San Diego, Calif. (January 19, 2024) - Last month, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) settled with Privilege Underwriters Reciprocal Exchange ("PURE") for $466,200 for its alleged violations of Ukraine/Russia-related sanctions.

PURE is an insurance company based in New York that offers insurance for luxury homes, cars, art collections, jewelry, and boats. In December 2023, it agreed to settle its alleged 39 violations of OFAC's Ukraine/Russia sanctions. The alleged violations occurred between May 2018 and July 2020, during which time PURE insured Victor Vekselberg's property.

When PURE began to insure Mr. Vekselberg's property in 2010 it did so by issuing policies to Medallion, Inc., a Panama company of which Mr. Vekselberg was the sole shareholder. At the time, neither his name nor the company's appeared on any U.S. sanctions lists. However, on April 6, 2018, his name was added to the List of Specially Designated Nationals and Blocked Persons pursuant to Executive Order (E.O.) 13662. Because Medallion is wholly owned by Mr. Vekselberg, it also became a blocked person on April 6, 2018.

Between May 1, 2018 and July 24, 2020 PURE collected 38 premium payments totaling $308,391 from Medallion. PURE also paid out $7,500 on one of the policies in July of 2020. PURE's underwriters failed to upload the shareholder information from Medallion's disclosure statement into its underwriting systems where corporate ownership information is stored, so these policies were never flagged. By engaging in these transactions, PURE allegedly violated the Ukraine/Russia sanctions regulation codified as 31 C.F.R. § 589.201(a)(4)(iii).

The statutory maximum civil penalty that PURE faced was $13,906,581. Although the violations were not voluntarily disclosed, OFAC determined that they were non-egregious. Accordingly, under OFAC's Enforcement Guidelines, the base civil monetary penalty amount was $666,000. The settlement amount of $466,200 reflects the following considerations:

Aggravating Factors:

  • PURE failed to exercise due caution or care for sanctions compliance because it failed to ensure ownership information about its customers was incorporated into its sanctions screening program, which resulted in it providing services to blocked persons for more than two years.
  • PURE knew that Medallion was owned by Victor Vekselberg in 2010, so it knowingly provided services to a blocked person.
  • PURE provided an economic benefit to a sanctioned person by providing insurance for more than two years and paying out on an insurance claim in 2020.

Mitigating Factors:

  • This was PURE's first violation in the five years.
  • PURE undertook remedial measures like screening all of its customers through two third-party vendors and requiring its underwriting department to upload all corporate disclosure statements into PURE's system. Now applications involving non-U.S. entities are subject to review and approval by PURE's management and compliance staff.
  • PURE cooperated throughout OFAC's investigation.
  • This case highlights the importance of implementing and maintaining an effective sanctions compliance protocol.

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