U.S. company to pay $5.86 million to settle Cuban sanction violations

U.S. company to settle Cuban sanction violations

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) today announced that a New York company agreed to remit approximately $5.86 million to settle its potential civil liability for apparent violations of the Cuban Assets Control Regulations (CACR).

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According to the OFAC release [PDF 56 KB], the company intentionally referred Cuba-related payments to its Canadian affiliate, thereby avoiding processing reimbursement payments directly to Cuban parties and to travelers while they were located in Cuba. The company then subsequently reimbursed its Canadian affiliate for those payments. This indirect payment process was formally codified in its procedures manual.

Summary

The company—a New York-incorporated travel assistance services company—between June 2010 and January 2015 served as a travel services provider on behalf of two Canadian insurers that offered medical expense, travel insurance, and emergency travel insurance policies for non-U.S. Canadian subscribers who travelled to Cuba. The company provided medical expense claim processing and payment services in support of claims paid to Canadian travelers who were insured under a group insurance policy sold by one of the Canadian insurers.

The company dealt in blocked property in which Cuba or a Cuban national had an interest by (1) providing prohibited post-travel claim reimbursements directly to Canadian travelers who travelled to Cuba, and (2) providing for the indirect payment of claims to Cuban service providers through a Canadian affiliate.

  • With respect to the claim payments to Canadian travelers, the company processed claims and made direct post-trip reimbursement payments to the travelers in the same manner as other travel destinations.
  • For requests for payments intended for Cuban service providers, the company intentionally referred those requests to a Canadian affiliate. The company would then reimburse the Canadian affiliate after it had paid the Cuban service providers. The company codified this referral process in its procedures manual, which provided instructions to employees on how to service Canadian travelers’ policies. The policy was drafted in 2010 and updated in 2013.

The company engaged in the transactions prior to the Cuba sanctions regulatory changes implemented in January 2015. In servicing these policies, the company processed 2,593 transactions with a value of $285,760 in apparent violation of the CACR.

While the company had a sanctions compliance policy in place at the time of the apparent violations that required individuals and providers be screened against individuals or entities on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List), the company’s procedures failed to require screening for countries and regions subject to OFAC prohibitions.

OFAC determined that the case was voluntarily self-disclosed and that the apparent violations constitute an egregious case.
 

For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner and Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Steve Brotherton
Principal and Global Export and Sanctions Leader
T: 415-963-7861
E: sbrotherton@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
T: 212-954-3094
E: labad@kpmg.com

Irina Vaysfeld
Principal
T: 212-872-2973
E: ivaysfeld@kpmg.com

Amie Ahanchian
Principal
T: 202-533-3247
E: aahanchian@kpmg.com

Christopher Young
Principal
T: 312-665-3229
E: christopheryoung@kpmg.com

Gisele Belotto
Managing Director
T: 305-913-2779
E: gbelotto@kpmg.com

George Zaharatos
Principal
T: 404-222-3292
E: gzaharatos@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

Jessica Libby
Managing Director
T: 612-305-5533
E: jlibby@kpmg.com

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