$6 Million OFAC Penalty a Reminder of Importance of Pre-Aquisition Due Diligence
April 30, 2014

CWT B.V. (CWT), a Netherlands-based travel services company, was fined nearly $6 million by the Treasury Department’s Office of Foreign Assets Control (OFAC) this month to settle allegations that the company violated the U.S. embargo on Cuba by providing travel services to over 44,000 people from 2006 through 2012. 

CWT became subject to the U.S. embargo in 2006, after it was acquired by a U.S.-based company.  The case is an important reminder that cross border acquisitions should be carefully screened prior to closing to determine whether the target company conducts business in countries subject to U.S. economic sanctions or embargoes.  Prior to closing, the activities of non-U.S. companies like CWT are often not fully subject to U.S. sanctions laws.  However, if such activities continue after closing, they can generate substantial liability for both the U.S. acquiring company and the non-U.S. target.  Appropriate pre-acquisition due diligence can identify these risks and ensure that any impermissible activity is wound down before the target becomes more fully subject to U.S. sanctions laws.