On October 9, 2026, OFAC announced a $175,015 settlement with Pegasus Worldwide Logistics, a California freight forwarder of about a dozen employees. The dollar figure is modest, and the shipment at the center of the case was a machine worth $5,950. But the action is one of the clearest recent illustrations of how an ordinary trade transaction becomes a sanctions violation, and it speaks directly to freight forwarders, customs brokers, importers, and anyone who relies on name-only screening.

What Happened

In early 2023, Pegasus adopted a basic screening instruction: employees were to compare the names, addresses, emails, phone numbers, and other information of transaction parties against OFAC’s Specially Designated Nationals (SDN) List. On May 30, 2023, OFAC designated Youli Technology Development Co., Ltd., a China-based supplier of pill press and packaging equipment, under Executive Order 14059 for shipping machinery to individuals in the United States involved in producing counterfeit pills. After the designation, Youli changed its name to Huizhou Youli Fushi Co., Ltd. Its phone number and email address, both listed on the SDN List, did not change.

In August 2023, a U.S. nutritional supplement company asked Pegasus to coordinate the purchase and shipment of a customized sugar packet-filling machine from Youli. OFAC states that the machine’s intended use was legitimate commercial activity, and that the Drug Enforcement Administration indicated it has little utility for packaging narcotics. The customer had previously bought a breath mint tableting machine from Youli through Pegasus. In September 2023, Pegasus communicated with Youli through an email address that appears on the SDN List, instructed Youli to arrange shipment through a Chinese shipping agent, received the shipping documents, filed an Importer Security Filing through a customs broker, and paid the shipping agent $146.33.

Pegasus did screen, but only at the point when the machine was about to leave China and after it had already instructed Youli to arrange shipment. Its procedure never said when screening should occur. It checked the new company name, got no match, and stopped. The shipping documents still carried Youli’s original phone number. The email address Pegasus had been using was on the SDN List. A basic internet search would, according to OFAC, have produced a match.

The machine arrived in Long Beach on October 11, 2023. On November 3, CBP issued a Detention Notice identifying OFAC as the responsible agency. Pegasus did not investigate. A week or so later, the customs broker billed duties and fees of $1,463.55, which Pegasus paid, and Pegasus received $2,358.62 from its customer covering those fees and its own forwarding charges. CBP seized the machine as blocked property on December 6, 2023.

The Second Problem: The Subpoena Response

OFAC had issued an administrative subpoena shortly before the seizure, listing three name variations and Youli’s email address and phone number. On February 1, 2024, Pegasus submitted a certified response denying it had any responsive information. OFAC then presented Pegasus with an arrival notice showing its involvement in the shipment, and only then did Pegasus find responsive records. Pegasus told OFAC that it had not given its attorney all necessary information when the response was prepared. A corrected response did not arrive until August 8, 2024, six months after the first.

That produced a separate set of violations. OFAC found one violation of Section 599.201 of the Illicit Drug Trade Sanctions Regulations for dealing with a blocked person or property in which a blocked person had an interest, and six violations of Section 501.602(a) of the Reporting, Procedures, and Penalties Regulations for failing to furnish complete information in response to the subpoena over those six months.

How OFAC Calculated the Penalty

OFAC treated the case as non-egregious and not voluntarily self-disclosed, which put the base penalty at the schedule amount of $205,900. The settlement of $175,015 reflects its weighing of the General Factors.

Aggravating factors:

• Reckless disregard. Pegasus failed to screen information it already had about Youli and did not investigate after learning the machine had been detained under OFAC authorities, resulting in multiple dealings in blocked property.
• Knowledge. Pegasus knew it was arranging an export from Youli, which it had reason to know was the sanctioned party.
• Harm to program objectives. Its dealings helped an SDN continue exporting to the United States and profiting from it, and its slow subpoena response delayed OFAC’s investigation.
• Sector risk. Though small, Pegasus is an international logistics company and freight forwarder, and OFAC said that role called for heightened attention to sanctions risk.

Mitigating factors:

• No OFAC enforcement action in the five years before the transactions.
• A small company, with relatively low-value transactions.
• Extensive remedial measures, including hiring an outside sanctions consultant, along with a commitment to make regular and detailed reports to OFAC for an extended period.

The enhanced reporting commitment is worth noticing. For a company this small, the reporting obligation is a continuing cost, and it signals that OFAC expects remediation to be verifiable.

Compliance Lessons

OFAC’s compliance considerations are direct, and I would highlight five.

First, name screening is a baseline, not a program. OFAC says screening against SDN names is critically important but that firms must account for efforts by sanctioned parties to obscure their involvement. Here, a name change defeated a name-only check while the phone number and email stayed the same. Screening that covers addresses, telephone numbers, emails, and other identifiers, and that reflects how entities rebrand, is the minimum. Notably, Pegasus’s own written policy called for checking those identifiers. The failure was in execution, which is a reminder that a policy on paper does not substitute for an employee who follows it and a process that enforces it.

Second, timing matters. Pegasus screened late. Under Pegasus’s process, it had already engaged in prohibited conduct by the time it checked. Screening should occur at onboarding of a counterparty and before any services are provided, and again at defined points in the transaction. Procedures should say when.

Third, red flags have to trigger action. A CBP Detention Notice naming OFAC as the responsible agency should have prompted an investigation and a hold on further activity. Training should teach employees that a notice from CBP or OFAC is an escalation event.

Fourth, logistics providers sit at the center of trade. OFAC describes intermediaries as the first line of defense, dealing with buyers, sellers, shippers, carriers, and others. Freight forwarders, customs brokers, shipping agents, and similar providers should assess their own risk, train staff on OFAC requirements, and tailor controls to sector risks such as transshipment, name changes, and documents prepared by foreign parties.

Fifth, a subpoena response is its own compliance event. Conduct a thorough, searching inquiry, give counsel everything, and test responses against known identifiers before certifying. The failure to cooperate carried independent penalties here, six separate violations. OFAC also notes that cooperation affects both the resolution of a case and the size of the penalty.

A Note on Low-Value Transactions

Comparing the numbers is instructive. The machine cost $5,950. Pegasus’s fees and the customer’s duties and fees recouped were a few thousand dollars. The settlement was more than 29 times the machine’s price. The lesson for compliance officers is that dealing in blocked property is prohibited regardless of the amount involved. OFAC’s language is that once a party is designated, any property in which it has an interest becomes “effectively radioactive,” and any dealing, however small, is generally prohibited without authorization. Companies sometimes set screening thresholds or exemptions for small transactions. This case shows why that practice is dangerous.

Whistleblower Reminder

OFAC’s release also reminds readers that FinCEN runs a whistleblower incentive program for sanctions violations. Individuals in the United States or abroad who provide information leading to a successful enforcement action with monetary penalties above $1,000,000 may be eligible for awards, in any commercial sector. While this particular settlement did not reach that threshold, the program signals that employees in logistics and trade businesses have a channel to report.

The Bottom Line

Pegasus was a small company with a written screening policy. The case turned on what happened between the policy and the transaction: screening that came too late, a check that looked only at a name, a detention notice that was ignored, and a subpoena response that was incomplete. Each of those is fixable with a risk-based process, training, and escalation rules. Every freight forwarder, broker, and importer should ask a simple question this week: if a sanctioned supplier changed its name tomorrow but kept its phone number and email, would our process catch it, and would it catch it before we did anything?