On July 2, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced that it had entered into a settlement agreement with Key Holding, LLC (“Key Holding”), a privately held logistics and freight forwarding firm headquartered in Delaware, to resolve Key Holding’s potential civil liability for apparent violations of the Cuban Assets Control Regulations (“CACR”), 31 C.F.R. part 515. The apparent violations stemmed from the activities of Key Holding’s Colombian subsidiary, Key Logistics Colombia S.A.S. (“Key Colombia”), which managed the logistics for dozens of shipments to Cuba over an 18-month period. While OFAC determined that the apparent violations were not egregious and were voluntarily self-disclosed, the settlement—totaling $608,825—reflects a calculated response to serious compliance deficiencies that occurred after Key Colombia became subject to U.S. jurisdiction as a result of its acquisition by a U.S. person.

The transactions at issue occurred between January 24, 2022 and July 31, 2023, during which time Key Colombia arranged the logistics for thirty-six freight shipments from suppliers located in Colombia, Spain, China, and Panama to consignees in Cuba. These shipments, valued in total at over $3 million, included both non-licensable foodstuffs and industrial components such as safety-related oil well machinery, towels, and electric forage choppers. Although Key Colombia had operated independently since its founding in 2011, its acquisition by Key Holding in December 2021 triggered the extraterritorial application of the CACR. Because the CACR extends to entities owned or controlled by U.S. persons, Key Colombia’s post-acquisition business dealings with Cuba fell within OFAC’s jurisdiction, making each of the thirty-six transactions a potential violation of § 515.201 of the CACR. Notably, one of the shipments involved an intermediary, Comercial Cupet S.A.—a Cuban government-controlled entity designated to manage oil machinery imports—raising additional concerns regarding the Cuban government’s indirect benefit from the transactions.

Key Holding did not become aware of Key Colombia’s Cuba-related activities until January 2024, when it was conducting diligence in connection with a prospective sale of the business to another U.S. entity. At that time, it also came to light that neither Key Holding nor Key Colombia had a sanctions compliance program in place. Upon discovery, Key Holding voluntarily self-disclosed the matter to OFAC and ceased processing further orders involving Cuba. The company subsequently adopted its first formal trade sanctions and export control compliance policy on April 1, 2024, followed by mandatory company-wide training initiated two weeks later. By July 2024, Key Colombia also implemented an automated screening system for continuous compliance monitoring of international shipments. OFAC acknowledged these measures as mitigating factors in the final penalty calculation.

In accordance with OFAC’s Enforcement Guidelines, the base penalty for the apparent violations was determined to be $1,217,651—representing half the total transaction value. The final settlement amount of $608,825 was reduced in light of multiple mitigating factors, including Key Holding’s lack of prior OFAC violations, its prompt remedial actions, and its high level of cooperation throughout the investigation. OFAC specifically noted that most of the shipments were benign consumer goods and that the company took immediate steps to address its internal compliance gaps.

Notably, however, OFAC identified several aggravating factors that informed its decision to impose a more substantial financial penalty. Chief among these was the failure of both Key Holding and Key Colombia to exercise appropriate caution or implement basic compliance procedures following the change in ownership that subjected the Colombian subsidiary to U.S. jurisdiction. OFAC found that although Key Holding’s U.S.-based personnel were unaware of the Cuba shipments until January 2024, Key Colombia’s staff knew of the activity at the time it occurred. The agency further concluded that Key Holding had reason to know of the conduct, and that the company’s inaction contributed to undermining the stated policy objectives of the CACR—namely, isolating the repressive Cuban regime and denying it access to foreign resources.

This case highlights a critical, and often overlooked, compliance risk: the automatic extension of U.S. sanctions jurisdiction to non-U.S. subsidiaries of U.S. companies. While Key Colombia’s operations were managed entirely outside of the United States, its status as a controlled affiliate of a U.S. person subjected it to the same prohibitions applicable to domestic entities. The fact that neither entity had adopted a sanctions compliance framework at the time of acquisition significantly increased the likelihood of inadvertent violations and underscored a lack of enterprise-wide risk awareness. The settlement serves as a cautionary precedent for U.S. companies acquiring foreign affiliates, particularly in sectors such as logistics and freight forwarding where transactional visibility and jurisdictional reach may be obscured by the layered structure of cross-border shipments.

The enforcement action against Key Holding further reinforces OFAC’s expectation that U.S. persons—particularly those expanding globally through mergers or acquisitions—conduct timely risk assessments and implement robust compliance controls as part of their post-acquisition integration process. Companies are advised to ensure that all subsidiaries, regardless of location, receive appropriate sanctions training, adopt screening mechanisms, and understand their extraterritorial obligations under U.S. law. As OFAC continues to prioritize enforcement in connection with foreign affiliates of U.S. entities, this case stands as a concrete reminder that jurisdictional boundaries do not end at national borders when it comes to economic sanctions enforcement.