Legal Updates

Recent Settlement Underscores Importance Of OFAC Compliance For Schools

March 2026 by Allison L. Cheney

The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) recently imposed a civil penalty of $1.72 million against an independent school as part of a settlement stemming from alleged violations of U.S. sanctions laws governing dealings with foreign entities and persons.

Many independent schools have international touch points that may create risks of exposure to OFAC sanctions, such as enrolling and receiving tuition from international students, hosting visiting faculty, accepting donations from non-U.S. persons, and participating in exchange programs or other collaborations with foreign institutions. As the recent OFAC enforcement action illustrates, independent schools that engage in such activities should carefully monitor their programs and be aware of their legal responsibilities in order to minimize the risk of sanctions.

Legal Framework

OFAC maintains (and periodically updates) a Specially Designated Nationals and Blocked Persons List (“SDN List”), which identifies those foreign individuals and entities with whom U.S. persons are prohibited from transacting. Transactions with such parties are referred to as “blocked.”

OFAC also maintains a non-SDN list, which identifies entities and individuals that are subject to other specific restrictions affecting transactions but are not per se blocked from dealing with U.S. persons.

Both lists are publicly available online.

Penalties for violations are determined by OFAC in accordance with federal regulations (31 C.F.R. Part 501, app. A). Relevant considerations include the specific statute involved, whether the violation was egregious, and whether the institution voluntarily disclosed the matter. OFAC may also consider other aggravating or mitigating factors.

Factual Background

IMG Academy, an independent boarding school and athletic training facility located in Bradenton, Florida, enrolled the children of two individuals on the SDN List. These parents were designated under the Foreign Narcotics Kingpin Designation Act for providing financial support and services to a sanctioned Mexican drug trafficking organization. IMG entered into agreements, including tuition agreements, directly with the designated individuals for over five years.

Although the children themselves were not named on the SDN List, tuition and boarding payments were made to IMG on the parents’ behalf through non-designated third parties in Mexico. Presumably, the parents routed the payments through those third parties to avoid detection.

Enforcement Decision

U.S. institutions are required to block funds from any entity or individual on the SDN List, regardless of whether they are aware of the entity or individual’s inclusion on the list. Accordingly, OFAC found that IMG’s transacting on multiple occasions with two individuals on the SDN List constituted a violation of 31 C.F.R., § 598.202.

The substantial payment IMG agreed to make to settle the matter reflected a number of factors, including IMG’s lack of procedures for screening for blocked transactions, as well as the fact that IMG had actual knowledge of the transactions and invoiced the restricted individuals by name. Conversely, OFAC recognized certain mitigating factors, including that (i) IMG cooperated with OFAC in its investigation, (ii) there had been no other violations by IMG within the preceding five years, and (iii) IMG took appropriate remedial steps, including implementing a compliance program.

Recommendations For Independent Schools

OFAC has announced a five-pillar compliance framework for U.S. entities. For independent schools, steps suggested by this framework include:

Leadership Commitment: Senior administrators should dedicate adequate resources, time, and authority to OFAC compliance, including promoting a culture of compliance and designating an OFAC compliance officer.

Comprehensive Risk Assessment: Schools should identify and evaluate the specific sanctions risks they face, based on factors such as student demographics and geographic reach.

Internal Controls: A school should have formal policies and protocols for identifying persons and organizations that are on the SDN list or otherwise subject to OFAC restrictions, and for determining the school’s response to such a finding.

Auditing: Schools should have their OFAC compliance programs independently audited so that any gaps can be identified and fixed.

Training: Finally, all relevant employees, including senior leadership, admissions staff, and finance personnel, should receive at least annual training on OFAC compliance.

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If you have questions about the recent IMG settlement, or if you would like our assistance with carrying out OFAC trainings, audits, or risk assessments, please feel free to contact one of our experienced education attorneys.