Pegasus Worldwide Logistics OFAC Settlement Explained

This one is small in every dimension except the lesson. The goods were worth $5,950, the forwarder had about a dozen staff, and the payment that moved the cargo was $146.33. OFAC still settled for $175,015, and six of the apparent violations had nothing to do with the shipment at all. They came from how the company answered OFAC afterwards.

What happened

According to OFAC, Pegasus Worldwide Logistics, a California-based forwarder, was engaged in August 2023 by a U.S. nutritional supplement company to coordinate the purchase and import of a sugar packet-filling machine from Youli Technology Development Co., Ltd., a Chinese equipment supplier OFAC had designated on May 30, 2023 under its counter narcotics authority. After the designation the supplier began trading as Huizhou Youli Fushi Co., Ltd., but its phone number and email address, both listed in its SDN entry, stayed the same and appeared in the shipping documents and emails Pegasus handled. Pegasus checked only the new name, found no match, arranged the shipment, filed the Importer Security Filing through a customs broker, and paid the Chinese shipping agent; U.S. Customs and Border Protection (CBP) detained the machine at Long Beach and later seized it as blocked property. Pegasus then gave an incomplete certified response to an OFAC administrative subpoena and corrected it six months later. OFAC found the apparent violations of the Illicit Drug Trade Sanctions Regulations (31 C.F.R. part 599) and of its reporting rules non-egregious and not voluntarily self-disclosed, and Pegasus agreed to pay $175,015 to settle its potential civil liability.

Where the control failed

Pegasus had a written screening rule, and on paper it was a decent one. The release quotes it: employees were to "compare parties' name, address, email, phone, and other information for parties to the transaction" against the SDN List. Two things were missing from it, and a third thing went wrong in practice.

The first gap was timing. OFAC found the procedure said nothing about when to check the list. In practice the check came just before the machine left China, after Pegasus had already emailed instructions to the supplier on September 12, 2023 at an address listed in the supplier's SDN entry. By then, OFAC found, the prohibited conduct had already started. Screening that runs at the end of a job documents what happened. It cannot prevent it. The moment that matters is the first time you act for or communicate with a party, which for a forwarder is usually the booking or the first instruction, not the departure.

The second gap was in practice rather than policy. The employee screened the new company name and nothing else. The policy covered phone and email; the person doing the work treated it as a name check. OFAC states that the phone number and email in the documents matched the SDN entry, and that screening them, even with a basic web search, would have turned up the supplier. The release does not say why the supplier changed its name, and for screening purposes it does not matter. The countermeasure was already written into Pegasus's procedure. The practical lesson is to check, from time to time, whether staff actually follow the procedure as written.

The third failure is the one every operations team should study. On November 3, 2023, CBP detained the machine and sent Pegasus a Detention Notice that named OFAC as the responsible agency. According to the release, neither the notice nor the reference to OFAC led Pegasus to look further, and about a week later Pegasus paid a $1,463.55 invoice for duties and fees on that same machine and then collected $2,358.62 from its customer. A government notice that names a sanctions agency is about as clear a signal as a forwarder will ever get. It should freeze the file, not continue it.

Two smaller points are worth noticing. The customer had bought from the same supplier before, a tableting machine imported with Pegasus's help, and a supplier's status can change between one order and the next. A past order is history, not clearance. And the goods were harmless. OFAC notes that, based on its investigation, the machine was meant for legitimate commercial use and that the Drug Enforcement Administration indicated it had little use for packaging narcotics. None of that changed the analysis, because blocking attaches to the party, not to what is in the crate.

Red flags that were visible at the time

The release does not describe anything hidden. The shipping documents carried the supplier's listed phone number. Pegasus's own emails went to an address listed on the SDN List. The product category, pill press and packaging equipment, was the very thing OFAC's designation had described. And after arrival, a federal agency told Pegasus in writing that OFAC was involved.

The questions a reviewer should have asked are plain ones. Does any phone number, email or address on these documents appear on the SDN List? Has this supplier changed its name recently, and why? And when CBP holds a shipment and cites OFAC: what do they know that we don't, and should we stop paying anyone on this file until we find out?

How OFAC weighed it

OFAC treated the case as non-egregious and not voluntarily self-disclosed. For a non-egregious case without self-disclosure, the Enforcement Guidelines take the base penalty from a schedule of amounts tied to transaction value, which here came to $205,900. The settlement of $175,015 is exactly 85 percent of that base. That is a modest reduction, and the release explains why.

The aggravating factors rest on what Pegasus had in hand. OFAC found reckless disregard in failing to screen information already in its possession and in not investigating after the detention. It found Pegasus had reason to know Youli was the party OFAC had sanctioned, that the dealings helped an SDN keep exporting to the United States, and that the incomplete subpoena response delayed the investigation. It also said that, although Pegasus is not a large company, its role as a freight forwarder called for heightened attention to sanctions.

That last point cuts both ways in the release. OFAC lists Pegasus's small size and the low value of the transactions as a mitigating factor, alongside no enforcement history in the prior five years and an agreement to put in place extensive remedial measures, including an outside sanctions consultant and regular, detailed reports to OFAC for an extended period. So size lowered the number but did not lower the standard. A small forwarder is still expected to run a real check.

The subpoena counts deserve their own paragraph. OFAC's subpoena gave three name variations for the supplier plus its email and phone number. On February 1, 2024, Pegasus certified that it had no responsive information. Only after OFAC showed it the arrival notice Pegasus itself had issued did the company find its records, and it told OFAC it had not given its attorney all the necessary information. The revised response came on August 8, 2024. OFAC counted six apparent violations of the Reporting, Procedures and Penalties Regulations (31 C.F.R. part 501) across the six months the response stayed incomplete, and it lists the delay as an aggravating factor. Put simply, a records problem became an enforcement problem.

In terms of OFAC's Framework for Compliance Commitments, this case is about internal controls and testing rather than management commitment. The procedure needed to say when screening happens and which data points must be checked. A simple test, pulling a few closed files and looking at what was actually screened, would have shown that staff were checking names only. Training fits too: OFAC's compliance notes for this case say employees at logistics firms should understand OFAC requirements and train regularly. The release's broader point is worth quoting: name screening against the SDN List "while critically important, is a baseline tool."

What a small forwarder should check this week

Put a time on your screening rule. Write down the trigger: at booking or quote, before any instruction goes to a supplier or agent, and again before you release funds. "Before departure" is too late if you have already acted.
Screen the contact details, not only the name. Take the phone number, email domain and address from the commercial invoice, the booking request and the supplier's emails, and search them against the SDN data. A web search on the phone number takes a minute and is the step OFAC itself pointed to.
Pull three closed files and look. Check what was actually screened on each. If the record shows names only, your written procedure and your practice have drifted apart.
Screen repeat suppliers on every order. A clean result last quarter says nothing about today.
Treat any CBP notice that mentions OFAC as a stop. Freeze invoices and payments on that file, tell whoever owns compliance the same day, and get advice before paying duties or fees.
Make your files searchable by party details. You should be able to find every shipment involving a given company name, phone number or email within a day, across your TMS, shared drives and mailboxes.
If a regulator asks for information, search every variation they give you, give counsel full access, and correct the response as soon as you find more. A certified "nothing found" that turns out to be wrong is its own violation.

Where software helps and where it doesn't

A screening tool makes the name check fast and consistent, and keeps a dated record of each screen, which is useful evidence when you later need to show what you checked and when. Sanctix screens names against the OFAC, EU, UN and UK lists, keeps that audit trail, and on plans with monitoring it re-checks saved suppliers and customers when the lists update, which covers the repeat-supplier problem going forward.

The honest limit is the renamed supplier. Sanctix lets you add one identifier to a screen, such as a phone number or email address, and a match on a listed contact detail flags the hit for review. But that comparison only runs against list records whose name already scores above the matching threshold. A supplier that has changed its name to something that no longer resembles its listed name will not be found by its phone number alone. For that, the release's own suggestion works: search the phone number and email directly in the SDN data or on the web.

Software also cannot decide that a CBP detention notice means stop, and it cannot find the emails a subpoena asks for if your records are scattered. Those depend on a written rule for what happens when an agency holds your cargo, and on knowing where your own records live.

If you want every screen on a supplier, consignee or agent to carry a timestamp you can produce later, you can sign up free or compare plans.