Are your insurance services “sanctioned services”?
A fine art insurance policy, specialist equine risk or superyacht insurance: these are certainly some of the most attractive insurance services to provide. Did you know providing such assurance could pose a risk of non-compliance with sanctions? Continue reading…
In part one of our Sanctions Awareness series, we discussed sanctioned sourcing, importing and exporting and the risk of sanctions violations for engaging in sanctioned sourcing, importing and exporting. the export of certain specified goods with Russia, and an even wider range of sanctioned trade with Crimea, Sevastopol, Donetsk and Luhansk.
- Sanctioned export includes the export to Russia of luxury goods such as wine, pearls, lobster and works of art.
- Sanctioned import includes all goods from Sevastopol, Crimea, Donetsk and Luhansk.
- The permitted supply includes the supply to Sevastopol, Crimea, Donetsk and Luhansk of items related to transport, telecommunications, energy and the exploitation of oil, gas and mineral reserves.
As an insurance provider, you may not be directly involved in the trade of goods under sanctioned sourcing, importing or exporting. However, Australia’s self-governing sanctions also prohibit the supply of Insurance and reinsurance services if it assists or is provided in connection with a sanctioned supply, import or export, this is known as Service sanctioned.
Insurance means a covenant or covenant under which a person is bound, in return for payment, to provide to a person, in the event of the materialization of a risk, an indemnity or benefit determined by the covenant or covenant.
- the activity of accepting risks ceded by an insurance company or by another reinsurance company; Where
- for the association of underwriters known as Lloyd’s – the business of accepting risks, ceded by any member of Lloyd’s, by an insurance or reinsurance undertaking other than the association of underwriters known as Lloyd’s.
Sanctioned service also includes the provision of insurance or reinsurance if it assists or is provided in connection with:
- the manufacture, maintenance or use of an export-sanctioned good for a specified region of Ukraine;
- engaging in sanctioned business activity for the specified Ukrainian region; Where
- military activity in Russia or the manufacture, maintenance or use of weapons or related material for Russia.
Despite the fact that some services, such as reinsurance, may be quite far from sanctioned supply, import or export, it may be a sanctioned service and risk committing an offense with penalties up to 10 years in prison, and substantial fines.
It is a defense to a penalty suit if a company can demonstrate that it took reasonable precautions and exercised due diligence to avoid the contravention of the penalties.
Our next update will discuss the risks of providing financial services and business activities in violation of Australia’s sanctions regimes.