555 OFAC violations = $148K settlement for AIG

AIG insured maritime shipments and processed a mix of premium receipts and claims that violated the Iran, WMD non-proliferation, Sudan and Cuban sanctions regulations.The violations were, fortunately for AIG, voluntarily self-disclosed and not considered egregious, which puts the penalty in the quadrant with the least severe figures – $198,266 was the base penalty.

OFAC faulted AIG’s compliance program:

 

AIG’s OFAC compliance program in place at the time of the Apparent Violations included recommendations for when to use exclusion clauses in the policies it issued regarding coverage or claims that implicated U.S. economic sanctions. While a majority of the policies were issued with exclusionary clauses, most were too narrow in their scope and application to be effective. In addition, some of the policies were issued without such clauses. 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. 

And revisited this point:

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. 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. 

Here’s how OFAC arrived at its penalty:

 

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.

The following were considered mitigating factors: 

  • 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. 

Link:

OFAC Enforcement Information

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