OFAC Sanctions Cartel-Linked Timeshare Resort in Mexico: What Hospitality and Travel Companies Should Know

On February 19, 2026, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned a luxury timeshare resort near Puerto Vallarta connected to Cartel de Jalisco Nueva Generacion’s (CJNG).¹ This action signals increased scrutiny of tourism-related businesses operating in high-traffic resort destinations and highlights potential sanctions exposure for companies across the broader travel and hospitality industry.

Adjacent industries such as cruise operators and companies that maintain relationships with tourism-related businesses in Mexico and other major tourist destinations should pay close attention to these enforcement actions and make sure that their compliance programs proactively address such risks.

OFAC Targets Timeshare Fraud Network Linked to CJNG

Consistent with the U.S. Government’s crackdown on transnational criminal organizations and cartels, OFAC added Kovay Gardens, a luxury timeshare resort located near Puerto Vallarta, Mexico — along with multiple individuals and affiliated companies tied to the CJNG — to the Specially Designated Nationals and Blocked Persons (SDN) List.² According to the U.S. Department of the Treasury, the sanctioned network allegedly operated a sophisticated fraud scheme targeting U.S. timeshare owners.

The scheme reportedly involved deceptive sales and resale tactics designed to induce victims to pay fees connected to purported rental or resale opportunities. Victims, who were often elderly U.S.-based Mexico timeshare holders, were often contacted through cartel-run call centers that brokers or intermediaries had used to locate buyers or renters for their properties. They were asked to first pay taxes, transfer fees, or other costs tied to promised transactions that ultimately never occurred.

As a result of the designation, all property and interests in property of the designated or blocked persons that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned directly or indirectly, individually or in the aggregate, 50% or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons. OFAC has issued one such license, authorizing the wind down of transactions involving Kovay Gardens.³ The sanctioned individuals and entities can be found on OFAC’s designation page here.

Background on Timeshare Fraud in Mexico

Timeshare-related fraud schemes have increasingly become a focus of U.S. enforcement authorities in recent years. Law enforcement agencies have reported significant financial losses by U.S. consumers connected to fraudulent resale and rental schemes targeting timeshare owners. OFAC issued an alert in March 2023 regarding such scams, warning that individuals may falsely claim to represent OFAC in furtherance of their fraud.⁴ According to the U.S. Department of Treasury, the Kovay Gardens designation also marks the sixth time OFAC has sanctioned those linked, directly or indirectly, to CJNG’s timeshare fraud activities, resulting in the designation of over 90 individuals and entities at the time of the February designation.⁵

Industry stakeholders have welcomed increased enforcement efforts targeting timeshare fraud. The American Resort Development Association (ARDA), the leading trade association representing the timeshare industry, publicly supported the actions, emphasizing that enforcement against fraudulent actors protects consumers while reinforcing the integrity of legitimate timeshare operations.⁶

The Kovay Gardens designation thus reflects both a consumer protection priority and a broader strategy to disrupt cartel-linked financial networks operating in tourism-related sectors.

Implications for Cruise and Travel Operators

Although the designation specifically involves a timeshare resort, the development has broader implications for companies operating across the travel and hospitality industry.

Cruise operators and travel companies frequently interact with a wide range of local tourism businesses, including resort operators, excursion providers, transportation vendors, and tourism services in major destination markets. These relationships can create potential sanctions exposure where such businesses are connected to sanctioned persons or criminal networks.

Sanctions risks may arise where travel companies engage vendors or service providers that are owned or controlled by designated parties or where payments or transactions indirectly involve blocked entities. For example, news outlets found that travel operators were still selling bookings at Kovay Gardens, even after the sanction designation.⁷ As a result, cruise operators frequenting popular resort destinations should consider whether existing compliance frameworks adequately address such risks.

Parallel Enforcement Activity in Mexico

Enforcement is not just happening on the U.S. side. Mexican authorities have also taken parallel enforcement action in coordination with the U.S. sanctions designations. At the same time OFAC announced the Kovay Gardens related sanctions, Mexico’s Ministry of Finance and Public Credit, acting through its Financial Intelligence Unit (FIU), added several individuals and entities tied to the same CJNG network to Mexico’s List of Blocked Persons.⁸ The Secretary of Security and Citizen Protection in Mexico, Omar García Harfuch, recently also reported that there are additional investigations in Mexico related to resorts allegedly linked to criminal operations.⁹ The coordinated actions reflect increasing information sharing and enforcement alignment between U.S. and Mexican authorities targeting cartel-linked financial activity in tourism-related sectors.

Compliance Takeaways for Travel and Hospitality Companies

As U.S. enforcement authorities continue to expand efforts to target cartel-linked financial activity, companies operating in the travel and hospitality industry should review their sanctions compliance programs to ensure they remain aligned with evolving enforcement priorities. The Kovay Gardens designation provides several practical compliance considerations for companies operating in the travel, tourism, and hospitality sectors:

1. First, companies should ensure that sanctions screening and due diligence procedures extend to local tourism partners, including resort operators, excursion providers, travel agencies, and related vendors. Such screening should always be run against updated designation lists and should include screenings for any individuals or entities identified by OFAC and other agencies.
2. Second, organizations should evaluate whether their compliance programs account for beneficial ownership risks associated with foreign vendors that may operate through layered corporate structures.
3. Third, hospitality companies should consider whether vendor onboarding and payment approval processes adequately identify potential sanctions exposure in high-risk tourism markets. Currently onboarded vendors should undergo a process for ongoing counterparty review and re-screening. Changes in business scope, leadership, or operating regions should automatically trigger a due diligence refresh and possibly a targeted audit.
4. Finally, companies should ensure that personnel responsible for operations and vendor relationships in international destinations are trained to identify sanctions-related risks, escalate potential concerns, and report signs of cartel or TCO interference. Companies should be sure to establish secure, anonymous internal whistleblower channels and provide amnesty or protection policies to encourage early reporting of compliance breaches or attempted criminal coercion.

Foley’s multidisciplinary international trade and national security team advises U.S. and multinational companies on sanctions compliance, export controls, customs enforcement, supply chain risk management, and other regulatory issues affecting cross border operations. Our team regularly counsels companies in the travel, hospitality, transportation, and tourism sectors on sanctions exposure, third party risk management, and evolving enforcement priorities involving transnational criminal organizations. To discuss how Foley & Lardner LLP can assist with navigating sanctions compliance and related regulatory risks in international tourism markets, please contact Alejandro Gomez ([email protected] ), Olivia Singelmann ([email protected]), Jack Korba ([email protected] ), or Ahmad Murrar ([email protected]).