The United States Department of Treasury Office of Foreign Assets Control (“OFAC”) has released its latest civil penalties. Although the penalties were not that eye opening, there was one interesting name on the penalties list. That name was GEICO. The insurance giant paid $11,000 to settle allegations of violations of the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) for accepting premium payments of $2,265 from an individual designated as a Specially Designated Narcotics Trafficking Kingpin on the Specially Designated Nationals List (“SDN List”).

It was determined by OFAC that GEICO did not voluntarily disclose the violation, however, the violations were not found to be egregious. As such, it did not warrant a severe penalty. What was so incredible about this penalty is that OFAC reports that GEICO does not screen its existing policyholders database for SDNs as the SDN list is updated but only on an annual basis. Although GEICO has stated that they are committed to revamping their compliance program to prevent future violations such as the one that occurred, it is amazing that their compliance program was so lax.

Under the Kingpin Act U.S. persons are prohibited from engaging in transactions with individuals or entities designated as SDNTKs. GEICO is a major player in the insurance field engaging in a large amount of transactions on a daily basis. As such, for there to be a transaction in violation of an OFAC program from time to time is not surprising. However, for their OFAC compliance program to only check their policyholder’s database on an annual basis is incredibly surprising and speaks to a lack of understanding in the corporate compliance world on how to address issues arising under OFAC administered sanctions programs.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.