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Oligarchs Play Hide and Seek: Life Insurers Must Act

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Oligarchs Play Hide and Seek: Life Insurers Must Act

Author

Michelle Thiel
AML Product Manager
LexisNexis Risk Solutions

April 2025

The list of Russian elite members sanctioned in the U.S. for supporting President Putin’s invasion of Ukraine continues to grow as the conflict enters its fourth year. Additionally, the list of sanctioned family members of these individuals is also growing, which may pose a problem for life insurance carriers because many have been living and doing business in the U.S.

The oligarchs and elites are the top decision makers or influencers in Russia’s political, economic and military domains.

Since the beginning of the war in Ukraine, the Office of Foreign Assets Control (OFAC) within the U.S. Treasury has targeted Kremlin elites and oligarchs who are supporting the war with sanctions to stop them from hiding wealth, property ownership and financial services accounts under the names of their family and other associates. Some of them, along with their businesses and at times certain family members, are listed on OFAC’s Specially Designated Nationals (SDN) and Blocked Persons list for supporting President Putin’s war on Ukraine.

The steady inclusion of new names to OFAC’s list can make compliance with OFAC sanctions laws more complex for the insurance industry, including the life segment. There is no advanced notice or insight into when and who may be added. As a risk management measure, insurers need to monitor whether they are doing business with Russian elites who are not currently listed on government watch lists but who could be soon, along with their family members.

OFAC does not specify how insurers are to comply or how often to screen against its watch list, but a listed entity’s/individual’s assets must be frozen immediately when their name matches to a listed entity. OFAC lists are updated frequently and unpredictably, and industry practices dictate insurers screen their client database upon each update to ensure they block the assets and report a match within the required 10 business days.

The risk is high — but not unmanageable, especially with automation, quality data and the technology features available today.

Impact to Life Insurers

Aside from being screened to detect designation on the SDN list, Russian oligarchs in a client database must also be flagged as politically exposed persons, or PEPs, according to another regulation under the Patriot Act, which provides monitoring requirements of these individuals and businesses. Insurers can legally do business with PEPs, provided they do not exhibit suspicious activity indicating corruption or money laundering. Russian PEPs often title their U.S. property ownership and financial services accounts under the names of their family to avoid being flagged by U.S. financial institutions. The manual identification process of such individuals in a carrier’s client database is daunting and can cost insurers time, staff and other resources.

However, the cost of not complying and mitigating risk is far more dire if a Russian PEP in an insurer’s data becomes part of the SDN list, making them a sanctioned PEP, and they do not realize it in time.

Under federal OFAC law, the government prohibits U.S. companies from doing business with SDN-listed entities, including PEPs on the SDN list.

The U.S. government regards OFAC sanctions violations as grave threats to national security and foreign relations, and OFAC issues hefty civil and criminal penalties for those who fail to comply. Civil penalties can reach $1 million in fines and up to 20 years in prison, while criminal penalties range from $250,000 for individuals to $1 million for organizations or twice the pecuniary gain or loss from the violation.

In addition to the fines, the negative press associated with such violations is damaging to the reputation of carriers and can result in major losses of business. It is vital for organizations to understand who their customers are so they can remain compliant with laws and mitigate risk.

A Preventive Approach

To cope with potential damage to their reputation and significant fines, insurers should take a risk-based approach in implementing an operational workflow to most efficiently incorporate sanctions and PEP list screening.

OFAC requirements do not state how to comply with the rules. However, in November 2024, OFAC updated its FAQs clarifying activities for which it recommends insurance companies screen. Below are some of the applicable activities or transactions subject to screening.

  • Checking new policyholder(s) at issuance, renewal and policy amendment/rebinding
  • Screening names/businesses associated with policy renewals
  • Checking all beneficiaries
  • Checking new brokers or agents
  • Checking IT consultants
  • Scanning claims submissions and payments
  • Checking policyholders before making workman’s compensation payments
  • Checking IP addresses
  • Scanning worldwide travel assistance payments made under a global policy for incidents or damages
  • Scanning the locations the insured subject will use
  • Regularly scanning the complete customer database based on the institution’s degree of risk and OFAC updates

All the above needs to be done each time OFAC updates its list.

Automation Is the Answer

Manually screening and filtering for both OFAC entities and PEPs, including family members and associates, is a tall order, and one that even the most sophisticated of operations would have trouble accomplishing.

Industry best practice is to automate screening. One reason is that the rate of false positive matches returned when screening global PEP data is extremely high, due to the global content, common names in the dataset and the volume of entries — between 2 million and 3 million names. Efficient automation, brilliant data architecture and sophisticated matching rules help cut down the workload resulting from false positive matches and unveil the potential presence of actual PEPs in your client database. At LexisNexis Risk Solutions, our WorldCompliance database with Bridger Insight XG screens for both OFAC and for PEPs, their close business associates, family members and businesses they own or operate. It helps place high-risk and prohibited profiles at an insurer’s fingertips, making customer due diligence on PEPs easier and more focused.

Carriers need to protect themselves with anti-money laundering tools to ensure they are not doing business with the enemy and build a strategy to deal with the ever-changing compliance landscape and the evolving complexities. A solution continually developed with client input is a great and natural ally when dealing with millions of names.

Get the best and most reliable tools to help ensure you are compliant with OFAC, as well as to implement a risk-based approach to manage the nonregulatory risks to your business.

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