General Reinsurance Corp. Settles With OFAC Over Alleged Violations of Iranian Transactions Regulations
On June 29, 2011, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury announced that it had reached a settlement with General Reinsurance Corporation (“General”) over alleged violations of the Iranian Transaction Regulations (“ITR”). The alleged violations of the IRT highlight the broad reach and complexity of the sanctions on trade with Iran. General information regarding economic sanctions against Iran can be found at OFACs website here.
The ITR, which are found at 31 C.F.R. part 560, were promulgated pursuant to the International Emergency Economic Powers Act and are administered by OFAC. 31 C.F.R. § 560.206 prohibits U.S. persons from “financing, facilitating, or guaranteeing” goods, technology or services to Iran. Additionally, 31 C.F.R. § 560.208 prohibits U.S. persons from approving, financing, facilitating, or guaranteeing any transaction by a foreign person where the transaction performed would be prohibited under the IRT if performed by a U.S. person.
Similar to our previous reports of IRT settlement agreements, although General did not directly engage in business with Iran, due to the nature of its business relationships with other entities who were engaged in business in Iran, General was found to be in violation of the IRT. OFAC alleged that the violations consisted of two reinsurance claim payments to the Steamship Mutual Underwriting Association Limited for losses arising from vessel operations of the National Iranian Tanker Company which Steamship Mutual insured. According to OFAC, General made these excess of loss claim payments pursuant to its facultative reinsurance obligation to Steamship Mutual for the coverage period of June 16, 1998 to February 20, 2002. (Reinsurance is an insurance policy taken out by an insurance company on an insurance policy. Reinsurance is usually purchased by the original insurer to mitigate its own risks associated with payment of policies. The reinsurance is used to cover and pay the original policy. In a facultative reinsurance agreement the reinsurer assumes all or part of the risks associated with a particular policy.) Consequently, due to the broad reach of the IRT, and even though General had no direct business relationships with any Iranian business, Generals reinsurance activities were deemed by OFAC to be a violation.
OFAC announced that General has paid $59,130 in penalties for its violations. According to OFAC enforcement guidelines, the base penalty associated with such a violation is $131,424. However, this penalty was lowered because: 1) General voluntarily disclosed its violations and substantially cooperated with OFAC; 2) General is the largest reinsurer in the United States; 3) the violations were the result of personnel violating Generals policies and procedures; and 4) General has not previously been subject to OFAC penalties. Additionally, General has installed enhanced sanctions compliance software and implemented new training programs regarding sanctioned transactions. A copy of OFACs announcement can be read here.
For more information regarding OFAC and strategies on maintaining compliance with federal regulations, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com