OFAC Fines MetLife Subsidiary for Insuring Iranian-Linked Entities

OFAC said American Life Insurance Company (ALICO), which voluntarily disclosed the violations, issued group medical and life insurance policies, collected premiums and paid claims to several schools and entities based in the United Arab Emirates and owned by Iran. In total, ALICO processed 2,331 premiums and claims under these policies for $446,077, the agency said in an enforcement release.

OFAC said the violations stemmed from an ALICO sales agent requesting a group policy quote in 2013 for an Iranian-owned entity in the UAE. ALICO’s sanctions screening tool flagged the entity, but ALICO cleared the sanctions alert because the UAE entity wasn’t listed on OFAC’s Specially Designated Nationals List.

Despite clearing the SDN List check, ALICO’s screening tool also triggered a “Politically Exposed Person” alert because the entity’s trade license listed that it was owned by the Iranian embassy. After seeing this alert, ALICO escalated the issue to MetLife’s Global Anti-Financial Crimes Unit, which ordered ALICO not to onboard the entity.

One week later, the same ALICO sales agent requested a new quote but instead “sought a pre-packaged policy through a third-party administrator in the UAE through which ALICO outsourced administration of certain products,” OFAC said. The agent uploaded a copy of the entity’s trade license to the third-party portal, but this version of the trade license omitted the fact that the entity was owned by the Iranian embassy.

ALICO’s sanctions screening system again flagged the entity, and the company again cleared the alert because the entity wasn’t listed on the SDN List. And because the entity’s trade license didn’t list an owner this time, OFAC said ALICO’s screening system didn’t trigger a “Politically Exposed Person” alert and the issue wasn’t escalated to MetLife. OFAC said ALICO then issued an insurance policy to the entity.

In another case, the same sales agent requested a custom policy for a UAE-based school with the word “Iranian” in its name. Before formally submitting the request, the agent asked a sales manager to first test whether the school would trigger an alert within ALICO’s sanctions screening system “outside of the regular onboarding process.” OFAC said the sales agent eventually “proceeded with processing” the policy application, which was approved after the company’s screening system didn’t generate an alert.

The school tried to pay its insurance premium several weeks later through a check drawn on an account at Iran-based Bank Melli, which was sanctioned in 2018. After the payment was rejected by ALICO’s bank, the sales agent asked ALICO to allow the school to pay in cash. OFAC said ALICO accepted a $78,143.36 cash payment.

The insurance company discovered the possible violations when a sales manager questioned the UAE-based sales agent in May 2023 about the policy for the Iranian-owned entity, suspecting it of being owned or controlled by the Iranian government. OFAC said the sales agent produced a trade license for the entity, “purporting to have just received it from the new owner” of the school.

But ALICO determined that the license was “likely” manipulated, OFAC said, noting that the text in the ownership section was distorted, the Arabic lettering had been transposed, and a QR code at the top of the license had been removed.

MetLife’s Global Anti-Financial Crimes Unit began a review of the issue and the UAE-sales agent resigned soon after. ALICO then blocked the policies and reported them to OFAC.

The agency said MetLife’s review also found that ALICO issued two other group medical policies and one group life insurance policy to another Iranian-owned or controlled school in the UAE. ALICO had “reason to know” the school was owned by the Iranian government because the school provided documents during the onboarding process with letterhead that said “the Islamic Republic of Iran.”

OFAC also said ALICO twice ordered its third-party administrator to stop paying claims on the policies, “but for several weeks backdated claims continued to be paid from the administrator’s batch processing system, resulting in additional apparent violations.”

The agency could have imposed a maximum $858,125,016 civil penalty against ALICO, but it settled on a lower fine because the firm self-reported and the case was “non-egregious.” OFAC also said ALICO hadn’t received a penalty notice in the previous five years and put in place a range of “remedial measures” to improve its sanctions compliance program, including by making sure its screening system catches entities that are named after sanctioned countries.

ALICO also “enhanced” its onboarding process to track entities that have been rejected “based on sanctions compliance,” bolstered the sanctions training for its “regional businesses,” and updated the “text” involving its sanctions training to “include explicit reference” to restrictions on both direct and indirect dealings with governments in sanctioned countries.

The company’s Gulf operations team also carried out a three-year "lookback" of its insurance policies to find any customers that were rejected for sanctions or other similar reasons, and it created a spreadsheet to track those entities. The company now compares prospective customers to this list and escalates potential matches to its compliance staff.

OFAC also pointed to several aggravating factors that led to the penalty, including the fact that ALICO “failed to exercise due caution or care” in complying with sanctions, had “reason to know” it was doing business with entities owned by the Iranian government, and that ALICO’s insurance coverage helped Iranian-owned “educational institutions.” The agency also said ALICO is a large, commercially sophisticated insurance provider.

The case highlights the importance of carrying out due diligence on customers in countries with higher sanctions risks, OFAC said. The agency also stressed that the SDN List doesn’t include every person or entity that may be subject to sanctions, including every Iranian government agency or official.

OFAC also said companies should manage the risks around third-party business partners who may not have the same sanctions compliance standards. “Here, ALICO’s third-party administrator continued to pay claims despite being told twice by ALICO to stop doing so because the policies had been suspended (and ultimately blocked),” OFAC said. “When outsourcing parts of the business, it is important to have effective controls that prevent further activity with blocked or otherwise sanctioned persons upon discovery.”

A MetLife spokesperson didn't immediately respond to a request for comment.