On July 2, 2025, The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a settlement agreement for $608,825 with Key Holdings, Inc. (“Key Holdings”), a Delaware-based global logistics company. The settlement resolves potential civil liability related to violations of the Cuban Assets Control Regulations. Over the course of a year and half, Key Holdings’ Colombian subsidiary, Key Logistics S.A.S. (“Key Colombia”), managed the logistics for 36 shipments from Colombia to Cuba.
Key Colombia had been operating in Colombia since 2011 before Key Holdings acquired the company in December 2021. At that time, Key Holdings did not have a formal sanctions compliance program that covered its foreign subsidiaries. Key Colombia, as an apparent non-U.S. entity prior to this acquisition, did not have any type of U.S. sanctions compliance program itself.
Key Logistics S.A.S. Manages Logistics for Goods Shipped to Cuba
Following the acquisition, Key Colombia engaged in various transactions with Cuban entities. Between January 24, 2022 and July 31, 2023, Key Colombia managed the logistics for 36 shipments bound for Cuban from 13 suppliers throughout Colombia, Spain, China, and Panama. The value of these shipments totaled approximately $3,056,264. The majority of these shipments included foodstuffs that were not subject to an OFAC license. Notably, three of the shipments were for “safety-related oil well machinery components, towels, and electric forage choppers” that were ultimately shipped via Comercial Cupet S.A., an entity that is majority-owned by the Cuban government.
Key Holdings ultimately discovered these transactions while conducting due diligence for a pending sale of the company, including all of its subsidiaries, to another U.S. company. Key Holdings was not aware of any of the Cuban transactions. Meanwhile, Key Colombia was not aware that it was subject to U.S. sanctions laws. Key Colombia had never worried about U.S. sanctions prior to its acquisition as it was solely Colombia-based at that time. Key Holdings, meanwhile, failed to provide any type of sanctions compliance training, communications, or other information to its new subsidiary following the acquisition.
Following this discovery, the company quickly began to implement a sanctions compliance program. The company formally issued a trade sanctions and export controls policy that covered Key Holdings and all its subsidiaries on April 1, 2024. The company further instituted mandatory sanctions compliance training on April 16, 2024. On July 2, 2024, the company implemented a sanctions screening protocol that provided for automated and continuous sanctions screening for each shipment throughout the company.
To summarize:
- Prohibited Shipments: Key Colombia facilitated 36 shipments to Cuba, despite being subject to U.S. sanctions as a U.S.-owned entity post-acquisition.
- Lack of Compliance Program: At the time of acquisition, Key Holdings lacked a formal sanctions compliance program covering its subsidiaries, and Key Colombia, previously a non-U.S. entity, had no U.S. sanctions compliance framework.
- Awareness of Violations: Key Colombia employees knew the shipments were destined for Cuba but were unaware of their obligations under U.S. sanctions laws. Key Holdings did not conduct any oversight of the transactions at this entity; the company ultimately should have known of the violations.
- Violations Discovered Through Later Diligence: Key Holdings identified the violations during due diligence for a pending sale of the company and its subsidiaries to another U.S. entity.
OFAC’s Findings
OFAC noted several aggravating factors in its agreement, including:
- Lack of Caution or Care. Key Holdings and Key Colombia failed to exercise due caution or care in executing their sanctions compliance obligations. Key Colombia continued to conduct transactions involving Cuba despite the change in ownership that subjected the company to U.S. sanctions.
- Employee Awareness. Key Colombia employees were fully aware that the shipments were intended for Cuba. As such, Key Holdings should have known of the same.
- Undermining Sanctions Objectives. OFAC reasoned that Key Colombia’s shipments undermined the objectives of the Cuban sanctions.
- Insufficient Risk-Based Controls. Key Holdings should have provided extra care and attention to its foreign businesses to ensure it complied with U.S. sanctions.
Additionally, OFAC identified several mitigating factors, including:
- Clean Record. Neither Key Holdings nor Key Colombia had any prior sanctions violations.
- Benign Goods. The majority of the shipments were for benign consumer products and foodstuffs.
- Remediation Efforts. Upon discovery of the violations, Key Holdings discontinued shipments to Cuba and began to implement key sanctions compliance controls, such as a policy, training and communications, and a screening tool.
- Disclosure and Cooperation. Key Holdings voluntarily disclosed the violations and were highly cooperative during OFAC’s investigation.
Expert Compliance Considerations
The key compliance consideration here is that U.S. companies must ensure its foreign subsidiaries, branches, and affiliates are aware that they may be subject to U.S. sanctions in most cases. The company should have a comprehensive sanctions compliance program that covers these additional entities and provides for oversight. This program should include periodic training and communications so that foreign entities are aware of their responsibilities for sanctions compliance. The key goal is awareness, not mastery, so that the foreign employees know when to spot red flags, raise questions, and ultimately act as the eyes and ears of compliance.
Additionally, as we frequently see, OFAC continues to reward companies that voluntarily disclose these offenses with significantly reduced penalties. Due to the mitigating circumstances in this case, including the voluntary disclosure and continued cooperation, OFAC ultimately reduced the penalty from a potential $4,007,088 down to the $608,825 settlement figure.
Lessons Learned from the Key Holdings Settlement with OFAC
1. U.S. Sanctions Apply to Foreign Subsidiaries. Key Colombia’s violations stemmed from its lack of awareness of U.S. sanctions obligations post-acquisition. U.S. companies must ensure foreign subsidiaries understand their status as U.S. Persons under U.S. sanctions regulations.
Action Item: Develop a comprehensive sanctions compliance program that covers all foreign subsidiaries, with clear policies, oversight, and regular audits to ensure alignment with OFAC expectations.
2. Prioritize Post-Acquisition Integration. Key Holdings’ failure to provide sanctions training or guidance to Key Colombia post-acquisition led to sanctions violations. Newly acquired entities require immediate compliance integration to prevent violations.
Action Item: Implement a post-acquisition compliance checklist, including sanctions training, policy dissemination, and screening tool deployment, to align new subsidiaries with U.S. sanctions requirements.
3. Foster Awareness, Not Mastery. Key Colombia employees were unaware of U.S. sanctions applicability, highlighting the need for basic awareness to identify red flags. Employees need not be sanctions experts but should know when to escalate issues.
Action Item: Institute regular, accessible sanctions training for global staff, emphasizing red flags and escalation protocols to compliance and legal teams.
4. Leverage Benefits of Remediation and Voluntary Self-Disclosure. Key Holdings’ voluntary disclosure and cooperation significantly reduced its penalty, underscoring the value of transparency in OFAC enforcement actions.
Action Item: Establish internal protocols for identifying, escalating, and reporting potential violations promptly. Document remediation efforts to demonstrate good faith to OFAC.
5. Implement Robust Screening and Oversight. The absence of sanctions screening allowed Key Colombia’s violations to go undetected. Automated screening and centralized oversight are critical for global operations.
Action Item: Deploy automated sanctions screening tools that cross-reference OFAC’s SDN list and other sanctions databases. Automation and continuous monitoring are extremely beneficial.