1 US and EU sanctions : How are Insurers affected ? Matthew Getz, Debevoise & Plimpton Konstantin Bureiko, Debevoise & Plimpton US and EU sanctions : How are Insurers affected ? Matthew Getz Konstantin Bureiko 19 June 2015. Agenda 1. Introduction to sanctions 2. Overview of EU and US sanctions 3. sanctions Enforcement 4. Key sanctions Regimes Affecting Insurers : 1. Iran 2. Russia 3. Cuba 5. Other sanctions Risks 6. Dealing With sanctions Risks 1. Systems and Controls 2. sanctions Clauses 7. Future Developments 2.
2 INTRODUCTION. 3. Main Objectives of sanctions Induce change by governments disfavoured by international community. For example: Force Iran to stop developing nuclear weapons Foster regime change in Syria Stop Russia undermining the territorial integrity of Ukraine Cut off resources to terrorists, drug traffickers, nuclear proliferators, human rights violators and others 4. Applicable sanctions Regimes Sanctioned territory United States European Union Afghanistan . Belarus . Bosnia and Herzegovina * . Burma/Myanmar.
3 Central African Republic . China . Cote d'Ivoire (Ivory Coast) . Cuba . Democratic Republic of Congo . Egypt . Eritrea . Guinea-Bissau . Haiti . Iran . Iraq . Lebanon . Liberia * . Libya . Moldova . North Korea . Republic of Guinea . Russia . Serbia & Montenegro/Federal Republic of Yugoslavia * . Sierra Leone *. Somalia . South Sudan . Sudan . Syria . Tunisia . Ukraine . Venezuela . Western Balkans *. Yemen . Zimbabwe . 5. EU sanctions 6. US sanctions 7. Overview of US and EU sanctions 8. EU sanctions Generally sanctions are formulated and promulgated by the EU, with direct effect in Member States Enforcement by Member states Criminal / Financial / Insurance Regulators Broad jurisdictional reach, including: EU citizens and companies anywhere in the world Any business that takes place in the EU.
4 Prohibitions of circumvention or facilitation Licences sometimes available 9. Types of EU sanctions 1. Asset freezes 2. Targeted sanctions . : Oil industry in Iran Named Russian banks 3. Export controls 4. Fund transfer restrictions 5. Restrictions on admission / travel bans 10. US sanctions Generally sanctions are imposed by US President through Executive Orders or by US. Congress through legislation Administered and enforced by US Treasury Department's Office of foreign Assets Control ( OFAC ) (other government agencies also involved).
5 Recent significant enforcement actions against foreign companies Broad jurisdictional reach: US citizens, permanent residents and US companies, anywhere in the world Any business that takes place in US. Secondary sanctions can reach non-US companies Prohibitions on US persons facilitating restricted transactions or entering into transactions with intent or effect of evading sanctions Licences sometimes available 11. Types of US sanctions 1. Blocking sanctions 2. Country-wide embargoes 3. Transaction-based or activity-based restrictions Oil industry in Syria Sectoral sanctions against trade in long-term debt or equity of designated Russian companies 4.
6 Export controls 5. Secondary sanctions , applied to Iran and Cuba only: Non-US companies can be sanctioned for engaging in certain types of material transactions with Iran, or involving property nationalised by Cuba 12. sanctions Enforcement 13. Penalties for OFAC Violations (US). For primary sanctions violations Civil fines up to $250,000 or twice the amount of the transaction, whichever is greater For willful violations, criminal fines up to $1,000,000 and imprisonment up to 20 years US enforcement appears to target overseas entities Of around $16 billion in sanctions -related fines imposed since 2009 on the finance sector, only $90 million applied to US firms US imposed record penalty of $ billion on BNP Paribas in July 2014.
7 14. US Enforcement Actions: Financial Sector Entity Location Sanction Regimes Breached Year Fine BNP Paribas France Cuba, Iran and Sudan 2014 $ billion HSBC1 UK Burma, Cuba, Iran, Libya, Sudan 2012 $ billion Commerzbank2 Germany Burma, Cuba, Iran and Sudan 2015 $ billion Standard Chartered UK Burma, Iran, Libya, Sudan 2012 $667 million ING Netherlands Burma, Cuba, Iran, Libya, Sudan 2012 $619 million Credit Suisse Switzerland Iran 2009 $536 million ABN Amro3 Cuba, Iran, Libya, Sudan 2010 $500 million Barclays UK Burma, Cuba, Iran.
8 Libya, Sudan 2010 $298 million Clearstream Banking Germany Iran 2014 $152 million Royal Bank of Scotland UK Burma, Cuba, Iran, Sudan 2013 $100 million 1 Case also involved lack of money laundering controls 2 Part of Commerzbank's fine related to AML failings 3 ABN Amro was taken over by Royal Bank of Scotland in 2007. 15. US Enforcement Actions: Insurers Insurers are not safe! Entity Location Sanction Regimes Breached Year Fine The American Steamship Owners Mutual Protection and US Cuba, Iran and Sudan 2013 $348,000.
9 Indemnity Association, Inc AIG US Cuba 2014 $279,038. BUPA Florida US Cuba 2014 $128,704. HCC Insurance Holdings, Inc US Iran 2011 $38,448. 16. UK Regulation Violations prosecuted in criminal courts Criminal penalties Unlimited fines Imprisonment (up to 7 years). Financial Conduct Authority can punish violations of its Principles of Business: vital to have proportionate systems and controls in place Willis: million fine for failure to implement controls to prevent financial crimes, including sanctions (2011).
10 RBS: million fine for failure to implement sanctions controls (2010). 17. UK Regulation (cont'd.). Lloyd's of London takes proactive role in overseeing sanctions compliance for its members Sets standards of behaviour for Insurers through guidance Lloyd's International Regulatory Affairs Team undertakes reviews of insurer sanctions compliance (most recent review completed end of 2014). Provides tools and training for Insurers to assist with sanctions compliance 18. Key sanctions Regimes Affecting Insurers - Iran 19.