OFAC Penalizes US Company for Subsidiary's Shipments to Cuba

Key Holding, a Delaware-based logistics company, was fined $608,825 by the Office of Foreign Assets Control to settle allegations that it violated U.S. sanctions on Cuba. OFAC said the company’s Colombian subsidiary illegally managed the logistics for 36 freight shipments from Colombia to Cuba.

OFAC said the company self-disclosed the violations, which it called non-egregious. It also said Key Holding “had no OFAC sanctions compliance program in place covering its non-U.S. subsidiaries,” while Key Logistics Colombia “lacked any such program itself.”

The violations occurred when Key Colombia, which was bought by Key Holding in 2021, managed the logistics for freight shipments worth $3,056,264 to Cuba between January 2022 and July 2023. The shipments involved 36 shipments from 13 suppliers from Colombia, Spain, China and Panama. Thirty-three of the shipments were “foodstuffs that were not eligible to be licensed by OFAC,” while three of the shipments were for safety-related oil well machinery parts, towels and electric forage choppers. The agency said the oil machinery parts were shipped via Comercial Cupet S.A., a company majority-owned by the Cuban government.

Key Holding discovered its subsidiary shipments in January 2024 while carrying out due diligence for a pending sale to another U.S. company, OFAC said, adding that Key Holding “was unaware that Key Colombia was providing services to customers shipping goods to Cuba.” Key Colombia’s management also was unaware that it was subject to the Cuban Assets Control Regulations, OFAC said.

After discovering the Cuba shipments, Key Holding “ceased” those orders and “took action to address compliance deficiencies,” the agency said, including by issuing its first trade sanctions and export control compliance policy in April 2024. It also put in place mandatory company-wide sanctions training that same month. In July 2023, Key Colombia also started using a program that automatically screened each shipment for compliance with U.S. sanctions and export laws.

OFAC said it could have imposed more than $4 million in civil penalties but decided against it because Key Holding hadn’t received a penalty in the previous five years and because the “vast majority” of the shipments were of “benign consumer products.” OFAC also noted that the company stopped all Cuba orders and put in place company-wide sanctions compliance training along with new compliance procedures. The company was also “highly cooperative and responsive to OFAC’s requests for information and documentation.”

The agency said the case highlights the importance of newly acquired subsidiaries complying with sanctions laws. It also said 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.”