Independent Schools and OFAC Enforcement — How to Protect Your Institution and Avoid Becoming the Next Headline

While increasingly restrictive immigration policies remain an area of focus for independent schools that enroll international students, a recent enforcement action against IMG Academy by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), adds another dimension to the existing complexity, highlighting the importance for educational institutions to implement robust sanctions compliance programs tailored to their unique risk profile.

OFAC Sanctions

OFAC is responsible for administering and enforcing economic and trade sanctions based on U.S. foreign policy and national security goals. OFAC sanctions are a set of U.S. government restrictions that prohibit most transactions with certain countries, regions, and specific individuals or entities. These include broad embargoes on countries such as Cuba, Iran, North Korea, and parts of Ukraine, more targeted prohibitions on dealings with certain industries and institutions in countries like Russia and Venezuela, and blocking of the property of designated government officials, organizations, and individuals around the world—such as terrorists, drug traffickers, and those involved in human rights abuses or cybercrime. These rules can apply even if a sanctioned party is only indirectly involved. Importantly, OFAC sanctions are enforced on a strict liability basis, meaning that violations can result in penalties even if the U.S. institution did not intend or even know that a sanctioned party was involved.

Summary of Recent OFAC Enforcement Action

In February 2026, OFAC announced a settlement with IMG Academy, a prominent independent school, for alleged violations of U.S. sanctions regulations. According to OFAC, IMG Academy accepted tuition payments from individuals and entities linked to sanctioned parties, including those associated with a Mexican drug cartel. The enforcement action resulted in a substantial monetary penalty and required IMG Academy to undertake remedial compliance measures.

The key facts from the enforcement action include:

• IMG Academy processed payments from accounts of individuals that were on OFAC’s Specially Designated Nationals (SDN) list.
• The school failed to implement adequate screening and due diligence procedures to identify and block prohibited transactions.
• OFAC emphasized that educational institutions are not exempt from sanctions regulations and must take proactive steps to ensure compliance.
• Despite having taken immediate remedial steps after learning of the potential violations and subsequently developing and implementing an OFAC sanctions compliance program, IMG was still fined $1.72 million.

Implications for Schools

This enforcement action highlights several critical points for schools:

• Sanctions Compliance Applies to Schools: All U.S. persons, including educational institutions, are subject to OFAC regulations. Accepting funds from sanctioned individuals or entities can result in significant penalties.
• Reputational and Financial Risks: Beyond monetary penalties, enforcement actions can cause reputational harm and disrupt school operations.
• Increasing Regulatory Scrutiny: OFAC has signaled increased attention to the education sector, particularly as schools expand their international reach and accept payments from abroad.

How Schools Can Prevent Similar Issues

To mitigate the risk of sanctions violations, schools should consider the following steps:

1. Develop a Tailored Compliance Program
   • Conduct a risk assessment to identify potential exposure to sanctioned parties based on the school’s student population, geographic reach, and payment methods.
   • Establish written policies, procedures, and effective internal controls for sanctions screening, due diligence, property blocking, and required reporting, including regular updates to reflect changes in OFAC regulations.
2. Engage Outside Counsel
   • Work with experienced legal counsel to design and implement a compliance program that reasonably addresses the school’s specific risks.  This can help prevent violations and, under OFAC’s enforcement guidelines, reduce penalties in the event of a violation that occurs notwithstanding the operation of internal controls.
   • Outside counsel can provide training, conduct audits, and assist with responding to potential violations, including critical advice on risks and benefits associated voluntary disclosure of any violative transactions.
3. Implement Screening and Monitoring Tools and Train Staff
   • Use reasonably designed screening systems and processes, including automated screening systems when necessary, to check student and admissions records and all incoming payments and student records against OFAC’s SDN list and other relevant sanctions lists.
   • Ensure that staff responsible for marketing, admissions, finance, and development are trained to recognize red flags and escalate concerns appropriately.
4. Establish Clear Reporting and Response Protocols
   • Create procedures for promptly reporting rejections of prohibited transactions and freezing of blocked property to OFAC, evaluating whether to report violations voluntarily, and cooperating with any investigations.
   • Maintain documentation of all compliance efforts and decisions.

Conclusion

IMG Academy's predicament should serve to remind schools that sanctions compliance is a critical responsibility. By proactively developing a compliance program tailored to their risk profile and engaging outside counsel, schools can significantly reduce the risk of violations and demonstrate a commitment to regulatory compliance.

If you have any questions about OFAC regulations or would like assistance in developing or reviewing your school’s compliance program, please contact Cory Flashner, Natashia Tidwell, or Steve Ganis. 

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