American International Group, a global insurance and financial services company, last month agreed to pay the Office of Foreign Assets Control $148,698 to settle potential civil liability for 555 “apparent violations” of the OFAC sanctions program for insuring Iran, Sudan, and Cuba shipments.
According to the OFAC settlement agreement, from November 2007 to September 2012, AIG engaged in a total of 555 transactions totaling approximately $396,530 in premiums and claims for the insurance of maritime shipments of various goods and materials destined for, or that transited through, Iran, Sudan, or Cuba, and/or that involved a blocked person.” OFAC said it “has determined that AIG did voluntarily self-disclose the apparent violations, and that the apparent violations constitute a non-egregious case.”
AIG’s OFAC compliance program in place at the time “included recommendations for when to use exclusion clauses in the policies it issued regarding coverage or claims that implicated U.S. economic sanctions,” OFAC said. Although most of the policies were issued with exclusionary clauses, “most were too narrow in their scope and application to be effective,” OFAC added.
“In addition, some of the policies were issued without such clauses,” OFAC said. “Separately, some insureds, mindful of existing exclusionary clauses in their open cargo or worldwide master policies, sought single shipment policies that had no exclusionary clauses.”
OFAC said the following were considered aggravating factors:
AIG engaged in a pattern or practice that spanned multiple years in which it issued and maintained insurance policies and processed claims and premium payments in apparent violation of multiple U.S. sanctions programs;
AIG issued policies and insurance certificates, and/or processed claims and other insurance-related transactions, that conferred economic benefit to sanctioned countries or persons and undermined the policy objectives of several U.S. economic sanctions programs; and
AIG is a large and commercially sophisticated financial institution.
Mitigating factors, on the other hand, were:
AIG has not received a penalty notice or “finding of violation” from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations;
AIG had an OFAC compliance program in place at the time of the apparent violations that included, in most instances, the use of sanctions exclusion clauses to try to prevent the company from issuing policies or processing claims that implicated U.S. economic sanctions;
AIG took remedial action in response to the apparent violations; and
AIG cooperated with OFAC’s investigation, including by voluntarily self-disclosing the apparent violations, submitting detailed and well-organized information to OFAC, and signing tolling agreements that tolled the statute of limitations.
“This enforcement action highlights the important role that properly executed exclusionary clauses and robust compliance controls play in the global insurance industry’s efforts to comply with U.S. economic sanctions programs,” OFAC stated. “As outlined in OFAC’s Frequently Asked Questions regarding Compliance for the Insurance Industry, the best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions laws.”