The Treasury Department’s Office of Foreign Assets Control (OFAC) has delivered a pointed reminder that sanctions risk is not confined to banks, multinational manufacturers, or energy traders. It extends to schools — even elite athletic boarding schools operating primarily within the United States.
In a recent enforcement action, OFAC imposed a civil penalty against IMG Academy, a Florida-based athletic preparatory boarding school, after the school accepted hundreds of thousands of dollars in tuition payments from two individuals designated under the Foreign Narcotics Kingpin Designation Act. The case is a textbook example of how basic screening failures can produce significant sanctions exposure — even in sectors that do not traditionally view themselves as “high risk.”
The Conduct
According to OFAC, two parents who were subject to U.S. sanctions — and allegedly tied to a sanctioned Mexican drug cartel — paid for their children to attend IMG as student-athletes. One student attended from 2018 through 2023; another enrolled in 2020 and remained for two years. Annual tuition payments ranged from approximately $47,000 for a half semester to over $100,000 per academic year, including tuition, lodging, and ancillary fees.
Payments were made primarily through third-party wire transfers and credit card transactions. Some funds were first deposited into U.S. bank accounts from individuals or entities based in Mexico before being transferred to IMG. In total, OFAC determined that the transactions resulted in 89 apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations.
The most striking feature of the enforcement order is not complexity — it is simplicity. The sanctioned parents provided their full legal names, which matched entries on OFAC’s Specially Designated Nationals (SDN) List. OFAC concluded that “minimal due diligence at any point throughout this process would have revealed that these customers were sanctioned.”
“Reckless Disregard” and Compliance Gaps
Although OFAC characterized the case as “non-egregious,” it cited aggravating factors, including what it described as IMG’s “reckless disregard” for U.S. sanctions laws and its failure to implement any sanctions screening program between 2018 and 2022.
Importantly, OFAC noted that while IMG may not have had actual knowledge that the parents were sanctioned, it did have actual knowledge of the payments. Under OFAC’s strict liability framework, intent is not required for a violation. If a U.S. person provides services to an SDN — including educational services — liability attaches regardless of whether the institution understood the sanctions implications.
IMG disclosed the violations once it became aware of them. However, because OFAC had already initiated its investigation, the school did not receive credit for a voluntary self-disclosure. The timing of disclosure can materially affect penalty outcomes — a compliance lesson that should not be overlooked.
Mitigating factors included IMG’s lack of prior enforcement history, cooperation with OFAC, extension of the statute of limitations, hiring of a new chief legal officer, and implementation of a formal sanctions compliance program after discovering the violations.
The Broader Message: Sanctions Risk Is Ubiquitous
OFAC explicitly used this case to underscore that sanctions risk is “pervasive” across sectors and institutions — including academic organizations operating largely within U.S. borders. International students, cross-border tuition payments, visiting faculty, exchange programs, and global donor relationships all create sanctions touchpoints.
The enforcement action reinforces several critical principles:
- Sanctions screening is not optional. Any organization accepting payments — tuition, donations, service fees — must screen counterparties and payors against the SDN List.
- Strict liability governs. A lack of knowledge does not shield an institution from exposure.
- Names matter. Full legal names provided in enrollment agreements should trigger screening. Failure to run a simple list check is difficult to defend.
- Non-traditional sectors are enforcement targets. OFAC expects compliance maturity beyond financial institutions.
- Voluntary disclosure timing is critical. Once OFAC initiates an inquiry, the benefits of disclosure diminish significantly.
Practical Compliance Implications
For educational institutions, athletic academies, and similar organizations, the case should prompt immediate review of onboarding and payment processes. Screening must extend beyond the student to include parents, guarantors, sponsors, and third-party payors. Institutions should also assess whether funds are originating from higher-risk jurisdictions or routed through intermediaries.
Regular testing, employee training, and documented escalation procedures are essential. A compliance program need not be complex, but it must be deliberate and risk-based.
Ultimately, this enforcement action serves as a reminder that sanctions compliance is not a specialized financial-sector function. It is an enterprise-wide obligation. Schools provide services. Services to SDNs are prohibited. The compliance equation is straightforward.
OFAC’s message is equally straightforward: academic institutions are not immune — and basic due diligence failures will result in penalties.
