A one-hour presentation to members of the International Underwriters' Association of London on 12 September 2014. It offers an overview of UN, EU, US and UK sanctions and export controls which are imposing increased obligations on the insurance industry and sets out the main steps necessary to ensure compliance.

1. Sanctions, Embargoes &
Export Licensing
A Market Briefing for The International Underwriting Association of London
London, 12 September 2014
Richard Tauwhare, Green Light Exports Consulting
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2. 2 Costly if you get it wrong

3. 3 Costly to get it right

4. 4
Complex and constantly changing
40,000
Names on lists
1 day
List updates
4 billion +
Fuzzy logic combinations
20%
Annual growth of lists

5. 5 Controversial

6. 6 Context:
continuing
challenges
 “We meet at a time when the world faces many dangerous and
evolving challenges.
 To the east, Russia has ripped up the rulebook with its illegal, self-declared
annexation of Crimea and its troops on Ukrainian soil
threatening a sovereign nation state.
 To the south, there is an arc of instability from north Africa and the
Sahel to the Middle East.
 The growth of technology and globalisation is … raising the
capacity of terrorists to do harm…”
PM Cameron and President Obama, The Times, 4 Sept 2014

7. 7 Concerns Insurers
 ships and shipments
 Infrastructure
 individuals and entities

8. 1) Sanctions – Overview
2) Trade Sanctions
3) Financial Sanctions
4) Export & Trade Controls
5) Compliance
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9. Sanctions: Features
 Integrated: part of a comprehensive
approach to bring about a change in policy
by the target, imposing costs on their actions
 Targeted: minimise adverse or unintended
consequences. But some costs unavoidable.
Risk of retaliation
 Favoured: short of ‘boots on the ground’ and
airstrikes, more than ‘just words’
 Dynamic: frequent, rapid changes
 Calibrated: adjustable; bargaining chip in
negotiations
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10. Sanctions: Targets & Types
 2 Targets:
 Governments
 Persons/Entities
 4 Types:
 Diplomatic
 Trade
 Finance
 Travel
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11. Sanctions: Regimes
• Security Council Resolutions
• Binding on all UN Member States UN
• Common Foreign & Security Policy
• Directly applicable in Member States EU
• arms embargoes
• e.g. Armenia & Azerbaijan OSCE
• HMG may impose unilateral measures
• e.g. Argentina UK
• Additional national measures
• extraterritorial effect US
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12. UN Sanctions
 Under Chapter VII of the UN Charter, binding on all UN members
 “intended to apply pressure on a State or entity to comply with the
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objectives set by the Security Council without resorting to the use of force,
when peace has been threatened and diplomatic efforts have failed”
 target only specific actors and allow humanitarian and other exceptions

13. UN Sanctions Regimes
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Country Arms embargo Asset Freeze Travel Ban Other measures
Afghanistan (Taliban) * * *
Al Qaida & Associates * * *
Central African Republic * * *
Cote d’Ivoire * * *
DRCongo * * *
DPRK * * * WMD, luxury goods, fin. services
Guinea-Bissau *
Iraq (Saddam Regime) * * *
Iran * * * Wide range
Lebanon (PM killing 2005) * *
Liberia * * *
Libya (Gaddafi Regime) * * *
Somalia and Eritrea * * * charcoal
Sudan (Darfur) * * *
Yemen * *

14. UN Sanctions: Libya
 UN arms embargo
 UN travel ban on named individuals
 UN asset freeze on persons and entities
 UN measures on designated vessels illicitly exporting crude oil
 EU embargo on “internal repression items”
 Updated 27 August 2014 by UNSCR 2174: reinforced the arms
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embargo and expanded the criteria for designation of individuals and
entities subject to travel ban and assets freeze

15. UN Sanctions: Libya -
Exemptions
1) No Notification: non-lethal military equipment
solely for humanitarian or protective use, and related
technical assistance or training
2) Notify for ‘No Objection’: small arms, light
weapons temporarily exported by UN personnel,
media, humanitarian and development workers for
their personal use only
3) Require Prior Approval: arms and related materiel,
including technical assistance, training, financial and
other assistance, intended solely for security or
disarmament assistance to the Libyan authorities
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16. EU Restrictive Measures
 “to promote peace, democracy and the respect for the rule of law,
human rights and international law”
 all sanctions imposed by the UN
 may reinforce with additional measures
 may impose autonomous sanctions
 Council Decision, adopted unanimously, binding on member states
 As economic measures fall under EU competence, they also require a
Council Regulation, directly binding on EU citizens and businesses
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17. EU & OSCE Regimes 17
Country Arms embargo Internal repression
embargo
Other measures
Armenia &
Azerbaijan
OSCE (UK interprets as a ban on
all military items to any person
and on all dual use items to any
military end user)
Belarus EU EU
Burma EU EU
China EU (UK interprets as a ban on all
lethal weapons and their
components)
EU
Cote d’Ivoire EU
DPRK measures on range of goods and services
including all dual use items
Iran measures on range of goods and services
including nearly all dual use items
Russia EU measures on range of goods and services
Sudan and
South Sudan
UN - Darfur only. EU embargo
applies to all of Sudan and South
Sudan.
Syria No arms embargo in place, but
27 May 2013 Declaration sets out
conditions on supply of arms.
No internal repression
embargo, but 27 May
Declaration sets out conditions
on supply
measures on range of goods and services
Zimbabwe EU EU Travel ban, asset freeze

18. EU Restrictive Measures
Russia/Ukraine: 12 September
TRADE
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 Arms embargo: bans import, export and related technical, financial or brokering services
 Dual use goods and technology: prohibits exports and related financial, technical or
brokering services for military end use or end users, and 9 mixed defence companies
 Energy-related equipment and technology: export licence required. Will be denied for
deep water oil exploration and production, Arctic oil exploration and production, or shale oil
projects. Certain services for such projects are also now prohibited eg drilling.
FINANCE
 Capital transactions: prohibits loans to and trading or brokering of certain financial
instruments of 5 major state-owned Russian banks, 3 major defence companies and 3
major oil companies [nb gas sector unaffected]
 119 persons (24 of them added 12/9/14) and 23 entities subject to an asset freeze
and a visa ban. Freezes and bans may also be imposed on those conducting transactions
with Ukrainian separatists

19. EU Restrictive Measures: Scope
 within EU territory, including its airspace
 to EU nationals, whether or not they are in the EU
 to companies and organisations incorporated under the law of a
member state, whether or not they are in the EU. Includes branches of
EU companies in third countries
 to any business done in whole or in part within the EU
 on board aircraft or vessels under the jurisdiction of a member state
 No extraterritorial application, unlike …
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20. US Sanctions
 First US embargo imposed in 1775…
 Office of Foreign Assets Controls (OFAC)
 Dept of Commerce and the State Department
 Affect UK:
 a non-US company which supplies any person on a
US List may itself be added to a list or prohibited
from conducting business with US companies
 re-exporting items or data with US content
 US Persons in the UK
 UK Persons in the US
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21. US Sanctions
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UN SANCTIONS COUNTRIES LISTS
ALL Iran OFAC Specially Designated Nationals
Cuba OFAC Foreign Sanctions Evaders
Sudan BIS Denied Parties
Syria BIS Unverified Entities
DPRK BIS Proliferation Sanctions
Smart Sanctions
eg diamonds
BIS Entities
DDTC Debarred Parties

22. Example
US Sanctions - Cuba
 No direct exports to Cuba from the US
 US persons may not export to a third
country if item will be re-exported to Cuba
 US Persons may not facilitate transactions
with Cuba, even if residing in a third country
 Non‐US persons may not re-export to Cuba
any item incorporating more than 10% US
content without a licence
 Travel: travel by US Persons to Cuba is
prohibited, with some exceptions
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23. Evasion
• Evaders are determined and highly
creative
• Iran has established a dizzying array of
front companies. Most open and close
within a matter of months, leaving little or
no paper trail. (See BIS Iran List)
• companies can play a positive role:
reporting suspicious enquiries helps HMG
detect violations and understand illicit
programmes
• Requires due diligence on customers,
supply chains, distributors
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24. 1) Sanctions – Overview
2) Trade Sanctions
3) Financial Sanctions
4) Export & Trade Controls
5) Compliance
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25. 25
Trade Sanctions: Typical Prohibitions
 Moving embargoed items from the UK for eventual
end-use in an embargoed destination, undertaken
by persons in the UK or UK citizens abroad:
 Exporting
 Brokering
 Providing technical or financial assistance

26. Trade Sanctions: Insurers
 implications for both
 property underwriters (hull and machinery and
cargo) and
 protection and indemnity (marine liability)
insurance
 definition of an ‘export’ can be very wide e.g.
items do not need to be moved permanently to
amount to an export
 US and EU sanctions on Iran have focused on
insurance to ship operators transporting Iranian
oil: the “stranglehold on Iran”
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27. Trade Sanctions: Challenges
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 difficult for a P&I insurer to be continuously
aware of the location of every vessel it insures.
 risks can be mitigated e.g. commercial
intelligence to raise a red-flag e.g. when an
insured ship enters an Iranian port. But costs
 Sanctions legislation can leave room for
conflicting interpretations. Resolving this can
take time, leaving a period of uncertainty

28. 1) Sanctions – Overview
2) Trade Sanctions
3) Financial Sanctions
4) Export & Trade Controls
5) Compliance
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29. UN/EU/UK Financial Sanctions
Typical Prohibitions
 transfer of funds to a sanctioned country and
freezing all its assets
 freezing the assets of an entity or individual -
prohibits dealing with economic resources owned or
controlled by them and from making economic
resources available to them or for their benefit,
directly or indirectly
 providing financial services, including insurance, to
designated individuals or governments (e.g.
terrorists, Iran, Syria)
 In certain cases, national authorities can permit
derogations e.g. to cover basic needs or prior
contracts. Apply to HMT for a licence
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30. Financial Sanctions: (Re)Insurance
 the provision of economic resources includes the
payment of claims or other sums under (re)insurance
contracts
 often also prohibit the provision of financing or financial
services which can include (re)insurance connected to
prohibited transactions.
 It is also prohibited to engage in any activities the object
or effect of which is to circumvent sanctions
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31. UN/EU/UK Financial Sanctions
HM Treasury Consolidated List
 includes all individuals and entities on all current
sanctions lists of the UN, EU and UK
 HMT provide a subscription service for updates
 Obligation to freeze the funds and report to HMT any
customer found on the list. If unsure, report to HMT
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32. US Financial Sanctions
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 Office of Foreign Assets Control (OFAC) administers sanctions based on
US foreign policy and national security goals
 Many US sanctions are based on UN mandates and involve close
cooperation with allied governments. But some go further. Two main lists:
 Specially Designated Nationals (SDN): individuals and companies owned or
controlled by, or acting for or on behalf of, targeted countries. And individuals,
groups, and entities, such as terrorists and narcotics traffickers not country-specific.
Their assets are blocked and U.S. persons are generally prohibited
from dealing with them.
 Foreign Sanctions Evaders (FSE): individuals and entities determined to have
violated, attempted to violate, conspired to violate, or caused a violation of U.S.
sanctions on Syria or Iran, or who have facilitated deceptive transactions for or
on behalf of persons subject to U.S. sanctions. Transactions by U.S. persons or
within the US involving FSEs are prohibited.

33. 1) Sanctions – Overview
2) Trade Sanctions
3) Financial Sanctions
4) Export & Trade Controls
5) Compliance
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34. UK Export Controls
 Listed Items
 Military
 Dual Use
 Unlisted items if
 embargoed to a specific country
 may be for military end-use in a country under an arms embargo
 may be used for WMD
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35. Trade and Brokering Controls
 Deals which result in the movement of
controlled goods from one third country to
another
 Two distinct regimes requiring licensing:
a) Trafficking and brokering of military
items
b) Brokering of dual use items intended
for WMD use. Does not include
‘ancillary services’ - defined as
‘transportation, financial services,
insurance or re-insurance or general
advertising or promotion’
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36. Trafficking and brokering of
military items
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 Category A: banned items eg cluster munitions, torture equipment. Trade licence
required (and not normally granted). Extraterritorial. No exemptions for shippers,
financiers, insurance
 Category B: most major weapons platforms and small arms. Trade licence required
as above. Extraterritorial. Those providing financial services, insurance or
reinsurance services in isolation from any other involvement in the controlled
trading activities are exempt
 Category C: all other Military List items. Shippers, insurers etc exempt. Not
extraterritorial.
 If the destination is embargoed, trading in any of these categories requires a
licence. No exemptions (i.e. insurers are included). Extraterritorial
 Extraterritorial controls apply regardless of whether a UK person is working
overseas for a UK company, for a foreign company, or acting on their own behalf

37. Trade Control Licences
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 4 Open General Trade Control Licences, including: Insurance or Re-
Insurance: to UN authorised missions or operations. Allows the transfer of
specified goods from a third country to another third country which is an
embargoed destination
 Open Individual Trade Control Licence: specified trader, items (but not
quantities), source and destination countries, consignors, consignees and
end users. Valid 2 years
 Standard Individual Trade Control Licence: specified trader, items,
quantity, source and destination countries, consignor, consignee and end
user. Valid 2 years

38. Transit and Transhipment
 Category A goods –always require a licence
 Category B goods –- most require a licence
for the 74 destinations of concern (see ECO
website)
 Category C goods – require a licence only for
embargoed destinations
 Dual-use List goods – only require a licence
for Iran or North Korea
 Any goods if intended for WMD use –
require licence
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39. Open General Transhipment Licences
 allow controlled goods to be exported from one country to
another via the UK without requiring a specific licence. Four
available:
1) certain Military List goods within Category C and other Dual Use
goods, except to 22 embargoed countries.
2) dual-use goods to Hong Kong Special Administrative Region
3) postal packets
4) sporting or recreational rifles, pistols, related ammunition and
telescopic sights
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40. Standard Individual Transhipment
Licence
 specific to a named provider, set quantity of
specific goods between a specific source
and destination country with a specified
consignor, consignee and end-user. Valid
for two years.
 may need to apply for more than one
licence to catch all aspects of a project
 Applications for Cat A goods, or any
controlled goods going to an embargoed
destination, likely to be refused. But
exceptions eg humanitarian
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41. 1) Sanctions – Overview
2) Trade Sanctions
3) Financial Sanctions
4) Export & Trade Controls
5) Compliance
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42. 42
Procedures
Audit & Review
Resources
Training
Culture
Policy
Compliance

43. Culture
 Compliance is a legal obligation
 Culture must be endorsed and demonstrated from the top
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44. Policy
 risk-based approach to minimise exposure and allocate limited resources
 NB any breach, however small, is a violation. But regulators take into
account effectiveness of compliance systems
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Resources
Risk

45. Procedures & Audit
Key Features:
 Due Diligence: cornerstone of compliance programme in any industry.
Do it early, before a transaction, and keep up to date through its life
 guidelines on your risk appetite
 queries discussed early with legal and/or compliance personnel
 Higher risks identified early, subjected to scrutiny and senior approval
 Timely reporting of any suspected violations
 fully documented
 regularly audited, updated and reviewed
 reports to audit committees and Board
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46. Due Diligence: Identify
For Financial Sanctions:
 named (re)insureds; ownership or control
 all those benefiting from the cover and receiving payments under it
 third parties such as agents and service providers
 whether any term of a contract makes it possible that payments could be
made to persons/entities, or involve activities/goods, not identified initially,
particularly any potential WMD activity
For trade sanctions and export controls:
 the goods, equipment or services concerned
 the parties involved including any intermediaries
 the origin of the goods and their destination (including any intermediate
destinations)
 their intended use
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47. Due Diligence: Screen
 lists of sanctioned persons/entities/countries
 lists of sanctioned goods/equipment/services
 non-list based sanctions e.g. Iran and Syria:
screen prospective policy holder’s business
and/or include self-declaration clause
 For large numbers/complex transactions,
automation is vital
 software often needs fine-tuning
 matches need to be reviewed by trained staff
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48. Due Diligence: Action
 Action as appropriate:
 not underwrite the risk, or terminate it
 apply specific terms and/or exclusions to
the contract
 apply for a licence
 freeze the account and ensure that no
payments are made
 report it
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49. Training and Awareness
 Ensure that all staff understand
 how sanctions apply
 the compliance procedures
 how to escalate concerns
 Training should be regular, formal and recorded
 Reinforced by intranet feeds and email alerts with updates
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 Ensure that brokers are informed of your sanctions and risk policy, that
they are asking the appropriate questions and are aware of red flags.

50. Conclusion
 sanctions and export controls are favoured policy tools
 compliance is a legal obligation with potentially heavy penalties
 requires a strong culture, risk-based policy, clear procedures
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51. Help and Advice
HMT
 AFUsubscribe@hmtreasury.gsi.gov.uk for financial sanctions-related releases
BIS
 Guides https://www.gov.uk/exportcontrol
 “Notices to Exporters” http://blogs.bis.gov.uk/exportcontrol
OFAC
 Resource Center: http://www.treasury.gov/resource-center/
sanctions/Pages/default.aspx
Green Light Exports
 Training and advice on ensuring compliance with export controls and sanctions
(UK, EU, ES)
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52. Thank you -
Any questions?
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Richard Tauwhare
Green Light Exports Consulting
Email: richard@greenlightexports.co.uk
Web: www.greenlightexports.co.uk
Phone: +44(0)770 311 0880