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Ransomware payments will be more closely scrutinised in 2021

  • Market Insight 14 December 2020 14 December 2020
  • Global

  • Insurance 2021 - the year ahead

There has been a steep rise in ransomware attacks in 2020, and the legality of paying ransomware fines will be under increasing legal and potentially even political scrutiny in 2021.

Ransomware attacks rose 50% this year.[1] This exponential rise is resulting in growing regulatory attention as significant amounts of money are diverted by criminal organisations but also by state-sponsored threat actors and also potentially terrorists.  This new scrutiny raises the spectre for insureds and cyber insurers alike that ransomware payments may be found to breach international sanctions, money laundering and anti-terrorism laws. 

In October, the US Treasury’s Office of Foreign Assets Control (OFAC) issued new guidance to companies that clarify the framework for ransomware payments by victims, insurers and other service providers involved in breach response services. The advice warned that such payments may be violating OFAC regulations and could be encouraging further attacks.

OFAC also warned that it may impose civil penalties for ransom payment sanctions violations based on ‘strict liability.’ This means that anyone found in breach may be held liable, even if they were unaware that the payment had broken US sanctions law.

Other Western regulators are also turning their attention to ransom fine payment as political concerns grow over where payments are ending up.

Heightened regulatory scrutiny poses a significant risk to both insureds and their insurers. There needs to be increased clarity over what are acceptable payments and what are not. There will also be a requirement for enhanced checks and precautions to be undertaken to ensure compliance with all international regulatory requirements before any ransom fines are paid in 2021.

View all our Insurance 2021 predictions here

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