The U.S. Treasury’s Office of Foreign Assets Control updated its sanctions roster and issued Counter Terrorism General License 34 authorizing limited wind-down transactions involving Kovay Gardens, a Mexican resort entity. The action allows U.S. persons to terminate existing dealings while maintaining asset freezes under terrorism and illicit drug trade sanctions.
The measure applies to transactions ordinarily necessary to close out business relationships with the sanctioned entity and runs until 12:01 a.m. EDT on March 21, 2026. The Treasury Department stated the license accompanies updates to the Specially Designated Nationals and Blocked Persons List, which restrict dealings with designated parties.
OFAC Sanctions List Update Targets Kovay Gardens
The U.S. Department of the Treasury added Kovay Gardens to the SDN List under the Global Terrorism Sanctions Regulations (31 CFR part 594) and the Illicit Drug Trade Sanctions Regulations (31 CFR part 599). These regulations broadly prohibit U.S. persons from conducting transactions with designated entities and require blocking of their property within U.S. jurisdiction. As a result, financial institutions must freeze assets linked to the entity and report them to OFAC.
Meanwhile, the Treasury Department described Kovay Gardens as a resort business in Nayarit, Mexico, allegedly linked to a fraud network associated with the Cartel de Jalisco Nueva Generación. The U.S. State Department designated CJNG as a Foreign Terrorist Organization in February 2021 under Section 219 of the Immigration and Nationality Act, providing legal authority for related sanctions measures. This designation frames the sanctions as part of broader efforts to disrupt organized crime revenue streams affecting U.S. nationals.
General License No. 34: Wind-Down Authorization
General License No. 34 permits transactions that are “ordinarily incident and necessary” to terminating relationships with Kovay Gardens or entities it owns 50 percent or more.
However, the license requires that any payments to blocked persons be deposited into blocked accounts rather than released, consistent with standard sanctions rules. This approach allows compliance while preserving enforcement pressure.
Additionally, the authorization is temporary and narrowly scoped, expiring in March 2026 unless extended. OFAC emphasized that the license does not allow new business, expansion of existing relationships, or transactions involving other sanctioned persons.
The policy effect is to minimize collateral disruption to U.S. persons while maintaining the integrity of sanctions controls.
Treasury Permits Temporary Wind-Down of Dealings
The Treasury Department stated the sanctions target a timeshare fraud network operating in the Puerto Vallarta–Bahía de Banderas region, where U.S. tourists have been targeted.
According to Treasury, such schemes involve deceptive sales practices and long-term extraction of payments from victims, including retirees. By sanctioning the resort entity, authorities aim to disrupt financial flows linked to these activities.
However, OFAC noted that U.S. persons must disentangle from existing contracts in an orderly manner rather than abruptly cease activity, which could create legal and financial complications.
The wind-down window allows businesses, banks, and individuals to cancel agreements, close accounts, and settle obligations into frozen funds. This structured exit mechanism balances enforcement with operational stability.
| Indicator | Recent Movement | Context |
|---|---|---|
| Sanctions designation | Kovay Gardens added to SDN List | U.S. Treasury action under GTSR and IDTSR authorities |
| Wind-down period | Expires March 21, 2026 | OFAC General License No. 34 authorization window |
| Payment handling | Funds must remain blocked | Treasury requires deposits into frozen accounts |
- Consumer protection focus: Treasury cited schemes targeting U.S. tourists and retirees through fraudulent timeshare sales
- Compliance guidance: OFAC instructed financial institutions to freeze assets and report holdings tied to designated parties
- Enforcement objective: The action seeks to cut off revenue streams linked to organized crime networks affecting U.S. nationals
Treasury Maintains Asset Freezes and Sanctions Pressure
Under U.S. sanctions law, U.S. persons are generally prohibited from providing funds, goods, or services to designated entities unless authorized. Violations may result in civil or criminal penalties, and OFAC can impose penalties on a strict liability basis. Financial institutions face additional exposure if they process prohibited transactions.
Meanwhile, the Treasury Department reiterated that sanctions aim to change behavior rather than solely punish. OFAC allows designated parties to petition for removal from the SDN List if conditions warrant, subject to legal review. This framework positions sanctions as both an enforcement tool and a mechanism for potential compliance resolution.
To Sum Up
The Treasury Department’s designation of Kovay Gardens and issuance of a temporary wind-down license reflects a calibrated approach to sanctions enforcement. Authorities seek to disrupt alleged criminal revenue streams while giving U.S. persons time to disengage from existing obligations.
By combining asset freezes with limited transaction authorization, the policy aims to maintain financial pressure without causing unnecessary disruption to legitimate stakeholders. Officials indicated that future actions will depend on compliance and broader developments related to organized crime activities.
Sources: U.S. Department of the Treasury, Office of Foreign Assets Control, U.S. Department of State.
Prepared by Ivan Alexander Golden, Founder of THX News, an independent news organization delivering timely insights from global official sources.
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