Anti-Money Laundering Rule Proposed

Although life agents are not included directly in the rule, it says they play an important role in the effort to combat money laundering.

“Because of their direct contact with customers, insurance agents are in a unique position to observe the kind of activity that may be indicative of money laundering,” the rule says.

As examples, the rule cites the lump-sum purchase of a policy using multiple money orders or the purchase of an annuity by a customer who expresses little or no interest in the details.

These are items that may not be known by the insurer, the rule says, and thus, each company must develop and implement an anti-money laundering program that integrates its agents.

At a minimum, the rule says, the program must be based on an assessment of the risks associated with its products, customers, distribution channels and geographic locations. Issues such as means of payment are a key component of this assessment, the rule says.

Insurance companies must obtain all the information needed to make their programs effective, including information maintained by their agents and brokers, according to the rule.

Thus, it continues, some insurers may need to amend their existing agreements with their agents and brokers in order to comply.

The rule adds that insurance companies typically conduct operations through agents and third-party service providers. Despite this, the rule says, companies remain fully responsible for the effectiveness of their anti-money laundering programs.

Insurers, the rule says, must ensure that federal examiners are able to obtain information and records relating to their programs and to inspect their affiliated agents or third parties.

In addition to developing a program, insurers must designate a compliance officer responsible for administration.

This person, the rule says, must be someone competent and knowledgeable regarding the legal requirements and money laundering issues. In addition, this person must have full responsibility and authority to enforce the procedures.

In addition, insurers must provide for education and training of their employees and establish and provide for independent testing of the program on a periodic basis.

Comments on the proposed rule are due within 60 days after it is published in the Federal Register. Treasury is inviting comments on several issues.

These include whether the rule should be limited to life insurers or expanded to other insurers, including health, whether producers should be required to establish anti-money laundering programs, and what factors should be considered as part of an insurance companys risk assessment responsibilities.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 23, 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.