NU Online News Service, Feb. 17, 2:15 p.m. EST

A review of enforcement actions taken by the U.S. Treasury Department reveals that bankers are the primary violators of sanctions imposed against foreign governments, but a few property and casualty insurers and one broker have also received fines.

The most recent case involved the placement of reinsurance by a subsidiary of Chicago-based insurance broker Aon Corp.

According to information provided by the Office of Foreign Assets Control (OFAC), which is in charge of monitoring sanction programs, Aon International Energy Inc. paid $36,000 to settle allegations of violations of the Iranian Transactions Regulations made in October 2005.

In a report dated Jan. 31, 2011, OFAC said Aon Energy facilitated the placement of reinsurance coverage and the payment of premium for a construction risk related to a petroleum project on Kharg Island in Iran.

The firm brokered and placed facultative retrocession reinsurance agreements on behalf of a European reinsurer with two European carriers, OFAC said.

The combined premium to the two placements was $62,883, according to OFAC.

OFAC said Aon Energy did not voluntarily disclose the transaction to the department.

OFAC said Aon Energy exhibited a pattern "of reckless, but not egregious, conduct…in connection with these policies."

OFAC noted that the parent company has since taken "several steps to strengthen its OFAC compliance program" and procedures after the violations.

This was the first time Aon Energy had been the subject of an OFAC action, and it did cooperate in correcting future actions, the office said.

In an e-mail statement, Aon said, "This issue was brought to our attention in 2006 and we immediately began collaborating with the Office of Foreign Assets Control to resolve this matter and to further enhance our compliance policies and procedures around trade restrictions, to ensure they meet the requirements and expectations of OFAC. Aon prides itself on its high standards of business conduct and has addressed OFAC's concerns with the utmost seriousness. We respect and accept OFAC's position and we consider this matter closed."

A review of violations at the OFAC's website going back to 2003 shows that p&c insurers have rarely been the subject of OFAC action.

In 2008 and 2010, GEICO was subject to enforcement actions totaling $12,086.

In 2010, the Chevy Chase, Md.-based insurer paid $11,000 to settle allegations it violated the Foreign Narcotics Kingpin Sanctions Regulations for providing automobile insurance to a "Specially Designated Narcotics Trafficker." The company received two premium payments in 2006 and again in 2007 totaling $2,265.

The fine was the lowest available under the statute, OFAC said. It noted that while GEICO did not volunteer information about the violation, it did not screen its system for drug kingpins in part because the narcotics trafficker list is only updated once a year. OFAC said GEICO committed to "making improvements" in its screening.

In 2008, GEICO paid $1,086 for violating sanctions imposed against the former Liberian Regime of Charles Taylor. OFAC said the insurer dealt in property or interests, or both, of a member of that regime between August 2004 and March 2005. GEICO voluntarily disclosed the matter to OFAC.

In 2009, a unit of Boston-based Liberty Mutual, Liberty International Holdings Inc., paid $35,212 to settle allegations that it violated the Cuban Assets Control Regulations. OFAC said a wholly owned subsidiary of Liberty International "participated in the underwriting of policies that insured Cuban business risk."

OFAC said Liberty International voluntarily disclosed the matter to OFAC and it was resolved according to standing procedure.

In 2003, reinsurance broker Guy Carpenter settled with OFAC for $50,000 for violating the sanctions program against Iraq. The firm voluntarily disclosed that it failed to retain funds in an interest bearing account and made unauthorized payments in 2000 and 2001.

Special Reports /

Few Enforcement Actions Against Insurers For Violating Sanctions

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