Sanctions serve as a powerful foreign policy instrument, exerted by governments to influence behaviour by penalising nations, entities, or individuals engaged in unlawful activities.
According to Moody’s, these measures, ranging from travel bans to financial embargoes, are deployed to address issues like terrorism and human rights abuses. For insurance firms, adhering to these regulations is paramount to ensure both ethical operations and national security.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has recently heightened its focus on the InsurTech sector’s adherence to sanctions. An advisory from OFAC underscores the risks insurers face if they fail to comply with these laws. In a notable case, OFAC fined Privilege Underwriters Reciprocal Exchange (PURE) $466,200 for transactions that contravened sanctions related to Ukraine and Russia, highlighting the severity of non-compliance.
Particular attention is required for policies in sectors like maritime and travel insurance due to their vulnerability to sanctions violations. Insuring vessels transporting commodities like Russian oil or providing travel insurance for trips to sanctioned regions can lead to significant fines and legal challenges. Insurers must perform diligent customer checks and stay vigilant about high-risk regions.
To manage sanctions risks effectively, insurers and reinsurers need to establish a robust compliance framework. This includes commitment from management, thorough risk assessments, and strong internal controls. Automated tools are increasingly important for continuous monitoring and ensuring that transactions do not breach sanctions. Regular audits and employee training are also crucial components to maintain compliance integrity.
Automated sanctions checks are vital in verifying that entities and individuals are not listed on sanctions registries, both at the onset and during the tenure of a business relationship. These proactive measures are essential to avoid legal repercussions and to uphold a company’s reputation in the industry.
Moody’s Gridfind solution provides essential support to the insurance sector by offering extensive sanctions list screening and real-time monitoring. This ensures that companies can swiftly respond to changes in their business network, mitigating risks associated with sanctioned parties and enhancing overall compliance efforts.
The implementation of comprehensive compliance programs supported by advanced solutions like Moody’s Grid is essential for insurance companies. By prioritising sanctions compliance, insurers safeguard their operations against legal issues and reputational damage, thereby maintaining the trust and confidence of their clients and stakeholders.
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