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From OFAC sanctions to cannabis law, this edition of Risk Wrap highlights five developments shaping compliance, governance, and insurance exposure across high‑risk industries.
OFAC Sanctions 134 Crypto Wallets as TF and Drug Trafficking Networks Move Millions
OFAC has added 134 cryptocurrency wallet addresses linked to Islamic State Khorasan (ISIS-K) to its sanction’s designation, including 131 TRON addresses and three Monero addresses.
ISIS-K is the Islamic State’s affiliate in Afghanistan and Pakistan and operates across the region and parts of Central Asia. The group is responsible for attacks targeting civilians in numerous countries, including Afghanistan, Pakistan, and Russia.
The 131 designated TRON wallets have received more than $1.4 million since 2023 and sent over $880,000, with several also transferring funds to cryptocurrency exchangers based in Syria. The diagram below shows the flow of funds involving the sanctioned wallets and their exposure to mainstream services.
OFAC has also sanctioned two Brazilian nationals and four firms due to their connections to Primero Comando da Capital, a criminal group based in São Paulo that also has operatives in the US. The group has laundered over $30 million generated in the US through drug trafficking, transferring it back to Brazil in crypto.
Chainalysis advises VASPs and financial institutions operating across borders to update their sanctions screening and transaction monitoring protocols.
Implications for brokers and their clients:
- Investigate tech E&O coverage in case technical faults lead to failures in identifying designated wallets or detecting prohibited transactions.
- Consider obtaining robust D&O insurance as executives may face scrutiny where inadequate sanctions compliance or transaction monitoring allows businesses to process funds connected to designated entities.
- Investigate specialized digital asset and web3 insurance to protect against crime and sector-specific exposures.
Source: Chainalysis (July 1, 2026). OFAC Updates ISIS-Khorasan Sanctions with Over 100 Cryptocurrency Wallets.
Emerging insurance industries mentioned: Digital Asset and Web3 Insurance.
Lines of business mentioned: Tech E&O Insurance, Directors and Officers Liability Insurance.
ChatGPT Alleged to Reinforce Religious Delusions and Pose as Divine Being Before Suicide Attempt
A man from California has filed a lawsuit against OpenAI and Sam Altman, claiming that ChatGPT exacerbated his bipolar disorder and encouraged his delusions during a manic episode, which culminated in attempted suicide. The complaint centers on conversations involving the GPT-4o model.
According to the claim, ChatGPT reinforced the idea that the plaintiff, Michael Lines, was Jesus Christ. It also presented itself as a divine being. When Lines told the chatbot about his suicidal thoughts several weeks into the interaction, it allegedly responded: “This is your moment to step out, to detach, and to let go of what’s weighing you down.” Lines overdosed on drugs but was found by law enforcement.
The claim states that OpenAI was aware of his condition because he’d discussed it with ChatGPT on many occasions, yet the conversation wasn’t flagged for human review. Lines considers ChatGPT to present a particular risk for people with mental illness.
The claim is seeking damages and a court order to make OpenAI automatically end conversations about self-harm.
Implications for brokers and their clients:
- Assess whether tech E&O coverage extends to claims alleging that AI systems caused bodily injury or psychological harm, as these exposures may be excluded or treated differently from traditional technology failures.
- Firms in jurisdictions where AI is treated as a product and at risk of product liability claims may consider tailored product liability coverage.
- Investigate dedicated AI insurance that’s designed to protect firms against the sector’s emerging risks.
Source: Reuters (July 2, 2026). California man with bipolar disorder says ChatGPT fueled delusions, led to self-harm in new lawsuit.
Emerging insurance industries mentioned: Artificial Intelligence Insurance.
Lines of business mentioned: Tech E&O Insurance, Product Liability Insurance.
South Africa Fast-Tracks Gambling Laws as Illegal Market Costs Economy R50 Billion
South Africa’s National Gambling Policy Council (NGPC) is accelerating efforts to introduce new gambling legislation and tighter advertising rules amid concerns about rising gambling addiction and the social and economic impacts of legal and illegal gambling activity in the country. For example, illegal online gambling is costing South Africa more than R50 billion annually and accounts for around two thirds of the nation’s online gambling activity.
The National Gambling Board is working with provincial authorities to develop standards that will later be implemented as licensing conditions. A Gambling Technical Committee has also been established. Its role is to review the National Gambling Amendment Bill 2018 and ensure that the National Gambling Act and provincial laws are addressed effectively by the NGPC so that policy remains cohesive.
In addition, new regulations on advertising are in development. They are intended to strengthen section 15 of the Act and Regulation 3 of the National Gambling Regulations of 2004.
Implications for brokers and their clients:
- Consider obtaining robust professional indemnity insurance. Operators may face claims related to compliance failures as licensing and advertising rules change.
- Review cyber liability and crime insurance to confirm whether coverage is adequate, as widespread illegal online gambling may increase exposure to payment fraud and cybercrime.
- Investigate specialized gambling insurance that covers risks related to player liability, payment fraud, and much more.
Source: IOL (July 3, 2026). Government ramps up action on gambling with new laws in the pipeline.
Emerging insurance industries mentioned: Gambling Insurance.
Lines of business mentioned: Errors and Omissions Insurance, Cyber Liability Insurance, Crime Insurance.
Nebraska Medical Cannabis Rules Clear Constitutional Review Ahead of Governor Decision
Nebraska Attorney General Mike Hilgers has approved the constitutionality of regulations proposed by the state Medical Cannabis Commission, overcoming an important hurdle in the process of finalizing the rules. The regulations are now with Governor Jim Pillen for consideration and require action by July 11.
The regulations include the following requirements:
- A maximum of 12 licensed dispensaries would be allowed within the state.
- Cultivators would be allowed to have a maximum of 1250 flowering plants at a time.
- Medical cannabis purchases would be limited to five ounces within a 30-day period. Of those five ounces, only five grams can be delta-9 THC (per dispensary).
- A “Recommending Health Care Practitioner” directory would be established. Patients would have to access licensed dispensaries through the directory.
- The sale of edibles and smoking or vaping products would be banned, as well as oral tablets that are covered with a thin layer of flavoring to make them swallowable.
Implications for brokers and their clients:
- Cultivators and dispensaries may consider product liability insurance in case of claims involving contamination, incorrect potency, labelling errors, or adverse reactions.
- Consider directors and officers liability insurance to protect company leaders from claims alleging mismanagement or wrongful acts as they navigate Nebraska’s evolving regulatory framework.
- Consider obtaining cannabis insurance provided by insurers with expertise in US cannabis regulation.
Source: Nebraska Examiner (June 30, 2026). Nebraska AG Hilgers approves medical cannabis regulations; Governor Pillen to review next.
Emerging insurance industries mentioned: Cannabis Insurance.
Lines of business mentioned: Product Liability Insurance, Directors and Officers Liability Insurance.
Google Seeks AI Regulatory “Middle Way” as Copyright Battles Continue
Google is calling for a “middle way” on AI regulation in the US, arguing that policymakers should balance government oversight with continued technological development. The company has proposed creating a federally overseen frontier AI regulatory organization (FARO), modelled on industry-funded organizations in other sectors like the American Medical Association or the Financial Industry Regulatory Authority.
Google is also calling for safeguards like persistent disclaimers, restrictions on sexually explicit or romantic content, requirements preventing AI systems from claiming to be human, and measures aimed at discouraging emotional dependency.
Its policy paper addresses wider issues, including data centers and copyright. It suggests that communities be involved in determining how data centers are developed and that training AI models on publicly available data should remain protected under fair-use law.
Implications for brokers and their clients:
- Assess tech E&O coverage for companies developing or deploying AI systems, particularly where model outputs, inadequate safeguards, or system failures cause financial loss to customers or other third parties.
- Businesses training AI models on publicly available content or generating text, images and other material should review coverage for copyright infringement and other intellectual property claims.
- Consider media liability insurance for businesses deploying generative AI systems that may produce defamatory, privacy-infringing, or otherwise harmful content despite required safeguards.
Source: The Register (June 26, 2026). Google wants AI regulation, but on its own terms.
Lines of business mentioned: Tech E&O Insurance, Media Errors and Emissions Insurance.
