OFAC Fines Firm That Insured Property of Sanctioned Russian Oligarch
A New York insurance company reached a $466,000 settlement with the Office of Foreign Assets Control after the U.S. said it provided insurance policies for the blocked company of a sanctioned Russian-Ukrainian oligarch. OFAC said Privilege Underwriters Reciprocal Exchange, which provides insurance policies for luxury homes, cars and boats, continued collecting insurance payments from the company for more than two years after its owner was added to the agency’s Specially Designated Nationals List.
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The alleged violations stemmed from 2010, when the insurance company, known as PURE Insurance, issued a private fleet auto insurance policy, a jewelry and art insurance policy, and two high-value homeowners insurance policies to Medallion, a company owned by Viktor Vekselberg. OFAC said the policies were renewed each year, including after Vekselberg was added to the SDN List in April 2018. Medallion also became blocked under OFAC’s 50% rule, which imposes sanctions on any company majority owned by Vekselberg.
Despite the sanctions, PURE continued collecting insurance payments, OFAC said. The company's compliance failure was partly due to its underwriters failing to upload shareholder information from "the corporate disclosure statement” into PURE’s underwriting systems, OFAC said, where corporate ownership information is stored. The agency also said that when PURE onboarded Medallion in 2010, the insurance company didn't require non-U.S. policy holders to be “escalated for review and approval” by its management and compliance department.
In total, PURE collected 38 premium payments worth more than $308,000 for the four policies between May 1, 2018, and July 24, 2020. OFAC said PURE also paid a $7,500 claim involving one of the policies on July 22, 2020.
OFAC said it could have imposed a maximum civil monetary penalty of more than $13 million, but it settled on a lesser amount because the case was "non-egregious," PURE cooperated with OFAC's investigation and because it took “remedial measures,” including screening all of its customers through third-party vendors. It also began uploading all customers’ corporate disclosure statements into its system and seeking management and compliance approval for any involving a non-U.S. entity. PURE also signed an agreement to suspend the case’s statute of limitations and hadn’t received a penalty notice in the previous five years.
OFAC also pointed to several aggravating factors, including the fact the alleged violations weren’t voluntarily disclosed. PURE also “failed to exercise due caution or care for its sanctions compliance obligations,” including after its customer’s property was made subject to sanctions, which caused it to provide insurance coverage to a blocked person for more than two years. OFAC also said PURE had “reason to know” it was receiving payments from a sanctioned person, and the company “should have understood the connection between its customer and the customer’s designated owner.”
A PURE spokesperson didn’t respond to a request for comment.
The case highlights the importance of companies “continually” assessing their risk, especially as sanctions lists are updated, OFAC said. “Controls that were adequate at one point in time may not remain sufficient when new sanctions are imposed or existing sanctions are modified.”