.