On September 3, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a $1,610,775 settlement with Fracht FWO Inc. (“Fracht”), an international freight forwarder headquartered in Houston, Texas, in connection with apparent violations of multiple U.S. sanctions programs, including those targeting Venezuela and Iran. The matter arose from a May 2022 transaction in which Fracht, responding to urgent customer demands, contracted with a logistics broker in Mexico to secure air transport for a shipment of automobile parts destined for Argentina. In doing so, Fracht agreed to charter services from Empresa de Transporte Aéreocargo del Sur S.A. (“EMTRASUR”), a Venezuelan cargo airline wholly owned by the sanctioned state carrier Consorcio Venezolano de Industrias Aeronáuticas y Servicios Aéreos (“CONVIASA”), without conducting appropriate sanctions screening or seeking internal legal review as required under its compliance protocols.
The contractual arrangement was fraught with risk from inception. The executed agreement specified EMTRASUR as the carrier and identified an aircraft bearing the Venezuelan registration YV-3531—an aircraft that had previously been designated on the List of Specially Designated Nationals and Blocked Persons (“SDN List”) as blocked property of Iran’s Mahan Air. Although Mahan Air had ostensibly transferred the aircraft to CONVIASA in October 2021, its status as blocked property was unaffected, as the aircraft remained identifiable by its manufacturer serial number. Moreover, the flight was staffed by Iranian crew members, further implicating OFAC’s Iranian Transactions and Sanctions Regulations. Despite several red flags—including EMTRASUR’s Venezuelan address, references to its relationship with CONVIASA, and the clear tail number of the aircraft—Fracht’s Vice President of Airfreight executed the contract and authorized payments totaling $995,000 to EMTRASUR in two separate transactions. These funds conferred direct financial benefit to the Maduro regime while employing an aircraft blocked under both terrorism and proliferation authorities.
OFAC determined that Fracht’s conduct constituted apparent violations of the Venezuela Sanctions Regulations, the Weapons of Mass Destruction Proliferators Sanctions Regulations, the Global Terrorism Sanctions Regulations, and the Iranian Transactions and Sanctions Regulations. Although not deemed willful, the conduct was characterized as reckless in nature, particularly given the involvement of senior executives who possessed actual knowledge of EMTRASUR’s participation and failed to act upon clear sanctions risk indicators. OFAC emphasized that Fracht’s size and sophistication as a global freight forwarder compounded the seriousness of the violations, and that the company’s decisions reflected a troubling disregard for sanctions compliance in favor of expediency.
Applying its Enforcement Guidelines, OFAC concluded that the case constituted an “egregious” matter and declined to credit the company with voluntary self-disclosure, as U.S. authorities were already aware of the aircraft’s detention in Argentina. The statutory maximum civil penalty in the case was $2,147,700. The ultimate settlement amount—reduced to $1,610,775—reflected OFAC’s consideration of mitigating factors, including Fracht’s lack of prior sanctions violations, substantial cooperation with the investigation, and immediate remedial measures. Those measures encompassed terminating the employee directly responsible for the EMTRASUR contract, mandating legal and sanctions review of all new agreements, updating vendor approval procedures, modifying contract templates to include sanctions compliance representations, expanding compliance staffing to nine full-time personnel, committing over $1 million annually to compliance, instituting enhanced auditing mechanisms, and implementing recurring training and reporting obligations across the enterprise.
The case illustrates the perils faced by freight forwarders and other intermediaries in the global supply chain who operate at the nexus of multiple counterparties and commercial pressures. OFAC reiterated that sanctions obligations apply to all parties subject to U.S. jurisdiction, including service providers, and that compliance policies must be applied rigorously even in time-sensitive commercial contexts. As this action demonstrates, failure to conduct basic sanctions screening or to escalate transactions for legal review when red flags are present can result in significant liability. OFAC further stressed the importance of remedial action and cooperation once violations come to light, both of which played a role in reducing Fracht’s ultimate penalty exposure.
