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  June 29th, 2017 | Written by

Insurer to Pay $150K to Settle Violations of Sanctions Programs

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  • Insurer settled cases of violations of sanctions against Iran, Sudan, and Cuba.
  • Insurance coverage exclusionary clauses play an important role in compliance with US sanctions programs.
  • The best approach for lawfully insuring risks is to insert an exclusion for risks that would violate US sanctions.

American International Group, Inc. (AIG), a New York-based international insurance and financial services company has agreed to pay $148,698 to settle potential civil liability for 555 apparent violations of United States sanctions programs.

The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury said the company violated the Iranian Transactions and Sanctions Regulations, the Weapons of Mass Destruction Proliferators Sanctions Regulations, the Sudanese Sanctions Regulations, and the Cuban Assets Control Regulations by insuring maritime shipments of goods destined for, or that transited through the sanctioned countries and/or that involved a blocked person.

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 the maritime shipments involving Iran, Sudan, and Cuba.

While most of the apparent violations occurred under global insurance policies, dozens also occurred under single shipment policies. OFAC noted that AIG voluntarily self-disclosed the apparent violations.

In 455 of the instances, totaling $274,000, which AIG extended insurance coverage to parties that were engaging in a voyage, shipment, or transshipment to, from, or through Iran. OFAC also identified cases pertaining to global insurance policies that provided insurance coverage for shipments going to or from Sudan, with premiums received totaling $13,321.44. Thirty-three instances involved shipments aboard blocked Islamic Republic of Iran Shipping Lines vessels, with premiums received totaling $105,000, while 29 cases involved apparent violations CACR, all of which pertained to AIG’s provision of insurance coverage in connection with shipments to or from Cuba.

AIG’s compliance program included recommendations for when to use exclusion clauses in the policies it issued regarding coverage or claims that implicated U.S. economic sanctions. A majority of the policies were issued with exclusionary clauses, but, OFAC found, most were too narrow in their scope and application to be effective. Some of the policies were issued without exclusion clauses. Some shippers sought single shipment policies that lacked exclusionary clauses.

“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 US

economic sanctions programs,” an OFAAC document noted. “The best and most reliable approach for insuring global risks without violating US sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions laws.”