OFAC Essential for Brokers and Reinsurers David J. Brummond BRMA Committee Rendezvous April 11, 2011
Presentation Outline OFAC Overview What s Not OFAC Insurance Case Profile 2
OFAC Overview OFAC Mission To administer and enforce economic and trade sanctions based on U.S. foreign policy and national security goals against selected targets 3
OFAC Overview Sanctions Legal History Secretary Gallatin Embargo Act of 1807 Civil War Trading with Enemy Act (TWEA) WW I: Axis Powers - Trading with Enemy Act of 1917 Roosevelt Bank Seizures - TWEA1933 WW II: Nazi Germany TWEA 1939 North Korea/China TWEA 1950 Cuba Missile Crisis TWEA 1963 International Emergency Economic Powers Act -1977 Peacetime sanctions economic emergencies Presidential Implementation - Executive Orders Iranian Hostages 1979 Panama (Noriega) 1988 Yugoslavia - 1998 Somalia - 2010 4
OFAC Overview ODNI THE PRESIDENT Secretary of the Treasury Defense National Security Council SANCTIONS Under Secretary Terrorism Finance Intelligence (TFI) PROGRAMS State Commerce OFAC State MARAD Banking Regulators (FRB, FDIC, OCC, State) Intelligence Community Local Law Enforcement Justice (FBI, US Attorneys) 5
OFAC Overview OFAC Sanctions Statutory Authority Trading With the Enemy Act (TWEA), P.L. 65-91, 40 Stat. 411 (Oct. 6, 1917) International Emergency Economic Powers Act (IEEPA), P. L. 95-223, 91 Stat. 1626 (Dec. 28, 1977) Various Other Statutes United Nations Participation Act of 1945 Antiterrorism and Effective Death Penalty Act of 1996 Foreign Narcotics Kingpin Designation Act - 1999 Comprehensive Iranian Sanctions and Divestment Act - 2010 6
OFAC Overview Active Sanctions Programs (21) Balkans Belarus Burma (Myanmar) Cote d Ivoire (Ivory Coast) Cuba Congo Diamond Trading Iran Iraq Lebanon Liberia Libya Kingpin Narcotics Narcotics Trafficking Non-Proliferation WMD North Korea Sudan Syria Somalia Global Terrorism Zimbabwe 7
OFAC Overview Sanctions Program Categories Country-Based Programs Cuba, Iran, Sudan Regime-Based Programs Burma North Korea Iraq I and Iraq II Zimbabwe List Based Programs Narcotics Trafficking Diamond Trading Anti-Terrorism WMD Proliferation Balkans, Syria, Lebanon Somalia 8
OFAC Overview Specially Designated Nationals (SDNs) Foreign governments and entities owned, controlled by or acting on behalf of those governments Individuals engaged in prohibited activity Narcotics trafficking Global terrorist organizations WMD proliferation Somalia instability 9
OFAC Overview Sanctions Enforcement Options Criminal Referral Civil Penalty Finding of Violation Cautionary Letter No Action 10
OFAC Overview Base Penalty Calculation Yes Voluntary Self-Disclosure No (1) One-Half Transaction Value ($125k Cap) Egregious Case Yes (3) One-Half Statutory Maximum No (2) Applicable Schedule Amount ($250k Cap) (4) Statutory Maximum 11
Presentation Outline OFAC Overview What s Not OFAC Insurance Case Profile 12
What s Not OFAC Related Federal Enforcement Regimes Commerce Department Export Controls State Department Foreign Sanctions Treasury FinCEN AML / Financial Crimes 13
What s Not OFAC Commerce Department Export Controls Statutory / Regulatory Authority Export Administration Act (EAA) & IEEPA EAR, 15 C.F.R., Parts 730-774. Purposes National Security / Foreign Policy Nonproliferation / Short Supply Administered by Bureau of Industry & Security (BIS) Type of export item / Destination End use / Nature of End User 14
What s Not OFAC State Department Foreign Sanctions Delegated Authority to Designate Foreign Governments Foreign Persons Multiple Options As Consequences Export/Import Controls US Government Benefit Restrictions (Loans, Procurement Contracts, Foreign Aid) Divestment of Public Funds in US Prohibit Financial Transactions with US Persons (Securities Dealer, Bank Loans, Foreign Exchange) 15
What s Not OFAC Treasury FinCEN - Financial Crimes Purpose Safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity. Scope of Insurance Provisions Insurance company only, as defined Covered insurance products only, as defined Transaction thresholds Affirmative Regulatory Requirements Policies, procedures & internal controls (suspicious activity) Compliance Officer Training Independent Testing 16
Presentation Outline OFAC Overview What s Not OFAC Insurance Case Profile 17
Insurance Industry Compliance OFAC Insurance Related Files (January 1, 2006 March 31, 2011) Resolved/Concluded 177 Pending _53 Total 230 18
Insurance Industry Compliance OFAC Insurance Case Profile Enforcement 54 Inquiries 61 License Requests 115 19
Insurance Industry Compliance OFAC Insurance Cases Line of Business Profile Commercial Lines P&C 103 Individual L&H 36 Personal Lines P&C 33 Group L&H 28 Reinsurance 27 All Lines 2 20
Insurance Industry Compliance Sanctions Programs Insurance Case Profile Country - Based Programs 107 Cuba (55) Iran (33) Sudan (19) List-Based Programs 51 Narcotics (37) WMD (10) Terrorism (4) Regime - Based Programs 48 Burma (9) Somalia (31) Other (8) All Programs 24 21
OFAC Essentials for Brokers and Reinsurers David J. Brummond david.brummond@treasury.gov 202-622-7255