Sanctions Implementation for the Insurance Industry

1
Sanctions Implementation for the Insurance
Industry

• David J. Brummond
• Senior Sanctions Advisor - Insurance

2
Presentation Outline

• OFAC Overview
• OFAC Enforcement Process
• Insurance Case Profile
• Evolving Iranian Sanctions

3
OFAC Overview
OFAC Mission To administer and enforce economic
and trade sanctions based on U.S. foreign policy
and national security goals against selected
targets
4
OFAC Overview

• 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)

5
OFAC Overview
THE PRESIDENT
Defense
ODNI
Secretary of the Treasury
State
Under Secretary Terrorism Finance
Intelligence (TFI)
PROGRAMS

• SANCTIONS

OFAC
State
Commerce
Banking Regulators (FRB, FDIC, OCC, State)
Homeland Security
Intelligence
Community
Local Law Enforcement
Justice
(FBI, US Attorneys)
6
Presentation Outline

• OFAC Overview
• OFAC Enforcement Process
• Insurance Case Profile
• Iranian Sanctions - Insurance

7
OFAC Enforcement Process

• Economic Sanctions
• Enforcement 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

8
OFAC Enforcement Process
Sanctions Enforcement Options
9
OFAC Enforcement Process

• 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

10
OFAC Enforcement Process
Egregious Case
Base Penalty Calculation
No
Yes
(1) One-Half Transaction Value (125k Cap)
(3) One-Half Statutory Maximum
Yes
Voluntary Self-Disclosure
(2) Applicable Schedule Amount (250k Cap)
(4) Statutory Maximum
No
11
OFAC Enforcement Process

• 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 PI 348,000

12
Presentation Outline

• OFAC Overview
• OFAC Enforcement Process
• Insurance Case Profile
• Iranian Sanctions - Insurance

13
Insurance Case Profile
OFAC Insurance Case Files (January 1, 2006
July 1, 2013)
Resolved/Concluded 253 Pending _78 Total
331
14
Insurance Case Profile
Insurance Case Categories
License Requests 177 Enforcement
Actions 100 Inquiries 54
15
Insurance Case Profile
OFAC Insurance Cases - Line of Business
Profile

• Commercial Lines PC 132
• Individual LH 52
• Reinsurance 55
• Personal Lines PC 54
• Group LH 36
• All Lines 2

16
Insurance Case Profile
Sanctions Programs Insurance Case Profile
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
17
Presentation Outline

• OFAC Overview
• OFAC Enforcement Process
• Insurance Case Profile
• Iranian Sanctions - Insurance

18
Iran Sanctions - Insurance

• 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 9983 (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

19
Iran Sanctions - Insurance

• 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)

20
Iran Sanctions - Insurance

• 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

21
Iran Sanctions - Insurance

• Secondary Sanctions Integrated Expanded
• Comprehensive Iran Sanctions, Accountability, and
  Divestment Act of 2010 (CISADA)
• Pub. L.111195, July 1, 2010
• Section 102(a) Expanded ISA Sanctions Trigger
• Section 102(b) Expanded ISA Sanctions Menu
• Section 104(c) Correspondent or Pay-Through
  Accounts
• of Foreign
  Financial Institutions
• Section 104(d) Persons Owned or Controlled by
  Domestic
• Financial Institutions

22
Iran Sanctions - Insurance

• Secondary Sanctions Integrated Expanded2
• Iran Threat Reduction and Syria Human Rights Act
  of 2012, Pub.L. 112158, 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

23
Iran Sanctions - Insurance

• 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

24
Sanctions Implementation for the Insurance
Industry

• David J. Brummond
• david.brummond_at_treasury.gov
• 202-622-7255