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Insurers have been told in “unequivocal terms” by the U.S. Treasury Department that proposed regulations establishing guidelines to meet requirements of the U.S. Patriot Act will be released within two weeks, says Carl Wilkerson, chief counsel of securities and litigation, with the American Council of Life Insurers.

When the regulations for insurers are published, they will be a cross between regulation for broker-dealers and mutual funds, he adds.

Treasury has also indicated it will be both the “interpreter and enforcer of regulations,” Wilkerson says.

The Patriot Act mandates that all financial services entities have anti-money laundering programs in place by April 24, 2002.

The Treasury Department, which is responsible for creating regulations for the law, released rules for financial services businesses, including mutual funds, credit card companies, and securities brokers and dealers registered with the Securities and Exchange Commission.

However, Treasury said it would defer for no more than six months regulations pertaining to other players, including insurers and investment companies other than mutual funds.

The deferral, according to Wilkerson, was the result of a “tall learning curve” that Treasury officials needed to become better acquainted with the state-regulated insurance industry.

A positive about the regulations is they are likely to be conceptual rather than a list of ‘dos and don’ts,’ he says.

According to regulations released on April 23, mutual funds must develop and implement an anti-money laundering program by July 24. The program must:

–Establish and implement policies, procedures and internal controls to prevent money laundering that includes achieving compliance with the Bank Secrecy Act;

–Provide for independent testing of compliance;

–Designate responsibility for monitoring internal controls of the program; and

–Provide ongoing training for appropriate persons.

Scott Harrison, a partner with KPMG LLP, and head of its insurance regulatory practice in Washington, says Treasury wants to be sure it gets it right with respect to insurers and designs regulations that reflect the industry.

He notes that for insurers with broker-dealers, the b-ds will be required to comply with regulations specific to these operations, while insurers themselves will fall under regulations specific to the insurance industry.


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 29, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.