American International Group OFAC Settlement: $148.7K

From on or about November 20, 2007, to on or about September 3, 2012, AIG engaged in 555 transactions totaling approximately $396,530 in premiums and claims for the insurance of maritime shipments of various goods and materials destined for, or that transited through, Iran, Sudan, or Cuba, and/or that involved a blocked person. Most of the Apparent Violations occurred under global insurance policies; dozens occurred under single shipment policies.

OFAC identified 455 apparent violations totaling $274,463.64 in which AIG extended insurance coverage to parties engaging in a voyage, shipment, or transshipment to, from, or through Iran, and/or accepted premium payments or paid claims arising from that insurance coverage, in apparent violation of § 560.204 of the ITSR. OFAC identified 38 apparent violations of § 538.205 of the SSR, all pertaining to global insurance policies that provided insurance coverage for shipments going to or from Sudan, with premiums received totaling $13,321.44. OFAC identified 33 apparent violations of § 544.201 of the WMDPSR, all involving shipments aboard blocked Islamic Republic of Iran Shipping Lines vessels, with premiums received totaling $105,065.94. OFAC identified 29 apparent violations of § 515.201 of the CACR, all pertaining to AIG's provision of insurance coverage in connection with shipments to or from Cuba, or its processing of premiums or claims arising from that coverage or involving a Cuban entity, with premiums received totaling $3,679.

AIG's OFAC compliance program at the time of the Apparent Violations included recommendations for when to use exclusion clauses in the policies it issued regarding coverage or claims that implicated U.S. economic sanctions. While a majority of the policies were issued with exclusionary clauses, most were too narrow in their scope and application to be effective. In addition, some of the policies were issued without such clauses. Separately, some insureds, mindful of existing exclusionary clauses in their open cargo or worldwide master policies, sought single shipment policies that had no exclusionary clauses.

OFAC determined that AIG voluntarily self-disclosed the Apparent Violations, and that the Apparent Violations constitute a non-egregious case. The total base penalty amount for the apparent violations was $198,266. The settlement amount of $148,698 reflects OFAC's consideration of the facts and circumstances pursuant to the General Factors under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A.

This enforcement action highlights the important role that properly executed exclusionary clauses and robust compliance controls play in the global insurance industry's efforts to comply with U.S. economic sanctions programs. As outlined in OFAC's Frequently Asked Questions regarding Compliance for the Insurance Industry, the best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions laws.

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