HCC Insurance Holdings, Inc. Reaches Settlement With OFAC Over Alleged Violations of Iranian Transactions Regulations.

Apr 27, 2011   

On April 26, 2011, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury announced that it had reached a settlement with HCC Insurance Holdings, Inc. (“HCC”) over alleged violations of the Iranian Transactions Regulations (“ITR”). 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. General information regarding economic sanctions against Iran can be found at OFACs website here.

The settlement agreement and alleged violations of the IRT highlight the breadth and complexity of the sanctions on trade with Iran. OFAC alleged that HCC, a wholly-owned insurance subsidiary of Houston Casualty Company, violated 31 C.F.R. §§ 560.206 and 560.208 of the IRT by participating in the hull portion of a hull and liability aviation insurance policy that covered commercial flights operating in Iran from April 2005 to April 2006. 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.

More specifically, OFAC alleged the violations occurred when: 1) a foreign insurance broker insured a foreign-owned commercial airline with a hull and liability policy of which HCC was a part; 2) the foreign-owned commercial airliner then leased aircraft covered by this policy to an air charter company that operated in Iran. As a result of this arraignment, HCC received $113,921 in premiums. HCC voluntarily disclosed the violation and OFAC announced that HCC paid $38,448 in penalties for its violations. According to OFAC enforcement guidelines, the base penalty associated with such a violation is $56,960. However, this penalty was lowered because HCC cooperated with OFAC in its investigation and it had not been subject to prior OFAC penalties or administrative actions. 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.