Sanctions screening
Systematic checking of insureds, beneficiaries, vessels and counterparties against sanctions lists, at underwriting as at payment, which is the only documentable defense against a prohibited payment.
Screening means comparing, systematically and traceably, the names, companies, vessels and addresses involved in a transaction against the lists published by sanctions authorities: the US Specially Designated Nationals list, the EU consolidated list, the UK list, UN lists. In insurance it occurs at three moments the underwriter must distinguish: at underwriting, on the insured and its beneficial owners; during the contract, because a person may be listed after inception; and at payment, on each recipient of an indemnity, including a repairer or, in cyber, the recipient of a ransom. Two difficulties make it costly. The so-called fifty percent rule, applied by OFAC and adopted in substance by the Union, extends sanctions to entities majority-owned by designated persons even when they appear on no list, which requires reconstructing ownership chains. And in marine insurance the name is not enough: one must follow the vessel's IMO number, its flag changes and its gaps in position signals, the usual marks of evasion.
On May 14, 2020, the US Treasury, State Department and Coast Guard issued a global maritime advisory recommending that insurers, shipowners and brokers monitor gaps in vessels' automatic identification systems, ship-to-ship transfers at sea and repeated flag changes, and build those checks into their contracts.
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