On September 20, 2018 the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued “OFAC Advisory to the Maritime Petroleum Shipping Community” to alert the shipping industry participants, including insurers, as to sanctions risks relating to petroleum shipments to or from Syria. OFAC’s Syria Sanctions Program is authorized by Executive Order 13582 and regulations at 31 C.F.R. Part 542.
The OFAC Advisory indicates:
“The U.S. government will aggressively target for designation any person who provides support to the regime, for example by facilitating exports to or imports from the Government of Syria…”
The threat of designation of facilitators can have consequences to an insurer or reinsurer who provides coverage for vessels or shippers involved in import or export of petroleum to or from Syria, even though such insurer or reinsurer may not otherwise be subject to the OFAC Syria Sanctions Program. Designation of an insurer or reinsurer prevents U.S. persons from doing business with that insurer and reinsurer. Of course, insurers and reinsurers considered U.S. persons may also be subject to civil enforcement or criminal penalties for violations of OFAC’s Syrian Sanctions Program.
The OFAC Advisory provides a list of some of the deceptive practices that may be used to disguise shipments of petroleum destined for Syria. These tactics may prevent discovery by an insurer or reinsurer of the import of petroleum to Syria. The Advisory also provides a list of risk mitigation measures that participants in the shipping industry may implement.
With respect to shipments in or through the Mediterranean Sea, insurers and reinsurers should keep in mind OFAC’s stated intent to aggressively target Syrian petroleum imports. Since even inadvertent violations of the Syrian Sanctions Programs may result in liability, the Advisory list of mitigating factors provides guidance as to reduction of the amount of any OFAC fine or penalty.