Simply put, Chubb Corporation merged with ACE Limited, and one of ACE’s subsidiaries was subject to US jurisdiction (because one of its parents was incorporated in the US). And that subsidiary apparently violated the Cuban Assets Control Regulations(CACR) 20,291 times. The huge bulk of these were premium payments for Cuba-related travel insurance, with a small number (less than 100) claims related to Cuban travel.
Notably, the enforcement action notes:
The apparent violations appear to have been caused by ACE’s misunderstanding of the applicability of U.S. sanctions on Cuba with respect to this activity.
It also notes that the insurance policies did not include a “sanctions exclusionary clause, which is often inserted in global insurance policies as an explicit exclusion for risks that would violate U.S. sanctions law.”
ACE voluntarily self-disclosed the violations, which were deemed non-egregious. The base penalty for all these violations was $183,923.52, which then resulted in a final settlement amount of $66,212.
Here were the aggravating factors:
(1) ACE failed to implement adequate internal controls, including failing to use sanctions exclusionary clauses in its global policies, to mitigate the sanctions compliance risks inherent in issuing insurance policies that covered Cuba-related travel;
(2) Certain ACE Europe’s business leaders and their regional legal and compliance team had knowledge of the issuance of policies covering travel to Cuba and reason to know of the U.S. sanctions against Cuba but failed to insert sanctions exclusionary clauses based on its erroneous legal conclusions relating to the E.U.’s blocking regulation and the de minimis exposure presented by the Cuba policies;
(3) The activity described resulted from a pattern or practice spanning several years;
(4) ACE conferred economic benefit to U.S. sanctioned parties, and caused harm to the integrity of
U.S. sanctions programs, including their associated policy objectives by enabling and supporting individuals’ ability to travel to Cuba through the provision of travel insurance coverages, and the payment of claims under the coverages;
(5) ACE is a large and commercially sophisticated financial institution.
and mitigating factors:
(1) Many of the transactions at issue in this case would have been authorized by general license had they occurred on or after January 16, 2015, the date on which OFAC issued certain amendments to the CACR that authorized certain Cuba travel-related insurance activities;
(2) ACE has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations;
(3) ACE cooperated with OFAC’s investigation into these apparent violations, including by voluntarily self-disclosing the apparent violations to OFAC, conducting a transaction review, responding to OFAC’s requests for information, and entering into a statute of limitations tolling agreement with multiple extensions;
(4) The compliance deficiency that enabled the apparent violations appears to have been concentrated within a single ACE operating entity, and does not appear to have been widespread throughout the overall ACE organizational structure;
(5) In response to the apparent violations (which ACE management was alerted to after ACE Europe personnel raised questions following a sanctions compliance training), ACE represented that it has implemented remedial actions and instituted numerous compliance policy, procedure and training enhancements across its global operations, including:
• Hiring a Global Financial Crime Risk Officer;
• Conducting a comprehensive risk assessment across the Europe, Eurasia, and Africa
• Developing a sanctions risk assessment methodology to identify potential gaps, and to
drive future remediation work and improvements.
considered by OFAC to affect the final amount of the civil monetary penalty.
And OFAC’s lessons to be learned:
This enforcement action underscores: the applicability of U.S. sanctions to certain foreign-based entities; the importance of incorporating sanctions exclusionary clauses to mitigate potential sanctions violations; and the significance of maintaining robust internal controls and training practices designed to identify and prevent potential sanctions violations before they occur.