Allianz Global Risks OFAC Settlement: $170.5K (2019)

Between August 20, 2010 and January 15, 2015, AGR Canada fronted travel insurance policies that included occasional coverage relating to Canadian residents' travel to Cuba. Fronting involves an arrangement between two or more insurance companies to allow a company to issue a policy in a jurisdiction where it is not licensed. The policies were of two types: single-trip coverage in effect for 30 days for a specific trip, and annual coverage providing coverage for every trip taken during the year, including one or more trips to Cuba. Coverage included reimbursement for eligible emergency medical expenses while out of country and non-refundable expenses resulting from trip cancellation, delay, or interruption.

A Canadian underwriting manager operating separately from AGR Canada underwrote, marketed, and serviced the policies. Neither the underwriting manager nor AGR Canada collected travel destination information upon policy issuance; a destination was disclosed only when emergency medical assistance was required, a claim was submitted, or a coverage inquiry disclosed it. AGR Canada received only quarterly summary premium and claims information, without travel destination data included.

Despite learning on at least one occasion during the relevant period that AGR Canada was issuing insurance policies related to travel to Cuba, this practice continued for several years without either AGR US or AGR Canada addressing its OFAC compliance requirements. AGR US did not initiate an internal investigation until 2014, which resulted in the self-disclosure. The policies resulted in the processing and reimbursement of 864 Cuba-related claims totaling CAD 532,200.35 (approximately $518,092) and the collection of CAD 30,599.61 (approximately $23,289) in premiums. By providing this coverage, AGR Canada appears to have violated section 515.201 of the CACR, which prohibits persons subject to the jurisdiction of the United States from engaging in transactions in which Cuba or a Cuban national has an interest.

OFAC determined that AGR US voluntarily self-disclosed the apparent violations and that these apparent violations constitute a non-egregious case. The total base penalty amount for the apparent violations was $270,690.90. AGR US agreed to remit $170,535 to settle its potential civil liability, reflecting OFAC's consideration of the aggravating and mitigating factors under the General Factors of OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A.

This enforcement action draws particular attention to the importance of risk assessments in determining which financial products can be offered by persons subject to U.S. jurisdiction in the context of OFAC-administered sanctions programs. The enforcement action also highlights the need for, and importance of, internal controls, policies, and procedures in detecting and preventing potential violations of this nature in a timely manner.

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