NU Online News Service, May 6, 3:21 p.m. EDT
Insurers need to step up their compliance knowledge of sanctions if they want to avoid a fate similar to HHC Insurance Holdings, which paid a fine of over $38,000 for insuring aircraft used in Iran.
According to attorneys Michael Kurtis and Sue Stead with the law firm Nelson Levine de Luca & Horst, the recent fine of $38,448 to settle allegations of violations of the Iranian Transactions Regulations points to a rise in concern over sanction regulations that are growing as turmoil grips the Middle East and North Africa.
In an issues bulletin, the attorneys say insurers and reinsurers that could be in a position to transact business with Iran or other nations on the sanctions list "must enact internal protocols to ensure compliance" as regulations established by the Office of Foreign Asset Control (OFAC) become more complex. They add that an organization-wide process to screen insurance and reinsurance programs for potential violation of sanctions needs to be implemented.
Kurtis and Stead say a recent enforcement briefing released by OFAC outlines that the fine settles allegations that HCC Insurance Holdings Inc., a Houston, Texas-based insurance holding group, violated the International Emergency Economic Powers Act when it participated in the hull portion of an aircraft hull and liability insurance placement by a foreign broker. The policy insured a foreign-owned commercial airline that leased aircraft to an air-charter company that operated in Iran.
The policy was in effect from April 2005 to April 2006, and HCC voluntarily reported the violation.
OFAC says the base penalty for the violation was $56,960, established under the sanction guidelines, for a premium of $113,921 that HCC received.
The reduced fine reflects "General Factors" among which was the fact the company had never violated OFAC regulations and was never subject to action or penalty. OFAC also notes the company's cooperation in the investigation as a factor in reducing the fine.
"HCC did not renew its participation in the policy and no longer provides insurance coverage for the air-charter company that operated in Iran," OFAC says. However, the regulator says the company either did know or should have known it was in violation of the law.
In a statement HCC says of the incident, "As noted in the OFAC posting, this matter dates back to 2005, and we have since then strengthened our export control compliance program and are pleased to have resolved this matter on favorable terms."
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