American Life Insurance OFAC Settlement: $178.4K (2024)

From February 23, 2022 to August 14, 2023, ALICO issued group medical and life insurance policies, collected premiums, and paid claims to three policyholders in the United Arab Emirates that were owned or controlled by the Government of Iran (GOI).

The first was a GOI-owned entity ("the Entity"). A UAE-based sales agent requested a quote in February 2023, and ALICO's KYC process obtained a trade license stating that the owner was the Iranian embassy. Sanctions screening generated alerts that ALICO cleared as false positives because the Entity was not on the SDN List; however, a PEP alert due to Iranian embassy ownership was escalated, and on March 22, 2023, MetLife's Global Anti-Financial Crimes Unit (AFCU) directed ALICO not to onboard the Entity. ALICO rejected the application the following day.

Seven days later, the same sales agent submitted a new application through a third-party administrator portal using a trade license copy that omitted any reference to the Iranian embassy. With no escalation trigger and no system to flag previously rejected applicants, ALICO issued the policy.

Around the same time, the agent submitted applications for a school with "Iranian" in its name ("School 1"). Screening generated no alerts and the policy was issued. School 1 later attempted to pay premiums for both the Entity and School 1 via a check drawn on Bank Melli of Iran, a blocked person; that payment was rejected by ALICO's bank. At the agent's request, ALICO accepted a cash payment of $78,143.36 on April 29, 2023.

A subsequent review also found that ALICO had issued two group medical policies and one group life insurance policy to a second GOI-owned or controlled school in the UAE ("School 2"). Documents provided during School 2's onboarding bore letterhead stating "the Islamic Republic of Iran," which was not flagged during the process.

Discovery occurred on May 22, 2023, when a team member recalled that the Entity had previously been rejected. Further review found that the trade license submitted at re-application had likely been manipulated: text in the ownership section was distorted, Arabic lettering had been transposed, and the QR code had been removed. The AFCU launched a review, the sales agent resigned, and ALICO blocked and reported the policies to OFAC. Although ALICO twice directed its third-party administrator to stop paying claims, backdated claims continued from the administrator's batch processing system for several weeks.

In total, ALICO received 15 premiums totaling $240,614 and paid 2,316 claims totaling $205,463 associated with these policies, resulting in apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. §§ 560.204 (prohibited export of services to Iran) and .211 (prohibited transactions involving blocked property).

OFAC determined that ALICO voluntarily self-disclosed the apparent violations and that the apparent violations constitute a non-egregious case. The statutory maximum civil monetary penalty applicable in this matter is $858,125,016. Under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. Part 501, app. A, the base civil monetary penalty for a non-egregious, voluntarily self-disclosed case equals one-half of the transaction value for each apparent violation, totaling $223,038 in this matter. After consideration of the General Factors under the Enforcement Guidelines, OFAC agreed to a settlement amount of $178,421.

This case demonstrates the importance of performing due diligence research on customers in countries with higher sanctions risk to ensure no customer is a blocked person, even if not specifically listed on the SDN List. The Government of Iran is blocked, but the SDN List does not list every Iranian government agency or official. Ensuring that KYC information is thoroughly reviewed is important to mitigate the risk of providing services to blocked persons.

Screening new and existing customers for additional risk factors can helpfully supplement screening against the SDN List. In this case, PEP screening flagged the Iranian embassy when a search against the SDN List did not.

Companies should consider risks arising from arrangements involving business partners and other third parties, who may differ in their approach to compliance. Here, ALICO's third-party administrator continued to pay claims despite being told twice by ALICO to stop doing so because the policies had been suspended. When outsourcing parts of the business, it is important to have effective controls that prevent further activity with blocked or otherwise sanctioned persons upon discovery.

This case also demonstrates the importance of having an internal process or system for flagging applicants who were previously rejected. An applicant determined (or an agent determined on the applicant's behalf) to obtain a policy might seek to disguise a sanctions reference to achieve a positive result. Institutions that have systems that watch for re-submitted applications or payments rejected for sanctions reasons may protect themselves better against sanctions risks.

This page summarizes an OFAC enforcement case based on the document archived below. SanctionsLookup assumes no liability for errors, omissions, or inaccuracies in the original documents, this summary, or any changes made to the source documents at any time.

Provided for informational purposes only and does not constitute legal or compliance advice. Always consult the source document directly rather than relying on this summary.