67. If my policyholder, who is a U.S. person, requests a change of beneficiaries and designates a cousin living in Cuba as a beneficiary under the life insurance policy, what shall I do?
In general, an insurance policy is considered "property" and a beneficiary’s interest in the policy is considered an "interest in property" that may require blocking under the applicable regulations. The Cuban Assets Control Regulations, however, contain a general license that deals with transactions involving blocked life insurance policies. 31 C.F.R. § 515.526. In this case, the only blocked interest is that of a beneficiary, so the general license would authorize the insurer to accept premium payments and interest on policy loans as well as to pay loans to the insured or process the insured’s request for a change of beneficiary. Also, the insurer would be authorized under the general license to deduct premiums from cash surrender value, if any, or accumulate dividends or otherwise increase cash surrender value on the books of the insurer, pursuant to the terms of the policy. However, the insurer usually cannot pay an entire claim (the face amount of the policy) to the beneficiary without a specific license from OFAC. Recent amendments to the Cuba regulations authorize by general license remittances to a Cuban beneficiary of up to $300 per quarter from a blocked account at a U.S. banking institution if the funds in that account were deposited there as a result of a payment from a life insurance policy triggered by the death of the policy holder. If you have a blocked policy, you should seek legal advice or contact OFAC for further guidance regarding the handling of that particular account. [05-01-03]
1) Removed, see FAQ # 796 - "Are specific licenses still required for transactions relative to the administration of a Cuban estate? 515.570(g) now permits remittances beyond that which was allowed at the time of this FAQ.
2) Even though obsolete with regard to Cuba, the detail provided concerning how OFAC treats policies involving an SDN beneficiary interest may be of use for guidance in other blocking contexts.
Note that the version of 515.526 discussed here treated all life insurance policies in which a Cuban had a beneficial interest to be "blocked" in their entirety, such that the servicing of those policies required a general license that contained an exception for payments to blocked beneficiaries. See https://www.govinfo.gov/content/pkg/CFR-2002-title31-vol2/xml/CFR-2002-title31-vol2-part515.xml.
3) One thing that FAQ does not address is just what sort of act a person must take in order to "name a beneficiary" such that the interest in property requires blocking. Presumably some close to the "concrete instruction" standard applicable to wire transfers applies, but in this context it is more difficult to apply. Compare OFAC FAQ # 53 - Blocking and Rejecting Transactions, dealing with the difference between "inquiry" and "instructions."