Sanctions Implementation for the Insurance Industry

Sanctions Implementation for the Insurance Industry

David J. BrummondSenior Sanctions Advisor - Insurance

Presentation Outline

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• OFAC Overview • OFAC Enforcement Process

• Insurance Case Profile

• Evolving Iranian Sanctions

OFAC Overview

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OFAC Mission

To administer and enforce economic and trade sanctions

based on U.S. foreign policy and national security goals against

selected targets

OFAC Overview

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Sanctions History• Secretary Gallatin – Embargo Act of 1807• “Trading with Enemy Act” (TWEA)

– Civil War – The Great War (WW I)– Roosevelt Bank Seizures (1933)– Nazi Germany (WW II) – North Korea/China (1950) – Cuba Missile Crisis (1963)

• “International Emergency Economic Powers Act” (IEEPA)

–Peacetime Sanctions – “Economic Emergencies”–Presidential Implementation - Executive Orders

Iranian Hostages (1979) Panama Noriega (1988) Yugoslavia (1998) Libya (2011)

SANCTIONS

Homeland Security

Secretary of the Treasury

THE PRESIDENT

Local Law Enforcement

OFAC

National SecurityCounci

l

State

IntelligenceCommunity

Justice

(FBI, US Attorneys)

Banking Regulators(FRB, FDIC, OCC, State)

State

Under Secretary Terrorism Finance Intelligence (TFI)

PROGRAMS

OFAC Overview

Commerce

ODNI

Defense


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• Iranian Sanctions - Insurance

OFAC Enforcement Process

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Economic SanctionsEnforcement Guidelines

74 FR 57593 (November 9, 2009)

• Scope – All Sanctions Programs – All U.S. Persons

• OFAC Enforcement Goals– Flexibility to Achieve Appropriate

Result– Predictability/Equity in OFAC

Response


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No Action

Cautionary Letter

Finding of Violation

Civil Penalty

Criminal Referral

Sanctions EnforcementOptions


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Enforcement Guidelines General Factors

• Willful or Reckless Violation

• Awareness of Conduct

• Harm to Sanctions Program Objectives

• Individual Characteristics of Subject Person

• Compliance Program / Remedial Response

• Cooperation with OFAC

Voluntary Self-

Disclosure

Egregious Case

(1)One-Half

Transaction Value($125k Cap)


No Yes

No

Yes

(3)One-HalfStatutory Maximum

(2)Applicable

Schedule Amount($250k Cap)

(4)Statutory Maximum

Base Penalty

Calculation


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Insurance Penalty Settlement Cases

2011

• Aon International Energy $ 36,000

• HCC Insurance Holdings $ 38,448

• McGriff Seibels & Williams $ 122,408

• Gen Re Corporation $ 59,130

• Metropolitan Life $ 22,500

2013

• America Steamship Mutual P&I $348,000


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Insurance Case Profile

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Resolved/Concluded 253

Pending _78

Total 331

OFAC Insurance Case Files

(January 1, 2006 – July 1, 2013)


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License Requests 177

Enforcement Actions 100

Inquiries 54

Insurance Case Categories


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• Commercial Lines P&C 132• Individual L&H 52• Reinsurance 55• Personal Lines P&C 54• Group L&H 36• All Lines 2

OFAC Insurance Cases -

Line of Business Profile


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Country-Based Programs 187 Cuba (98) Iran (52) Sudan (28) Syria (9)

List-Based Programs 81

Narcotics (47) Somalia (15) Terrorism (6) WMD (13) Regime-Based Programs

30 Burma (15) Libya (8) Other (7)

All Programs 33

Sanctions ProgramsInsurance Case Profile


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Iran Sanctions - Insurance

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“Primary” Sanctions

Iranian Assets Control Regulations, 31 C.F.R Part 535, November 14, 1979

International Security and Development Cooperation Act of 1985 (“ISDCA”) PL 99–83 (S 960) August 8, 1985

• Section 505 – Delegated authority to impose trade restrictions• EO – 12613 Prohibit Imports From Iran (October 29, 1987)• EO – 12957 Prohibit Development of Iranian Petroleum Resources

(March 16, 1995)• EO - 12959 Prohibit Exports to Iran (May 7, 1995)

Iranian Transactions Regulations, 31 C.F.R. Part 560, September 11, 1995


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Related Executive Orders

EO-13224 Global Terrorism (Sept. 23, 2001)

EO-13382 Proliferation of Weapons of Mass Destruction (WMD) (June 29, 2005)

* * * * Iranian Transaction And Sanctions Regulations, 31

C.F.R., Part 560 (October 22, 2012)


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“Secondary” Sanctions

Iran and Libya Sanctions Act of 1996 (“ISA”), Pub.L. 104-172, August 5, 1996

• Background • Scope: Any Person, i.e., Foreign Persons • Section 5 – Sanctions Trigger • Section 6 – Sanctions Menu


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“Secondary” Sanctions: Integrated & Expanded2

Iran Threat Reduction and Syria Human Rights Act of 2012, Pub.L. 112–158, Aug. 10, 2012 (“TRA”)

• Section 202 - Insurance for Transport of Crude Oil from Iran • Section 204 - Add 3 New Sanctions Options to ISA Section 6 • Section 211 - Insurance for Transport of Goods that Contribute to

NPWMD/Terrorism• Section 212 - Insure or Reinsure NIOC or NITC

* * * * • Section 218 - US Parent Liability for Foreign Subsidiaries• Section 219 - US “Issuer” – Report Iranian Activities


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“Secondary” Sanctions: Integrated & Expanded3

Iran Freedom and Counter-Proliferation Act of

2012 “IFCA” National Defense Authorization Act for Fiscal Year 2013

Pub. L. 112-239, Subtitle D – Iran Sanctions, signed January 3, 2013

• Section 1244(c): Blocking of Property of Entities in Energy, Shipping and Shipbuilding Sectors

• Section 1246(a): Imposition of Sanctions With Respect to the Provision of Underwriting Services or Insurance or Reinsurance for Activities or Persons with Respect to Which Sanctions Have Been Imposed

Sanctions Implementation for the Insurance Industry

David J. Brummond

[email protected]

202-622-7255

mailto:[email protected]

mailto:[email protected]

Sanctions Implementation for the Insurance Industry

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