OFAC Fines Navigators Insurance Company without Compliance Program for Apparent Violations of Various Sanctions Programs.
Several interesting things stand out regarding OFAC’s enforcement action against Navigators Insurance Company (“Navigators”). On August 6, 2015, OFAC entered into a settlement agreement with Navigators to settle potential liability for apparent violations of the North Korea, Iran, Sudan, and Cuba sanctions programs for a fine of $271,815.
According to OFAC’s enforcement information, Navigators is a commercially sophisticated financial institution. Indeed, a review of the company’s website confirms that the company holds approximately $4.5 billion in assets. So it is very surprising that at the time the violations occurred, Navigators “did not have a formal OFAC compliance program in place.”
OFAC compliance programs can sometimes be costly or difficult to implement for small businesses, but a large financial institution with extensive ties to global commerce should have had an OFAC compliance program in place. So it is no surprise that OFAC considered this an aggravating factor in its enforcement action against the company.
So what exactly happened at Navigators that OFAC decided warranted a penalty of $271,815? According to OFAC’s enforcement information the following occurred:
OFAC’s enforcement information also reveals that personnel within Navigators U.K. misinterpreted the applicability of OFAC sanctions regulations, which further accentuates the importance of having a formal OFAC compliance program. Most compliance programs feature an escalation component when employees are confronted with situations or transactions that implicate OFAC sanctions regulations. It seems clear from the enforcement information that employees within the company at least thought about and/or deliberated amongst themselves regarding the suspect transactions.
Presumably, with a sanctions compliance program in place, those U.K.-based employees would have sent the transaction up the chain of command for further clarification and guidance from an in-house or outside expert on sanctions. Proper escalation to a professional with sanctions experience could have probably prevented this entire situation.
All companies directly or indirectly involved in international trade or finance should evaluate whether they need an OFAC compliance program. Not all compliance programs are the same, and the robustness and formality of any particular OFAC compliance program depends upon many factors. Factors to consider include a company’s volume of transactions, the size of its operations, its customers’ locations around the globe, and whether the company utilizes foreign third parties. Fashioning an OFAC compliance program to a company’s particular needs and size can be a cost-effective way to protect the company from liability and protect the company’s reputation.
Disclaimer: Blog posts should not be relied upon as legal advice and are only provided for informational purposes. Information contained in blog posts may also become outdated with the passage of time as laws change and U.S. foreign policy and national security objectives evolve.