Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and IMG Academy, LLC
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $1,720,000 settlement with IMG Academy, LLC to settle its potential civil liability for 89 apparent violations of OFAC counternarcotics sanctions. Between 2019 and 2025, IMG Academy dealt in the property or interests in property of two Specially Designated Nationals (SDNs) sanctioned for their ties to a sanctioned Mexico-based drug cartel. Specifically, IMG Academy entered into yearly tuition agreements with the SDNs and received and processed payments pursuant to those agreements. The settlement amount reflects OFAC’s determination that IMG Academy’s conduct was non-egregious and not voluntarily disclosed.
Here’s Gemini’s take:
Based on the OFAC Enforcement Release regarding IMG Academy, LLC (the document referenced by the URL provided), here is the reformatted and simplified breakdown as requested.
What Happened
The Core Issue
IMG Academy, a Florida-based sports prep school, agreed to settle its legal liability after it was discovered they had been doing business with two people on the U.S. sanctions list. These individuals were sanctioned due to their ties to a major Mexican drug cartel.
The Two Sets of Violations
The school entered into two separate tracks of business dealings:
- Customer 1 (SDN 1): Between 2018 and 2022, the school signed three separate yearly tuition contracts with this individual.
- Customer 2 (SDN 2): During that same period, the school signed another three yearly tuition contracts with this second individual.
In both cases, the school provided “elite academic and athletic training” for the children of these individuals. Even though the parents’ names were clearly listed on the U.S. government’s “No-Business” list (the SDN List), the school continued to invoice them, communicate with them about payments, and process their money.
How the Money Moved
The school didn’t just take one-off payments. They processed 89 total transactions over several years. This included:
- Direct Charges: Using credit cards the sanctioned parents had left on file.
- Third-Party Wires: Accepting wire transfers from other people and companies in Mexico intended to cover the students’ costs.
Description of the Apparent Violations
IMG Academy appears to have violated § 598.202 of the Foreign Narcotics Kingpin Sanctions Regulations. Essentially, the school “dealt in the property” of sanctioned persons by providing services in exchange for their money, which is a violation of federal law.
The Bottom Line
While the school eventually reported the issue, they only did so after the government had already started an investigation, meaning they did not get credit for a “voluntary” disclosure.
The Penalty
The final settlement amount is $1,720,000.
Violation Breakdown
OFAC categorized all 89 violations as non-egregious (meaning they weren’t considered a “worst-case scenario” of intentional defiance), but because the school didn’t self-report before the investigation began, the penalty was still substantial.
- Total Violations: 89
- Total Egregious Violations: 0
- Total Non-Egregious Violations: 89
- Base Penalty: $1,720,000 (The “schedule” amount for non-disclosed, non-egregious violations).
Mitigating and Aggravating Factors
Aggravating Factors (Why the penalty remained high)
- Failure to Perform Basic Checks
- General Factor: Reckless Disregard. The school failed to run the parents’ names through any sanctions screening software, even though the parents provided their real names which matched the SDN list exactly.
- Management Awareness of the Relationship
- General Factor: Awareness of Conduct. While the school might not have realized the parents were “sanctioned,” they had actual knowledge of the transactions. They sent invoices directly to the parents and spoke with them regularly about their accounts.
- Providing a “Safety Valve” for Cartel Money
- General Factor: Harm to Sanctions Program. By accepting this money, the school allowed people tied to a drug cartel to use the U.S. financial system and obtain high-end services in the U.S.
Mitigating Factors (Why the penalty wasn’t higher)
- A Clean Recent Record
- General Factor: Compliance Record. IMG Academy had not been flagged for a sanctions violation in the five years before this happened.
- Coming Clean and Cooperating
- General Factor: Cooperation. Once they realized the government was looking into them, the school cooperated fully, shared information quickly, and agreed to extend the legal deadlines to help the investigation.
- A Total Compliance Overhaul
- General Factor: Remediation. After a change in ownership in 2023, the school hired a new Chief Legal Officer, conducted a deep audit of their past mistakes, and built a professional sanctions screening system.
What are the Takeaways?
- Screen the Payors: It is not enough to screen the student; you must screen the person signing the contract and the person sending the wire transfer.
- Names are Enough: If a customer gives you their real name and it matches a sanctioned person, “I didn’t know” is not a valid excuse if you never bothered to check the list.
- Non-Bank Businesses are at Risk: This case shows that OFAC is looking closely at “non-traditional” sectors like private schools, luxury goods, and specialized training centers.
- Ownership Changes are an Opportunity: If you buy a company, conduct a “compliance lookback” immediately. IMG’s new management helped limit the damage by fixing the system as soon as they took over.
Other Resources
- OFAC Civil Penalties & Enforcement: Visit the official Treasury website to see a list of recent actions and understand how OFAC applies these rules to different industries.
- Compliance Framework: Review the “Framework for OFAC Compliance Commitments” to see the five pillars of a strong legal safety net.
- Contacting OFAC: If you find a potential violation, you can contact the OFAC Compliance Hotline or use their online reporting portal.
Here’s the actual Enforcement Release:
Note: Gemini originally didn’t catch that there were 2 sets of violations with SDN 1 and SDN 2. What flagged this for me was that the date range of the violations was wrong.
Fixing it was pretty simple – I just told Gemini to recheck its work and why I thought it had missed something.
Probably a good thing to do with enforcement actions that have “multiple’ something – whether its sets of actions, sanctioned parties or affected sanctions programs. It’s generally good practice to have an AI tool check its work – since I asked for a simplified recap, I expected it to omit certain detail. But, this was not that…
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