The New York Department of Financial Services (“DFS”) has issued subpoenas to four insurers as part of an ongoing probe into violations of U.S. trade sanctions against Iran. The issuance of these subpoenas follows on the heels of an investigation that began last year of several non-U.S. based reinsurers certified under New York Insurance Regulation 20 (Credit for Reinsurance from Unauthorized Insurers) into potential violations of the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCPA”), which took effect on July 1, 2013. IFCPA was passed into law as part of a U.S. economic sanctions regime meant to deter Iran’s growing nuclear ambitions.

IFCPA imposes sanctions against the provision of underwriting services or insurance or reinsurance: (i) for any activity with respect to Iran for which sanctions have been imposed by the IFCPA or any other provision of law; (ii) to or for any person engaged in transactions prohibited under the IFCPA; or (iii) to or for any person on the “specially designated nationals” list. Transacting in goods or services used in connection with the energy, shipping, or shipbuilding sectors of Iran is prohibited under IFCPA. Further, dealing in any precious metal and certain other raw materials to or from Iran is also prohibited under IFCPA.

As we discussed previously, on November 24, 2013, the United States, China, the Russian Federation, France, Germany, and the United Kingdom (the “P5+1”) entered into a Joint Plan of Action with Iran to, among other things, suspend U.S. and E.U. sanctions on Iran’s petrochemical exports and associated services in exchange for a roll-back of Iran’s nuclear program (the “JPOA”).  On January 12, 2014, the P5+1 and Iran arrived at technical understandings for the JPOA, which began implementation on January 20, 2014 and expires on July 20, 2014 (the “JPOA Period”).  In order to implement the sanctions relief outlined in the JPOA, the U.S. Department of the Treasury has, among other items, issued limited waivers to IFCA sanctions (with specific exceptions) for transactions by non-U.S. persons during the JPOA Period involving Iran’s exports of crude oil to China, India, Japan, the Republic of Korea, Taiwan, and Turkey.

The DFS regulates insurers that transact insurance in the state of New York. The DFS has the authority to rescind an insurer’s ability to write policies on New York risks if it finds the insurer is in violation of the law.