SlideShare une entreprise Scribd logo
1  sur  41
Télécharger pour lire hors ligne
Going Beyond OFAC Screening:
What Insurance and Reinsurance
Companies Must Do To Avoid
Sanctions and Ensure
Compliance

             American Conference Institute
             AML and OFAC Compliance
             for the Insurance Industry

             January 24-25, 2012
Speakers’ Information
Frank Bria
General Reinsurance Corporation

David Butman
Locke Lord LLP

Martin Feuer
Zurich Financial Services

Kathy Silberthau Strom
Cahill Gordon & Reindel LLP



                                        This presentation is solely for educational and
                                        informational purposes. It is not intended to constitute
                                        legal advice and should not be relied upon as a
                                        substitute for legal advice.



                                  January 10, 2012                                                 2
Agenda
• Economic Sanctions Programs
   • U.S. Persons ‒ Kathy Strom
   • Facilitation   ‒ Kathy Strom
   • Iran Sanctions ‒ David Butman

• Compliance Programs
   • Primary Insurance ‒ Martin Feuer
   • Reinsurance       ‒ Frank Bria

• Enforcement Actions ‒ David Butman

• Questions?
                       January 10, 2012   3
Economic Sanctions Programs
 Key Statutory Bases: International Emergency Economic
    Powers Act (IEEPA) and Trading with the Enemy Act (TWEA)
    (Cuban program)
   Country Programs – Burma, Cuba, Iran, Sudan, Syria, etc.
   Targeted Programs – SDNs-based, terrorism, non-proliferation,
    drug trafficking, etc.
   “U.S. persons” — defined for most programs as any U.S.
    citizen, permanent resident alien, entity organized under U.S.
    law or any jurisdiction within the U.S. (including foreign
    branches) or any person in the U.S. — are subject to OFAC
    economic sanctions programs, and may not engage in
    “prohibited facilitation”
   Non-U.S. persons face risk as well — U.S.-origin goods,
    causing violations by U.S. persons, branches within the U.S.,
    servers or other functions performed in the U.S., etc.

                              January 10, 2012                       4
OFAC: Facilitation Risks
 “Facilitation” by a U.S. person of conduct engaged in
  by a foreign person where that conduct is proscribed
  by U.S. sanctions programs is prohibited.
 Definitions of facilitation vary among programs, but
  concepts are similar.
 For insurance and reinsurance industry subject to
  OFAC jurisdiction, facilitation includes providing
  insurance or reinsurance for conduct, which if done by
  a U.S. person, would violate an OFAC sanctions
  program.


                         January 10, 2012                  5
Country Program Definitions
 Burma: 31 CFR § 537.205 (basic concept)
  U.S. persons are prohibited from “approving, financing,
  facilitating or guaranteeing a transaction by a person who is a
  foreign person where the transaction would be prohibited if
  performed by a U.S. person or within the United States.”
 Iran: 31 C.F.R. § § 560.206 and 560.417
  Same basic concept and adds the following to the definition of
  “prohibited facilitation”:
      where a U.S. person alters its operating policies or procedures or
       those of a foreign affiliate to permit a foreign affiliate to accept or
       perform a specific contract or transaction involving Iran without
       the approval of a U.S. person where such transaction (cont)


                                    January 10, 2012                         6
Country Program Definitions
      previously required approval by a U.S. person and such
 transaction would be prohibited if performed directly by a U.S.
      person; or
         where U.S. person refers to a foreign person bids or orders
          involving Iran to which a U.S. person could not directly
          respond as a result of prohibitions; or
         where U.S. person changes the operating policies and
          procedures of an affiliate with the specific purpose of
          facilitating transactions prohibited if performed by a U.S.
          person.




                              January 10, 2012                     7
Country Program Definitions
 Sudan: 31 CFR § 538.407
  Includes basic concept as well as prohibitions on
  changes in procedures or referrals. States that U.S.
  parent must ensure that its foreign subsidiaries act
  independently of any U.S. person with respect to all
  transactions and activities relating to exportation of
  goods, technologies or services going to or from Sudan,
  including but not limited to:
     business and legal planning, decision making, designing,
      ordering or transporting goods and financing, insurance and
      other risks.



                               January 10, 2012                     8
Country Program Definitions
 Syria: E.O. 13582, dated August 17, 2011
Prohibits in Section 2(b) and 2(e);
   - The exportation, sale or supply, directly or indirectly
      from the U.S. or by a U.S. person of “any services
      to Syria”; and
   - any “approval, financing, facilitation or guarantee
      by a U.S. person of a transaction by a foreign
   person where the transaction by that foreign person
      would be prohibited . . . if performed by a United
      States person.”


                           January 10, 2012                9
Best Practices to Reduce Facilitation
Risk
  Consider each of these definitions of “facilitation” to be
   part of OFAC’s interpretation of facilitation, and
   potentially applicable to all OFAC sanctions programs.
  Review all proposed business and insurance risks with
   these concepts in mind.
  Alert and train all risk personnel and business
   managers regarding facilitation risks.
  Identify all “U.S. persons” so as to prevent facilitation by
   such persons.



                             January 10, 2012                   10
Best Practices to Reduce Facilitation
Risks (con’t)
 Scrutinize and screen all parties involved in risks to be
  insured (and owners thereof).
 Obtain and understand the details (business, place,
  parties, etc.) of transactions for which insurance or
  reinsurance is considered.
 Include sanctions clauses in all policies and
  agreements.
 Review and discuss all business in light of changing
  sanctions programs.



                            January 10, 2012                  11
IRAN Sanctions

 Iranian Transaction Regulations
 Comprehensive Iran Sanctions, Accountability, and Divestment
    Act of 2010 (CISADA)(2010)
   Foreign Persons Liable
        Knowingly supporting Iran’s development of petroleum resources ($1M/yr or $5M aggregate)
        Knowingly facilitating Iran’s domestic production of refined petroleum products ($250K/yr or
         $5M aggregate)
        Knowingly exporting refined petroleum products to Iran ($1M/yr or $5M aggregate)
        Knowingly exporting goods, technology or services to Iran that would contribute materially to
         Iran’s acquisition of weapons of mass destruction

        Parent Vicariously Liable
        Corporate parent liable if it “knew” of subsidiary’s prohibited activity

        Divestment from Companies Investing in Iran
        State and local governments authorized to divest/prohibit investments in persons
         investing/extending credit of $20M+ in Iran’s energy sector




                                                        January 10, 2012                                 12
IRAN Sanctions cont.
 Executive Order 13590 (November 2011)
      Authorizes sanctions on persons that sell, lease or provide goods,
       services, technology or support to Iran that could directly and
       significantly facilitate the maintenance or expansion of domestic
       production of petrochemical products ($250,000 FMV or $1M/yr.)

 HR 1540 (2011)
      Foreign Persons Sanctions
      Foreign financial institutions that knowingly conduct or facilitate significant transactions with
       The Central Bank of Iran are barred from opening correspondent or payable through accounts
       in U.S.


      Requires President To Impose Mandatory Sanctions Absent Exception or
       Waiver
      Statutory provision for waiver of sanctions by President in “national security interest”
      Presidential signing statement says “non-binding” to the extent it interferes with President’s
       constitutional authority to conduct foreign affairs.



                                                    January 10, 2012                                       13
Some sanctions challenges faced by
international insurers
 What to Screen and When?
   –   OFAC, UN, OSFI, DPL, E.U.?
   –   Sanctions have become more “list-based”; how do you
       manage the various lists?
   –   Insured, additional insured, beneficiaries, third parties (how
       far do you go?)
   –   Do you screen pre-quote, at quote and or upon payment of a
       claim?
        – Sanctions need to be considered during the entire Product and
            Insurance Life Cycle
   –   Should you screen periodically or at sanctions lists updates?
        –   OFAC requires regular screening at the update of its sanctions list
 Should you use enterprise-wide interdiction software?
   –   Does your interdiction software integrate with your in-house systems and
       database?
                                           January 10, 2012                       14
Some sanctions challenges faced by
international insurers, cont’d
 Extraterritorial nature of sanctions regimes such as OFAC
 Do you audit third party providers to ensure they conduct regular
  sanctions checks?
 Should you approve screening mechanisms utilized by third parties
  screening on your behalf to ensure compliance with your policy?
 Consider OFAC anti-blocking legislation of countries such as Canada,
  Mexico and the E.U. nations
    –   Canadian based companies can do business in Cuba; this can be a
        challenge for U.S. based parent companies
    –   Your company could be subject to conflicting requirements; advise staff to
        contact regional Compliance or legal functions for guidance
 Do you “ring-fence” international customer data and transactions that
   involve an OFAC embargoed country such as Cuba?
    –   Where is your international customer data stored?
    –   Ensure there are no “Cuban-related” customer data warehoused on your
        computer servers in the U.S.
    –   What about expatriates?
                                           January 10, 2012                          15
Evaluation of Sanctions policies

 Responsibility for your Sanctions Compliance Program
      Policy should acknowledge individual responsible for
       the day-to-day compliance of the program
      “Top-down” approach to OFAC and sanctions
      Operational procedures and sanctions screening
       requirements are owned by the business
      Compliance professionals within the business with
       reporting line to the regional compliance officer
          Business Unit Compliance -> Regional Compliance

           -> Global Compliance

                             January 10, 2012                 16
Evaluation of Sanctions policies, cont’d
    Identification of High Risk Areas
     –      Does your policy address the identification of higher-risk customers/areas as part
            of your CDD procedures?
     –      Does your policy address the assessment of customers, product lines, geography
            and nature of transactions?

    Reporting Requirements
     –      Provide clear guidelines to local staff for handling items blocked or rejected under
            the various sanctions programs
     –      Escalation process must be clearly defined and address reporting to senior
            management and OFAC, or other sanctions regulator

    Does your policy address the scope of your sanctions program?
     –      What about the sanctions laws of other countries?
              Does your policy provide guidance for all U.S. persons, wherever they are
               located in the world? 1
                   Does the policy address part-time and temporary workers, third parties who
                    do business on your company’s behalf, such as consultants, advisers, service
                    providers, suppliers, intermediaries, agents or brokers globally?
                           Include sanctions screening requirements in contract agreements with third parties
1
 Sanctions generally apply within the jurisdiction they are established in, but some sanctions have extraterritorial reach,
and/or become relevant depending on where business is conducted.
                                                                      January 10, 2012                                        17
Recommendations
   Establish common enterprise-wide screening policies and work-flow
    procedures. Require Third Party Administrators (TPAs) to follow same
    policies and procedures;

   Adopt and implement an enterprise-wide technology that is adaptable to the
    business;
    –   Zurich is presently implementing a common global platform

   Provide adequate training for all appropriate employees
    –   Mandatory for new employees within North America
    –   Targeted training provided to compliance personnel and client facing employees
        such as underwriters
    –   Training should be risk-based and targeted to your organization

   Compliance as a second line of defense
    –   Advise all employees globally to contact their local/regional compliance or legal
        function should they have questions regarding sanctions


                                           January 10, 2012                                 18
Summary
 The adverse effect of reputational risk associated with OFAC
    compliance issues is great
   Be mindful of the weakest link: third parties
   Test for sanctions compliance on a regular basis
   Maintain an open dialogue with OFAC and local sanctions regulators at
    all times; don’t assume anything; ask for guidance
   We all make mistakes, but a robust, OFAC and sanctions compliance
    program will mitigate the severity of any penalty
   Manage the examination process with an open and collaborative
    methodology
   Train all U.S. persons within the company; don’t forget to train those
    living/working overseas
   Periodically assess products and services for sanctions regulatory
    requirements
   Incorporate “red flags” within company policies and procedures; and
   Ensure senior management has approved your policy

                                      January 10, 2012                       19
Designing an Effective OFAC Compliance Program


ASSESS

● Obtain senior management’s input and support

● Conduct legal and risk assessments




                       January 10, 2012          20
Designing an Effective OFAC Compliance Program


   BUILD
   ● Implement policies and guidelines
   ● Implement screening software (ensure that all underwriting
     submissions, claims payments and wire transfers are screened
     against the Specially Designated Nationals List ("SDN List"))
   ● Create awareness at all levels of the company
   ● Train employees
   ● Establish procedures to encourage employees and third
     party vendors to report potential OFAC violations
   ● Encourage trade sanctions exclusions for global insurance
     and reinsurance policies



                               January 10, 2012                  21
Designing an Effective OFAC Compliance Program

   CERTIFY
   ● Appoint and train representatives from each business
     and service unit to:
         -oversee the OFAC screening
         -ensure that the unit complies with screening guidelines
         -routinely meet with Legal to review OFAC compliance efforts
         and report any changes within the unit that may impact screening

   ● Obtain confirmation from vendors and business
     partners that they have an OFAC compliance program
     that includes some form of screening


                                 January 10, 2012                           22
Designing an Effective OFAC Compliance Program


REVIEW

● Regularly reassess the company’s legal and business
  risks

● Routinely rescreen clients, insureds, claimants, and
  beneficiaries to confirm that they have not been added to
  the SDN List

● Conduct audits of the compliance program

                            January 10, 2012              23
Potential Trade Sanctions Exposures for Insurers and Reinsurers



 LINES OF BUSINESS

 ● Political Risk Coverage, more than any other class of
    business, tends to involve sanctioned countries
 ● Mobile risks, such as ocean marine and aviation,
    present the potential for prohibited claims payments
 ● International Group Life Policies
 ● Premiums and Claims that are reported on a bulk
    report may lack critical information and may be difficult
    to screen against the OFAC list


                                January 10, 2012                  24
Potential Trade Sanctions Exposures for Insurers and
Reinsurers

 REGIONAL EXPOSURES

 ● Middle East - large number of SDNs and trade
   with Iran, Syria and other sanctioned countries
   and entities
 ● Portions of Central and South America - large
   number of SDNs and trade with Cuba



                        January 10, 2012          25
Challenges for U.S. Insurers and Reinsurers in the
E.U.

    Compliance challenges due to Legal
    Differences between the U.S. and E.U.

     ● E.U. Blocking Laws

     ● E.U. privacy laws – German Federal Data
       Protection Act and Section 203 of the German
       Criminal Code



                            January 10, 2012          26
Practical Tips to Enhance Compliance Programs

 U.S. insurers and reinsurers should conduct the following:

   (1) screen their existing policyholders, claimants, and beneficiaries against
   the SDN list;

   (2) conduct due diligence on political risk, mobile risks and international
   group life policies;

   (3) establish a process to review premiums and claims reported on bulk
   reports;

   (4) monitor Iranian efforts to evade sanctions; and

   (5) include a trade sanctions exclusion on global policies.


                                      January 10, 2012                           27
OFAC LIABILITY/PENALTIES
   Civil Penalties (TWEA and IEEPA)
             Unintentional violations/Strict Liability
             $250,000 ($1.075M Kingpin) or 2xs the value of transaction (greater of)
             Forfeit pecuniary gains

   Criminal Penalties (TWEA and IEEPA)
             “Willful violations” of regulations
                    Individuals
                         $250,000 Maximum ($5,000,000 Kingpin); or
                         Imprisonment up to 20 years (IEEPA) or 10 years (TWEA) (30 years Kingpin Act); or
                         Both

                    Corporations
                         $1,000,000 Maximum ($10,000,000 Kingpin); or
                         Twice the amount of the transaction; or
                         Both


   Reputational Injury
             Stock Price Penalty



                                                          January 10, 2012                                    28
OFAC LIABILITY/PENALTIES Cont.

 Value of the Insurance Transaction

        Underwriting = Total Premium Charged

        Claims = Amount of Claim Payment

        Stacking Penalties




                         January 10, 2012       29
OFAC LIABILITY/PENALTIES Cont.
 OFAC ENFORCEMENT RESPONSES

      No Action – OFAC determines evidence insufficient to establish a
       violation or action is otherwise not required.

      Request Additional Information - May issue subpoena for more
       information before determining appropriate action.

      Cautionary Letter – Same as “No Action”, but warns that conduct could
       result in future violations or compliance program may be insufficient.

      Finding of Violation – OFAC determines a violation occurred, but
       identification of violation and remedial steps are appropriate response
       rather than civil monetary penalty.



                                    January 10, 2012                             30
OFAC LIABILITY/PENALTIES Cont.

   Civil Penalty – OFAC determines that a violation occurred which warrants
    imposition of a civil monetary penalty.

   Criminal Referral - In appropriate circumstances, OFAC may refer the
    matter to appropriate law enforcement agencies for criminal investigation
    and/or prosecution.

   Other Administration Action – In addition to or in lieu of the foregoing
    OFAC may:

       Deny, suspend, modify or revoke license where needed.
       Issue cease and desist orders




                                    January 10, 2012                      31
OFAC LIABILITY/PENALTIES Cont.
 CIVIL PENALTIES PROCESS
        Pre-Penalty Notice
              Describe the alleged violation
              Number of alleged violations
              Value of each alleged violations
              Identify law/regulation allegedly violated
              Base category upon which proposed penalty amount calculated
              Aggravating/Mitigating factors relevant to proposed penalty
              Maximum potential penalty under law/regulation
              Proposed Penalty
        Response
            Written Response within 30 days (post mark of pre-penalty notice)
            Agree/Disagree as to violation/Disagree as to penalty amount
            No Response = Imposition of Civil Penalty
        Penalty Notice
            Final Agency Action


                                         January 10, 2012                        32
OFAC LIABILITY/PENALTIES Cont.
                                                       Egregious Case
                                                     No              Yes
BASE PENALTY
CALCULATION                                          (1)
                                                  One-Half             (3)
                                             Transaction Value      One-Half
                          Yes                 ($125K Cap per        Statutory
                                             violation violation/   Maximum
               Voluntary                     $32,00 for TWEA)
               Self-Disclosure
                                                     (2)
                                                 Applicable            (4)
                           No                Schedule Amount        Statutory
                                              ($250k Cap per        Maximum
                                             violation/$65K for
                                                   TWEA)




                                 January 10, 2012                               33
OFAC LIABILITY/PENALTIES Cont.

   Applicable Scheduled Amount

   Transaction Value                           Scheduled Amount

   < $1,0000                                   $1,000
   $1,000 - $9,999.99                          $10,000
   $10,000 - $24,999.99                        $25,000
   $25,000 - $49,999.99                        $50,000
   $50,000 - $99,999.99                        $100,000
   $100,000 - $169,999.99                      $170,000
   >$170,000                                   $250,000



                            January 10, 2012                      34
OFAC LIABILITY/PENALTIES Cont.

 Mitigating Factors:
         Compliance Program in Place
         First Offense (25% Reduction)
         Voluntary Disclosure/Self-Reporting (50% Reduction)
         Substantial Cooperation (20% - 40% Reduction)
         Entering Into Settlement (10% Reduction – unwritten)

 Aggravating Factors:
         Willfulness (double the penalty)
         Lack of compliance program
         Familiarity with Sanctions programs
         Second or subsequent offense
         No remedial action after discovery

                             January 10, 2012                    35
OFAC PENALTIES
   Barclays, Aug. 2010
       Iranian and Sudanese Regulations
       $298 Million Penalty
       Stripped Iranian and Sudanese references from U.S. dollar transactions to U.S.
        correspondence banks
   Lloyds TSB, Jan 2009
       Iranian and Sudanese Regulations
       From 1997-2007, stripped Iranian and Libyan references from U.S. dollar transactions to U.S.
        correspondent banks
   ABN Amro, December 2005
       Iranian and Libyan Regulations
       $80 Million Penalty
       Stripped Iranian and Libyan references from U.S. dollar transactions to U.S. correspondent
        banks
   UBS, May 2004
       Cuba, Iran, Libya and Former Yugoslavia Regulations
       $100 Million Penalty ($25,000 per day of violation)
       Distribution of U.S. Bank Notes in violation of OFAC Regulations and concealment
   Guidant Corporation, March 2007
       Iraqi and Iranian Regulations
       $277,017
       Exporting goods for ultimate resale to Iraq and Iran from 2000 to 2004


                                             January 10, 2012                                   36
INSURANCE INDUSTRY PENALTIES
   Penalties Published on OFAC Website: www.ustreasury.gov
       U.S. P&C (Re)Insurer, March 2001
             Cuban Asset Control Regulations (CACRs)
             $2.4 Million Penalty
             British companies selling reinsurance to Cuban companies
       U.S. Reinsurer, June 2011
             Iranian Transaction Regulations
             $59,130 Penalty
             Two reinsurance claim payments totaling $309,740.65 to a protection and indemnity association or P&I Club
       U.S. Broker, April 2011
             Iranian Sanctions Regulations
             Placement of 6 Commercial Multi-Peril policies insuring submersible oil rig ($453,364 total premium)
             $122,406 Penalty
       U.S. Broker, January 2011
             Iranian Transaction Regulations
             $36,000 Penalty
             Placement of two retro contracts ($62,883 total premium) between European reinsurer and European retros.
       U.S. Personal Lines Insurer, June 2010
             Foreign Narcotics Kingpin Regulations
             $11,000 penalty
             Unauthorized auto policy issued to SDN



                                                         January 10, 2012                                            37
Broker Example 1
Step 1:   Determine Number of Transactions
           (6 Contracts)
          Determine “Value” of Transaction
           (Total Premium for 6 contracts = $453,364)

Step 2:   (a) Egregious v. Non-Egregious
               (Non-Egregious)
              Voluntarily Disclosed v. Disclosed By Other Means
                (Not Voluntarily Disclosed)

          (b) Determine “Base Penalty” Amount
               ($75,560 avg prem per policy x 50% reduction x 6 placements)

BASE PENALTY = $226,680

Step 3:   Adjust Penalty (Mitigating and Aggravating Factors)
          (a)25% first offense
          (b)10% settlement

ASSESSED PENALTY = $122,408

                                      January 10, 2012                        38
Broker Example 2
Step 1:   Determine Number of Transactions
           (2 Contracts)
          Determine “Value” of Transaction
           (Total Premium $62,883)

Step 2:   (a) Egregious v. Non-Egregious
               (Non-Egregious)
              Voluntarily Disclosed v. Disclosed By Other Means
                (Not Voluntarily Disclosed)

          (b) Determine “Base Penalty” Amount
               ($100K for transaction values between $50K-$100K)

BASE PENALTY = $100,000

Step 3:   Adjust Penalty (Mitigating and Aggravating Factors)
          (a)20%-40% substantial additional information/cooperation
          (b)25% first offense
          (c)10% settlement

ASSESSED PENALTY = $36,000
                                      January 10, 2012                39
FOREIGN PERSON CONSIDERATION

 Foreign Corporations – “What Me Worry?”

        U.S. citizen employees, managers, officers or directors
        Non-U.S. citizen employees while in the U.S.
        U.S. co-insurers
        U.S. reinsurers
        U.S. offices
        U.S. capital/investments
        Insuring/Reinsuring transactions involving export/re-
         export of U.S. origin goods
        Cuba (and Iran – CISADA)
        CAUSING OFAC VIOLATIONS


                            January 10, 2012                       40
Contact Information
Martin Feuer
Zurich Financial Services
Chief Compliance Officer Americas
917-534-4536
martin.feuer@zurichna.com

Frank Bria
General Reinsurance Corporation
Vice President and Assistant General Counsel
203-328-5112
FBria@genre.com

David Butman
Senior Counsel
Locke Lord LLP
312-443-0207
dbutman@lockelord.com

Kathy Silberthau Strom
Counsel
Cahill Gordon & Reindel LLP
202-862-8944
stromk@cgrdc.com




                                               January 10, 2012   41

Contenu connexe

Tendances

D&o power point presentationrims 2010.10.21
D&o power point presentationrims   2010.10.21D&o power point presentationrims   2010.10.21
D&o power point presentationrims 2010.10.21John Celeste
 
D&amp;O Coverage: Tailoring Coverage for the Risks that Matter to You
D&amp;O Coverage: Tailoring Coverage for the Risks that Matter to YouD&amp;O Coverage: Tailoring Coverage for the Risks that Matter to You
D&amp;O Coverage: Tailoring Coverage for the Risks that Matter to YouJoeBeavers
 
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...Financial Poise
 
Don't Litigate, Mediate: Here's How
Don't Litigate, Mediate: Here's HowDon't Litigate, Mediate: Here's How
Don't Litigate, Mediate: Here's HowMichelle Cohen
 
Fcpa ma slides presentation final
Fcpa ma slides presentation finalFcpa ma slides presentation final
Fcpa ma slides presentation finalMayer Brown LLP
 
Concerned About Vendor Management 10 30 12
Concerned About Vendor Management 10 30 12Concerned About Vendor Management 10 30 12
Concerned About Vendor Management 10 30 12wstippich
 
CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...
CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...
CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...Patton Boggs LLP
 
Creditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate LawCreditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate Lawterigrasmussen
 
Article March 2007 - Davis, Maeve CI
Article March 2007 - Davis, Maeve CIArticle March 2007 - Davis, Maeve CI
Article March 2007 - Davis, Maeve CIMaeve Davis
 
How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...
How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...
How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...Financial Poise
 
Best frenemies how to manage your relationship with regulatory examiners
Best frenemies   how to manage your relationship with regulatory examinersBest frenemies   how to manage your relationship with regulatory examiners
Best frenemies how to manage your relationship with regulatory examinersValerie Germany-Edgington
 
Managing Your Real Estate Portfolio
Managing Your Real Estate PortfolioManaging Your Real Estate Portfolio
Managing Your Real Estate PortfolioKaufman & Canoles
 
The Insurance Act 2015 - brokers guide
The Insurance Act 2015 - brokers guideThe Insurance Act 2015 - brokers guide
The Insurance Act 2015 - brokers guideBrowne Jacobson LLP
 
20 Questions to ask your Cyber Carrier - Wis Banker 12-2015
20 Questions to ask your Cyber Carrier - Wis Banker 12-201520 Questions to ask your Cyber Carrier - Wis Banker 12-2015
20 Questions to ask your Cyber Carrier - Wis Banker 12-2015Jeff Otteson
 
FTC overview on glba final rule on safeguards 2010 Compliance Presentation
FTC overview on glba final rule on safeguards 2010 Compliance PresentationFTC overview on glba final rule on safeguards 2010 Compliance Presentation
FTC overview on glba final rule on safeguards 2010 Compliance PresentationBrent Hillyer
 

Tendances (19)

D&o power point presentationrims 2010.10.21
D&o power point presentationrims   2010.10.21D&o power point presentationrims   2010.10.21
D&o power point presentationrims 2010.10.21
 
D&amp;O Coverage: Tailoring Coverage for the Risks that Matter to You
D&amp;O Coverage: Tailoring Coverage for the Risks that Matter to YouD&amp;O Coverage: Tailoring Coverage for the Risks that Matter to You
D&amp;O Coverage: Tailoring Coverage for the Risks that Matter to You
 
Current State of The 401k Market
Current State of The 401k MarketCurrent State of The 401k Market
Current State of The 401k Market
 
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...
A Menu of Products for Investors and Lawyers (Series: Commercial Litigation F...
 
Don't Litigate, Mediate: Here's How
Don't Litigate, Mediate: Here's HowDon't Litigate, Mediate: Here's How
Don't Litigate, Mediate: Here's How
 
New York vs. E&Y
New York vs. E&YNew York vs. E&Y
New York vs. E&Y
 
Fcpa ma slides presentation final
Fcpa ma slides presentation finalFcpa ma slides presentation final
Fcpa ma slides presentation final
 
Financing litigation
Financing litigationFinancing litigation
Financing litigation
 
Concerned About Vendor Management 10 30 12
Concerned About Vendor Management 10 30 12Concerned About Vendor Management 10 30 12
Concerned About Vendor Management 10 30 12
 
CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...
CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...
CAPITAL MARKETS ALERT: How Dodd-Frank and Other New U.S. Laws May Affect Non-...
 
Creditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate LawCreditor\'s Rights and Bankruptcy Issues in Real Estate Law
Creditor\'s Rights and Bankruptcy Issues in Real Estate Law
 
Article March 2007 - Davis, Maeve CI
Article March 2007 - Davis, Maeve CIArticle March 2007 - Davis, Maeve CI
Article March 2007 - Davis, Maeve CI
 
How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...
How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...
How to Avoid Malpractice & Disciplinary Actions - General Do's and Don'ts (Se...
 
Best frenemies how to manage your relationship with regulatory examiners
Best frenemies   how to manage your relationship with regulatory examinersBest frenemies   how to manage your relationship with regulatory examiners
Best frenemies how to manage your relationship with regulatory examiners
 
Managing Your Real Estate Portfolio
Managing Your Real Estate PortfolioManaging Your Real Estate Portfolio
Managing Your Real Estate Portfolio
 
The Insurance Act 2015 - brokers guide
The Insurance Act 2015 - brokers guideThe Insurance Act 2015 - brokers guide
The Insurance Act 2015 - brokers guide
 
20 Questions to ask your Cyber Carrier - Wis Banker 12-2015
20 Questions to ask your Cyber Carrier - Wis Banker 12-201520 Questions to ask your Cyber Carrier - Wis Banker 12-2015
20 Questions to ask your Cyber Carrier - Wis Banker 12-2015
 
FTC overview on glba final rule on safeguards 2010 Compliance Presentation
FTC overview on glba final rule on safeguards 2010 Compliance PresentationFTC overview on glba final rule on safeguards 2010 Compliance Presentation
FTC overview on glba final rule on safeguards 2010 Compliance Presentation
 
Whistleblower protections for government contractors and grantees
Whistleblower protections for government contractors and granteesWhistleblower protections for government contractors and grantees
Whistleblower protections for government contractors and grantees
 

Similaire à ACI's AML & OFAC Compliance for the Insurance Industry (Day 1)

Iran- Resilient Economy- December 2017
Iran- Resilient Economy- December 2017Iran- Resilient Economy- December 2017
Iran- Resilient Economy- December 2017Griffon Capital
 
NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14
NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14
NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14Jon Yormick
 
Orderly Liquidation Authority under Dodd-Frank
Orderly Liquidation Authority under Dodd-FrankOrderly Liquidation Authority under Dodd-Frank
Orderly Liquidation Authority under Dodd-FrankSimon Lacey
 
6 11 Red Flags Fa Qs
6 11 Red Flags Fa Qs6 11 Red Flags Fa Qs
6 11 Red Flags Fa Qspdallen
 
CBI Comments on FATF Implementation of Corporate Transparency Act
CBI Comments on FATF Implementation of Corporate Transparency ActCBI Comments on FATF Implementation of Corporate Transparency Act
CBI Comments on FATF Implementation of Corporate Transparency ActJasonSchupp1
 
Data Security and Regulatory Compliance
Data Security and Regulatory ComplianceData Security and Regulatory Compliance
Data Security and Regulatory ComplianceLifeline Data Centers
 
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...SHAUN HASSETT
 
Senior management
Senior managementSenior management
Senior managementTechweek
 
Residential lending
Residential lendingResidential lending
Residential lendingTechweek
 
Oa Presentation Pi Apr March 2009
Oa Presentation Pi Apr March 2009Oa Presentation Pi Apr March 2009
Oa Presentation Pi Apr March 2009sakphouseth
 
The Responsibility Of Health Insurance Portability And Law...
The Responsibility Of Health Insurance Portability And Law...The Responsibility Of Health Insurance Portability And Law...
The Responsibility Of Health Insurance Portability And Law...Jen Santiago
 
CFTC Cross-Border Guidance Frequently Asked Questions
CFTC Cross-Border Guidance Frequently Asked QuestionsCFTC Cross-Border Guidance Frequently Asked Questions
CFTC Cross-Border Guidance Frequently Asked QuestionsPatton Boggs LLP
 
Commercial lending
Commercial lendingCommercial lending
Commercial lendingTechweek
 
The right stuff: whose job is it to manage regulatory risk?
The right stuff: whose job is it to manage regulatory risk?The right stuff: whose job is it to manage regulatory risk?
The right stuff: whose job is it to manage regulatory risk?SWIFT
 

Similaire à ACI's AML & OFAC Compliance for the Insurance Industry (Day 1) (20)

Iran- Resilient Economy- December 2017
Iran- Resilient Economy- December 2017Iran- Resilient Economy- December 2017
Iran- Resilient Economy- December 2017
 
NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14
NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14
NACM Credit Congress & Expo.Navigating Economic Sanctions Successfully.01jun14
 
scce-cep-2015-05-Ward-1
scce-cep-2015-05-Ward-1scce-cep-2015-05-Ward-1
scce-cep-2015-05-Ward-1
 
Orderly Liquidation Authority under Dodd-Frank
Orderly Liquidation Authority under Dodd-FrankOrderly Liquidation Authority under Dodd-Frank
Orderly Liquidation Authority under Dodd-Frank
 
6 11 Red Flags Fa Qs
6 11 Red Flags Fa Qs6 11 Red Flags Fa Qs
6 11 Red Flags Fa Qs
 
Reicon14 session 5 ppt final
Reicon14 session 5 ppt finalReicon14 session 5 ppt final
Reicon14 session 5 ppt final
 
CBI Comments on FATF Implementation of Corporate Transparency Act
CBI Comments on FATF Implementation of Corporate Transparency ActCBI Comments on FATF Implementation of Corporate Transparency Act
CBI Comments on FATF Implementation of Corporate Transparency Act
 
Data Security and Regulatory Compliance
Data Security and Regulatory ComplianceData Security and Regulatory Compliance
Data Security and Regulatory Compliance
 
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...
 
ACCDocketArticle12_2015
ACCDocketArticle12_2015ACCDocketArticle12_2015
ACCDocketArticle12_2015
 
Senior management
Senior managementSenior management
Senior management
 
Residential lending
Residential lendingResidential lending
Residential lending
 
Trust
TrustTrust
Trust
 
Marketing
MarketingMarketing
Marketing
 
Oa Presentation Pi Apr March 2009
Oa Presentation Pi Apr March 2009Oa Presentation Pi Apr March 2009
Oa Presentation Pi Apr March 2009
 
Managing the country programme for results: Audit - Karen Juergens
Managing the country programme for results: Audit - Karen JuergensManaging the country programme for results: Audit - Karen Juergens
Managing the country programme for results: Audit - Karen Juergens
 
The Responsibility Of Health Insurance Portability And Law...
The Responsibility Of Health Insurance Portability And Law...The Responsibility Of Health Insurance Portability And Law...
The Responsibility Of Health Insurance Portability And Law...
 
CFTC Cross-Border Guidance Frequently Asked Questions
CFTC Cross-Border Guidance Frequently Asked QuestionsCFTC Cross-Border Guidance Frequently Asked Questions
CFTC Cross-Border Guidance Frequently Asked Questions
 
Commercial lending
Commercial lendingCommercial lending
Commercial lending
 
The right stuff: whose job is it to manage regulatory risk?
The right stuff: whose job is it to manage regulatory risk?The right stuff: whose job is it to manage regulatory risk?
The right stuff: whose job is it to manage regulatory risk?
 

ACI's AML & OFAC Compliance for the Insurance Industry (Day 1)

  • 1. Going Beyond OFAC Screening: What Insurance and Reinsurance Companies Must Do To Avoid Sanctions and Ensure Compliance American Conference Institute AML and OFAC Compliance for the Insurance Industry January 24-25, 2012
  • 2. Speakers’ Information Frank Bria General Reinsurance Corporation David Butman Locke Lord LLP Martin Feuer Zurich Financial Services Kathy Silberthau Strom Cahill Gordon & Reindel LLP This presentation is solely for educational and informational purposes. It is not intended to constitute legal advice and should not be relied upon as a substitute for legal advice. January 10, 2012 2
  • 3. Agenda • Economic Sanctions Programs • U.S. Persons ‒ Kathy Strom • Facilitation ‒ Kathy Strom • Iran Sanctions ‒ David Butman • Compliance Programs • Primary Insurance ‒ Martin Feuer • Reinsurance ‒ Frank Bria • Enforcement Actions ‒ David Butman • Questions? January 10, 2012 3
  • 4. Economic Sanctions Programs  Key Statutory Bases: International Emergency Economic Powers Act (IEEPA) and Trading with the Enemy Act (TWEA) (Cuban program)  Country Programs – Burma, Cuba, Iran, Sudan, Syria, etc.  Targeted Programs – SDNs-based, terrorism, non-proliferation, drug trafficking, etc.  “U.S. persons” — defined for most programs as any U.S. citizen, permanent resident alien, entity organized under U.S. law or any jurisdiction within the U.S. (including foreign branches) or any person in the U.S. — are subject to OFAC economic sanctions programs, and may not engage in “prohibited facilitation”  Non-U.S. persons face risk as well — U.S.-origin goods, causing violations by U.S. persons, branches within the U.S., servers or other functions performed in the U.S., etc. January 10, 2012 4
  • 5. OFAC: Facilitation Risks  “Facilitation” by a U.S. person of conduct engaged in by a foreign person where that conduct is proscribed by U.S. sanctions programs is prohibited.  Definitions of facilitation vary among programs, but concepts are similar.  For insurance and reinsurance industry subject to OFAC jurisdiction, facilitation includes providing insurance or reinsurance for conduct, which if done by a U.S. person, would violate an OFAC sanctions program. January 10, 2012 5
  • 6. Country Program Definitions  Burma: 31 CFR § 537.205 (basic concept) U.S. persons are prohibited from “approving, financing, facilitating or guaranteeing a transaction by a person who is a foreign person where the transaction would be prohibited if performed by a U.S. person or within the United States.”  Iran: 31 C.F.R. § § 560.206 and 560.417 Same basic concept and adds the following to the definition of “prohibited facilitation”:  where a U.S. person alters its operating policies or procedures or those of a foreign affiliate to permit a foreign affiliate to accept or perform a specific contract or transaction involving Iran without the approval of a U.S. person where such transaction (cont) January 10, 2012 6
  • 7. Country Program Definitions previously required approval by a U.S. person and such transaction would be prohibited if performed directly by a U.S. person; or  where U.S. person refers to a foreign person bids or orders involving Iran to which a U.S. person could not directly respond as a result of prohibitions; or  where U.S. person changes the operating policies and procedures of an affiliate with the specific purpose of facilitating transactions prohibited if performed by a U.S. person. January 10, 2012 7
  • 8. Country Program Definitions  Sudan: 31 CFR § 538.407 Includes basic concept as well as prohibitions on changes in procedures or referrals. States that U.S. parent must ensure that its foreign subsidiaries act independently of any U.S. person with respect to all transactions and activities relating to exportation of goods, technologies or services going to or from Sudan, including but not limited to:  business and legal planning, decision making, designing, ordering or transporting goods and financing, insurance and other risks. January 10, 2012 8
  • 9. Country Program Definitions  Syria: E.O. 13582, dated August 17, 2011 Prohibits in Section 2(b) and 2(e); - The exportation, sale or supply, directly or indirectly from the U.S. or by a U.S. person of “any services to Syria”; and - any “approval, financing, facilitation or guarantee by a U.S. person of a transaction by a foreign person where the transaction by that foreign person would be prohibited . . . if performed by a United States person.” January 10, 2012 9
  • 10. Best Practices to Reduce Facilitation Risk  Consider each of these definitions of “facilitation” to be part of OFAC’s interpretation of facilitation, and potentially applicable to all OFAC sanctions programs.  Review all proposed business and insurance risks with these concepts in mind.  Alert and train all risk personnel and business managers regarding facilitation risks.  Identify all “U.S. persons” so as to prevent facilitation by such persons. January 10, 2012 10
  • 11. Best Practices to Reduce Facilitation Risks (con’t)  Scrutinize and screen all parties involved in risks to be insured (and owners thereof).  Obtain and understand the details (business, place, parties, etc.) of transactions for which insurance or reinsurance is considered.  Include sanctions clauses in all policies and agreements.  Review and discuss all business in light of changing sanctions programs. January 10, 2012 11
  • 12. IRAN Sanctions  Iranian Transaction Regulations  Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA)(2010)  Foreign Persons Liable  Knowingly supporting Iran’s development of petroleum resources ($1M/yr or $5M aggregate)  Knowingly facilitating Iran’s domestic production of refined petroleum products ($250K/yr or $5M aggregate)  Knowingly exporting refined petroleum products to Iran ($1M/yr or $5M aggregate)  Knowingly exporting goods, technology or services to Iran that would contribute materially to Iran’s acquisition of weapons of mass destruction  Parent Vicariously Liable  Corporate parent liable if it “knew” of subsidiary’s prohibited activity  Divestment from Companies Investing in Iran  State and local governments authorized to divest/prohibit investments in persons investing/extending credit of $20M+ in Iran’s energy sector January 10, 2012 12
  • 13. IRAN Sanctions cont.  Executive Order 13590 (November 2011)  Authorizes sanctions on persons that sell, lease or provide goods, services, technology or support to Iran that could directly and significantly facilitate the maintenance or expansion of domestic production of petrochemical products ($250,000 FMV or $1M/yr.)  HR 1540 (2011)  Foreign Persons Sanctions  Foreign financial institutions that knowingly conduct or facilitate significant transactions with The Central Bank of Iran are barred from opening correspondent or payable through accounts in U.S.  Requires President To Impose Mandatory Sanctions Absent Exception or Waiver  Statutory provision for waiver of sanctions by President in “national security interest”  Presidential signing statement says “non-binding” to the extent it interferes with President’s constitutional authority to conduct foreign affairs. January 10, 2012 13
  • 14. Some sanctions challenges faced by international insurers  What to Screen and When? – OFAC, UN, OSFI, DPL, E.U.? – Sanctions have become more “list-based”; how do you manage the various lists? – Insured, additional insured, beneficiaries, third parties (how far do you go?) – Do you screen pre-quote, at quote and or upon payment of a claim? – Sanctions need to be considered during the entire Product and Insurance Life Cycle – Should you screen periodically or at sanctions lists updates? – OFAC requires regular screening at the update of its sanctions list  Should you use enterprise-wide interdiction software? – Does your interdiction software integrate with your in-house systems and database? January 10, 2012 14
  • 15. Some sanctions challenges faced by international insurers, cont’d  Extraterritorial nature of sanctions regimes such as OFAC  Do you audit third party providers to ensure they conduct regular sanctions checks?  Should you approve screening mechanisms utilized by third parties screening on your behalf to ensure compliance with your policy?  Consider OFAC anti-blocking legislation of countries such as Canada, Mexico and the E.U. nations – Canadian based companies can do business in Cuba; this can be a challenge for U.S. based parent companies – Your company could be subject to conflicting requirements; advise staff to contact regional Compliance or legal functions for guidance  Do you “ring-fence” international customer data and transactions that involve an OFAC embargoed country such as Cuba? – Where is your international customer data stored? – Ensure there are no “Cuban-related” customer data warehoused on your computer servers in the U.S. – What about expatriates? January 10, 2012 15
  • 16. Evaluation of Sanctions policies  Responsibility for your Sanctions Compliance Program  Policy should acknowledge individual responsible for the day-to-day compliance of the program  “Top-down” approach to OFAC and sanctions  Operational procedures and sanctions screening requirements are owned by the business  Compliance professionals within the business with reporting line to the regional compliance officer  Business Unit Compliance -> Regional Compliance -> Global Compliance January 10, 2012 16
  • 17. Evaluation of Sanctions policies, cont’d  Identification of High Risk Areas – Does your policy address the identification of higher-risk customers/areas as part of your CDD procedures? – Does your policy address the assessment of customers, product lines, geography and nature of transactions?  Reporting Requirements – Provide clear guidelines to local staff for handling items blocked or rejected under the various sanctions programs – Escalation process must be clearly defined and address reporting to senior management and OFAC, or other sanctions regulator  Does your policy address the scope of your sanctions program? – What about the sanctions laws of other countries?  Does your policy provide guidance for all U.S. persons, wherever they are located in the world? 1  Does the policy address part-time and temporary workers, third parties who do business on your company’s behalf, such as consultants, advisers, service providers, suppliers, intermediaries, agents or brokers globally?  Include sanctions screening requirements in contract agreements with third parties 1 Sanctions generally apply within the jurisdiction they are established in, but some sanctions have extraterritorial reach, and/or become relevant depending on where business is conducted. January 10, 2012 17
  • 18. Recommendations  Establish common enterprise-wide screening policies and work-flow procedures. Require Third Party Administrators (TPAs) to follow same policies and procedures;  Adopt and implement an enterprise-wide technology that is adaptable to the business; – Zurich is presently implementing a common global platform  Provide adequate training for all appropriate employees – Mandatory for new employees within North America – Targeted training provided to compliance personnel and client facing employees such as underwriters – Training should be risk-based and targeted to your organization  Compliance as a second line of defense – Advise all employees globally to contact their local/regional compliance or legal function should they have questions regarding sanctions January 10, 2012 18
  • 19. Summary  The adverse effect of reputational risk associated with OFAC compliance issues is great  Be mindful of the weakest link: third parties  Test for sanctions compliance on a regular basis  Maintain an open dialogue with OFAC and local sanctions regulators at all times; don’t assume anything; ask for guidance  We all make mistakes, but a robust, OFAC and sanctions compliance program will mitigate the severity of any penalty  Manage the examination process with an open and collaborative methodology  Train all U.S. persons within the company; don’t forget to train those living/working overseas  Periodically assess products and services for sanctions regulatory requirements  Incorporate “red flags” within company policies and procedures; and  Ensure senior management has approved your policy January 10, 2012 19
  • 20. Designing an Effective OFAC Compliance Program ASSESS ● Obtain senior management’s input and support ● Conduct legal and risk assessments January 10, 2012 20
  • 21. Designing an Effective OFAC Compliance Program BUILD ● Implement policies and guidelines ● Implement screening software (ensure that all underwriting submissions, claims payments and wire transfers are screened against the Specially Designated Nationals List ("SDN List")) ● Create awareness at all levels of the company ● Train employees ● Establish procedures to encourage employees and third party vendors to report potential OFAC violations ● Encourage trade sanctions exclusions for global insurance and reinsurance policies January 10, 2012 21
  • 22. Designing an Effective OFAC Compliance Program CERTIFY ● Appoint and train representatives from each business and service unit to: -oversee the OFAC screening -ensure that the unit complies with screening guidelines -routinely meet with Legal to review OFAC compliance efforts and report any changes within the unit that may impact screening ● Obtain confirmation from vendors and business partners that they have an OFAC compliance program that includes some form of screening January 10, 2012 22
  • 23. Designing an Effective OFAC Compliance Program REVIEW ● Regularly reassess the company’s legal and business risks ● Routinely rescreen clients, insureds, claimants, and beneficiaries to confirm that they have not been added to the SDN List ● Conduct audits of the compliance program January 10, 2012 23
  • 24. Potential Trade Sanctions Exposures for Insurers and Reinsurers LINES OF BUSINESS ● Political Risk Coverage, more than any other class of business, tends to involve sanctioned countries ● Mobile risks, such as ocean marine and aviation, present the potential for prohibited claims payments ● International Group Life Policies ● Premiums and Claims that are reported on a bulk report may lack critical information and may be difficult to screen against the OFAC list January 10, 2012 24
  • 25. Potential Trade Sanctions Exposures for Insurers and Reinsurers REGIONAL EXPOSURES ● Middle East - large number of SDNs and trade with Iran, Syria and other sanctioned countries and entities ● Portions of Central and South America - large number of SDNs and trade with Cuba January 10, 2012 25
  • 26. Challenges for U.S. Insurers and Reinsurers in the E.U. Compliance challenges due to Legal Differences between the U.S. and E.U. ● E.U. Blocking Laws ● E.U. privacy laws – German Federal Data Protection Act and Section 203 of the German Criminal Code January 10, 2012 26
  • 27. Practical Tips to Enhance Compliance Programs U.S. insurers and reinsurers should conduct the following: (1) screen their existing policyholders, claimants, and beneficiaries against the SDN list; (2) conduct due diligence on political risk, mobile risks and international group life policies; (3) establish a process to review premiums and claims reported on bulk reports; (4) monitor Iranian efforts to evade sanctions; and (5) include a trade sanctions exclusion on global policies. January 10, 2012 27
  • 28. OFAC LIABILITY/PENALTIES  Civil Penalties (TWEA and IEEPA)  Unintentional violations/Strict Liability  $250,000 ($1.075M Kingpin) or 2xs the value of transaction (greater of)  Forfeit pecuniary gains  Criminal Penalties (TWEA and IEEPA)  “Willful violations” of regulations  Individuals  $250,000 Maximum ($5,000,000 Kingpin); or  Imprisonment up to 20 years (IEEPA) or 10 years (TWEA) (30 years Kingpin Act); or  Both  Corporations  $1,000,000 Maximum ($10,000,000 Kingpin); or  Twice the amount of the transaction; or  Both  Reputational Injury  Stock Price Penalty January 10, 2012 28
  • 29. OFAC LIABILITY/PENALTIES Cont.  Value of the Insurance Transaction  Underwriting = Total Premium Charged  Claims = Amount of Claim Payment  Stacking Penalties January 10, 2012 29
  • 30. OFAC LIABILITY/PENALTIES Cont.  OFAC ENFORCEMENT RESPONSES  No Action – OFAC determines evidence insufficient to establish a violation or action is otherwise not required.  Request Additional Information - May issue subpoena for more information before determining appropriate action.  Cautionary Letter – Same as “No Action”, but warns that conduct could result in future violations or compliance program may be insufficient.  Finding of Violation – OFAC determines a violation occurred, but identification of violation and remedial steps are appropriate response rather than civil monetary penalty. January 10, 2012 30
  • 31. OFAC LIABILITY/PENALTIES Cont.  Civil Penalty – OFAC determines that a violation occurred which warrants imposition of a civil monetary penalty.  Criminal Referral - In appropriate circumstances, OFAC may refer the matter to appropriate law enforcement agencies for criminal investigation and/or prosecution.  Other Administration Action – In addition to or in lieu of the foregoing OFAC may:  Deny, suspend, modify or revoke license where needed.  Issue cease and desist orders January 10, 2012 31
  • 32. OFAC LIABILITY/PENALTIES Cont.  CIVIL PENALTIES PROCESS  Pre-Penalty Notice  Describe the alleged violation  Number of alleged violations  Value of each alleged violations  Identify law/regulation allegedly violated  Base category upon which proposed penalty amount calculated  Aggravating/Mitigating factors relevant to proposed penalty  Maximum potential penalty under law/regulation  Proposed Penalty  Response  Written Response within 30 days (post mark of pre-penalty notice)  Agree/Disagree as to violation/Disagree as to penalty amount  No Response = Imposition of Civil Penalty  Penalty Notice  Final Agency Action January 10, 2012 32
  • 33. OFAC LIABILITY/PENALTIES Cont. Egregious Case No Yes BASE PENALTY CALCULATION (1) One-Half (3) Transaction Value One-Half Yes ($125K Cap per Statutory violation violation/ Maximum Voluntary $32,00 for TWEA) Self-Disclosure (2) Applicable (4) No Schedule Amount Statutory ($250k Cap per Maximum violation/$65K for TWEA) January 10, 2012 33
  • 34. OFAC LIABILITY/PENALTIES Cont. Applicable Scheduled Amount Transaction Value Scheduled Amount < $1,0000 $1,000 $1,000 - $9,999.99 $10,000 $10,000 - $24,999.99 $25,000 $25,000 - $49,999.99 $50,000 $50,000 - $99,999.99 $100,000 $100,000 - $169,999.99 $170,000 >$170,000 $250,000 January 10, 2012 34
  • 35. OFAC LIABILITY/PENALTIES Cont.  Mitigating Factors:  Compliance Program in Place  First Offense (25% Reduction)  Voluntary Disclosure/Self-Reporting (50% Reduction)  Substantial Cooperation (20% - 40% Reduction)  Entering Into Settlement (10% Reduction – unwritten)  Aggravating Factors:  Willfulness (double the penalty)  Lack of compliance program  Familiarity with Sanctions programs  Second or subsequent offense  No remedial action after discovery January 10, 2012 35
  • 36. OFAC PENALTIES  Barclays, Aug. 2010  Iranian and Sudanese Regulations  $298 Million Penalty  Stripped Iranian and Sudanese references from U.S. dollar transactions to U.S. correspondence banks  Lloyds TSB, Jan 2009  Iranian and Sudanese Regulations  From 1997-2007, stripped Iranian and Libyan references from U.S. dollar transactions to U.S. correspondent banks  ABN Amro, December 2005  Iranian and Libyan Regulations  $80 Million Penalty  Stripped Iranian and Libyan references from U.S. dollar transactions to U.S. correspondent banks  UBS, May 2004  Cuba, Iran, Libya and Former Yugoslavia Regulations  $100 Million Penalty ($25,000 per day of violation)  Distribution of U.S. Bank Notes in violation of OFAC Regulations and concealment  Guidant Corporation, March 2007  Iraqi and Iranian Regulations  $277,017  Exporting goods for ultimate resale to Iraq and Iran from 2000 to 2004 January 10, 2012 36
  • 37. INSURANCE INDUSTRY PENALTIES  Penalties Published on OFAC Website: www.ustreasury.gov  U.S. P&C (Re)Insurer, March 2001  Cuban Asset Control Regulations (CACRs)  $2.4 Million Penalty  British companies selling reinsurance to Cuban companies  U.S. Reinsurer, June 2011  Iranian Transaction Regulations  $59,130 Penalty  Two reinsurance claim payments totaling $309,740.65 to a protection and indemnity association or P&I Club  U.S. Broker, April 2011  Iranian Sanctions Regulations  Placement of 6 Commercial Multi-Peril policies insuring submersible oil rig ($453,364 total premium)  $122,406 Penalty  U.S. Broker, January 2011  Iranian Transaction Regulations  $36,000 Penalty  Placement of two retro contracts ($62,883 total premium) between European reinsurer and European retros.  U.S. Personal Lines Insurer, June 2010  Foreign Narcotics Kingpin Regulations  $11,000 penalty  Unauthorized auto policy issued to SDN January 10, 2012 37
  • 38. Broker Example 1 Step 1: Determine Number of Transactions (6 Contracts) Determine “Value” of Transaction (Total Premium for 6 contracts = $453,364) Step 2: (a) Egregious v. Non-Egregious (Non-Egregious) Voluntarily Disclosed v. Disclosed By Other Means (Not Voluntarily Disclosed) (b) Determine “Base Penalty” Amount ($75,560 avg prem per policy x 50% reduction x 6 placements) BASE PENALTY = $226,680 Step 3: Adjust Penalty (Mitigating and Aggravating Factors) (a)25% first offense (b)10% settlement ASSESSED PENALTY = $122,408 January 10, 2012 38
  • 39. Broker Example 2 Step 1: Determine Number of Transactions (2 Contracts) Determine “Value” of Transaction (Total Premium $62,883) Step 2: (a) Egregious v. Non-Egregious (Non-Egregious) Voluntarily Disclosed v. Disclosed By Other Means (Not Voluntarily Disclosed) (b) Determine “Base Penalty” Amount ($100K for transaction values between $50K-$100K) BASE PENALTY = $100,000 Step 3: Adjust Penalty (Mitigating and Aggravating Factors) (a)20%-40% substantial additional information/cooperation (b)25% first offense (c)10% settlement ASSESSED PENALTY = $36,000 January 10, 2012 39
  • 40. FOREIGN PERSON CONSIDERATION  Foreign Corporations – “What Me Worry?”  U.S. citizen employees, managers, officers or directors  Non-U.S. citizen employees while in the U.S.  U.S. co-insurers  U.S. reinsurers  U.S. offices  U.S. capital/investments  Insuring/Reinsuring transactions involving export/re- export of U.S. origin goods  Cuba (and Iran – CISADA)  CAUSING OFAC VIOLATIONS January 10, 2012 40
  • 41. Contact Information Martin Feuer Zurich Financial Services Chief Compliance Officer Americas 917-534-4536 martin.feuer@zurichna.com Frank Bria General Reinsurance Corporation Vice President and Assistant General Counsel 203-328-5112 FBria@genre.com David Butman Senior Counsel Locke Lord LLP 312-443-0207 dbutman@lockelord.com Kathy Silberthau Strom Counsel Cahill Gordon & Reindel LLP 202-862-8944 stromk@cgrdc.com January 10, 2012 41

Notes de l'éditeur

  1. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  2. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  3. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  4. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  5. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  6. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  7. C:\\Documents and Settings\\chy5484\\Local Settings\\Application Data\\Office\\Macros\\Ppt_ci\\Templates\\Pres_blue_on_white.pot
  8. Additional Mitigating Factors: Provide Useful Enforcement Information Remedial Measures Clerical Error