Agents To Meet With Treasury About New Anti-Money-Laundering Rules
Insurance agent groups will be meeting with Treasury Department officials to determine the extent to which agents and brokers may have to comply with new anti-money-laundering rules established in the aftermath of the Sept. 11 terrorist attack.
The issue arises from the USA Patriot Act, which was enacted by Congress following Sept. 11 as a way of better tracking the assets of terrorist groups.
Section 352 of the USA Patriot Act requires all financial institutions to develop anti-money-laundering procedures.
David Winston, vice president of federal affairs for the National Association of Insurance and Financial Advisors, notes that an exemption from the anti-money-laundering provisions of the Bank Secrecy Act exists for agents who sell variable products.
In an earlier Dispatch (see NU, Jan. 21), it was noted that Treasury issued a notice of proposed rulemaking which said that a current exemption from anti-money-laundering statutes applied to limited service broker/dealers that sell variable annuities would likely be revoked.
However, Winston says, most of NAIFAs members who sell variable products also sell mutual funds, and are thus already subject to the act.
NAIFA will be in discussions with Treasury to develop rules that are workable, that make sense and that agents can live with, Winston says.
A recent legal memo produced for agent groups notes that Treasury has broad discretion to implement regulations that could bring all agents and brokers under the scope of federal anti-money-laundering laws.
If Treasury exercises that discretion, the memo says, agents and brokers will have to establish anti-money-laundering programs that include several elements.
Specifically, agents and brokers will have to develop internal policies, procedures and controls, designate a compliance officer, develop an ongoing training program and establish an independent audit function to test the program.
The memo says agents will discuss with Treasury the fact that many agencies are too small to be in a position to implement extensive anti-money-laundering procedures, especially when there is a tangential relationship between insurance activities and anti-money-laundering activities.
Agents will note that insurance products do not lend themselves to money laundering because they require the demonstration of a loss to recover policy proceeds.
The only way to avoid this is to engage in fraud, agents say, and federal and state law enforcement mechanisms are already in place to deter fraud and detect money laundering.