On April 26, 2011 the Office of Foreign Assets Control (“OFAC”) reported that another insurance company has been sanctioned for violating the Iranian Transactions Regulations. OFAC alleged that the company violated the regulations by participating in a specialty aviation insurance policy that covered commercial flight operations in Iran from April 2005-April 2006. The company had participated in the hull portion of an aircraft hull and liability insurance policy placed by a foreign broker. The policy insured a foreign-owned commercial airline that leased aircraft to an Iranian air charter company. Premium received by the company on this policy totaled $113,921.
The insurer paid $38,448 to settle the allegations, which was lower than the amount stipulated by OFAC’s Economic Sanctions Enforcement Guidelines, because the company voluntarily disclosed the matter to OFAC and the alleged violation constituted a non-egregious case.
The enforcement action is indicative of OFAC’s growing interest in the insurance industry. Earlier this month OFAC announced two other enforcement actions.
In the first, a US insurance brokerage firm paid $122,408 to settle allegations of violations of the Iranian Transactions Regulations. According to the OFAC, the company placed six commercial multiple peril insurance policies that insured the risks of a submersible oil rig in Iranian waters. The combined premiums received by the foreign insurers for these placements totaled $453,364. The broker’s voluntary disclosure of the matter to OFAC was taken into consideration in determining the final settlement amount. OFAC also considered the nature of the insurance services, which were highly specialized and involved in the Iranian petroleum industry and were therefore deemed particularly harmful to the sanctions program. The fine was mitigated by the facts that senior management was unaware of the actions that led to the violations and that the broker had subsequently strengthened its OFAC compliance program in response to the violations.
In the other enforcement action, an insurance company paid $22,500 to OFAC to settle allegations that it violated the Cuban Assets Control Regulations. According to OFAC, the insurer mailed a death benefit check for $30,162 directly to the beneficiary in Cuba. The matter was not voluntarily disclosed to OFAC but was reported to OFAC and the insurer by the US decedent’s attorney. The base penalty for the company’s violation was reduced by the fact that it had not been subject to prior OFAC penalties and cooperated with OFAC. In addition, OFAC determined that the insurer had taken steps since the incident to enhance its OFAC compliance program.