Privilege Underwriters OFAC Settlement: $466.2K (2023)

In 2010, PURE issued four policies to Medallion, Inc. (Medallion) of Panama: a private fleet auto insurance policy, a jewelry and art insurance policy, and two high-value homeowners insurance policies. The policies were renewed annually thereafter. Email correspondence from January 2010 demonstrates that PURE's Underwriting Manager was aware the policies provided coverage for Viktor Vekselberg's property. Vekselberg was also identified as Medallion's sole shareholder on a February 24, 2010 response to a form questionnaire PURE used to confirm that the insured properties were not used for commercial purposes. At the time the four policies were issued, neither Medallion nor Vekselberg was subject to U.S. sanctions.

On April 6, 2018, OFAC added Vekselberg to the SDN List pursuant to Executive Order 13662. Under OFAC's 50 Percent Rule, Medallion became a blocked person on that date. PURE's underwriters had failed to upload the shareholder information from the corporate disclosure statement into PURE's underwriting systems where corporate ownership information is stored. Further, at the time Medallion was onboarded in 2010, there was no requirement for prospective non-U.S. policyholders to be escalated for review and approval by PURE's management and compliance staff.

Between May 1, 2018 and July 24, 2020, PURE collected 38 premium payments totaling $308,391 for the four policies. PURE also paid a $7,500 claim related to one of the policies on July 22, 2020. In total, PURE engaged in 39 transactions totaling $315,891 with a blocked person, apparently violating the Ukraine-/Russia-Related Sanctions Regulations, 31 C.F.R. § 589.201(a)(4)(iii).

The statutory maximum civil monetary penalty applicable in this matter is $13,906,581. OFAC determined that the apparent violations were not voluntarily self-disclosed and were non-egregious. Under OFAC's Economic Sanctions Enforcement Guidelines, the base civil monetary penalty equals the applicable schedule amount, which in this case is $666,000. The settlement amount of $466,200 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case demonstrates the importance of implementing and maintaining effective, risk-based sanctions compliance controls. Such controls should capture and incorporate all relevant available information to conduct responsive and regular screening, including risk-based steps to comply with OFAC's 50 Percent Rule and to account for changes to applicable sanctions. Such changes, including updates to OFAC's SDN List, can occur regularly.

As sanctions programs are updated, companies should continually reassess their risk in light of their customer profile, lines of business, and other criteria. A risk assessment should generally inform the extent of the due diligence efforts at various points in a relationship or in a transaction. Controls that were adequate at one point in time may not remain sufficient when new sanctions are imposed or existing sanctions are modified.

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