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Sanctions Implementation for the Insurance Industry

Sanctions Implementation for the Insurance Industry. David J. Brummond Senior Sanctions Advisor - Insurance. Presentation Outline. OFAC Overview OFAC Enforcement Process Insurance Case Profile Evolving Iranian Sanctions. OFAC Overview. OFAC Mission

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Sanctions Implementation for the Insurance Industry

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  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. National Security Council OFAC Overview SANCTIONS THE PRESIDENT Defense ODNI Secretary of the Treasury State Under Secretary Terrorism Finance Intelligence (TFI) PROGRAMS OFAC Commerce State 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. Criminal Referral Civil Penalty Finding of Violation Cautionary Letter No Action 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 P&I $ 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 P&C 132 • Individual L&H 52 • Reinsurance 55 • Personal Lines P&C 54 • Group L&H 36 • All Lines 2

  16. Insurance Case Profile Sanctions Programs Insurance Case Profile • Country-Based Programs 187Cuba (98) Iran (52) Sudan (28) Syria (9) • List-Based Programs 81 • Narcotics (47) Somalia (15) Terrorism (6) • WMD (13) • Regime-Based Programs30 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 • IranianAssets 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

  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.111–195, 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. 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

  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@treasury.gov 202-622-7255

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