On August 2, 2016, the Office of Foreign Assets Control (“OFAC”) issued Findings of Violations of the Foreign Narcotics Kingpin Sanctions Regulations against AXA Equitable Life Insurance Company and Humana Inc. In both cases, OFAC found that the companies did not screen their policyholders and beneficiaries against the OFAC Specially Designated Nationals and Blocked Persons List (the “SDN List”).
The Foreign Assets Control Regulations require that companies block the funds of persons on the SDN List, prohibit providing services to such persons and require, and give them ten business days to notify OFAC that they have blocked the funds (e.g., premiums or claims payments). As the AXA and Humana cases demonstrate, screening is a continuous process because OFAC continuously adds names to the SDN List. A robust screening program would compare the SDN List to
- potential policyholders and designated beneficiaries before issuing a policy;
- confirm that funds for premium payments are not coming from SDN’s and have a procedure in place to block and report such funds if they are; and
- beneficiaries before making any claims payment.
In addition, it would rescreen all policyholders and beneficiaries each time the SDN List changes to ensure that the new SDN’s are not current policyholders or beneficiaries.
Locke Lord’s Trade Compliance team routinely works with clients to design and implement screening, blocking, and reporting procedures designed to detect and prevent these types of violations.