Life insurance agents are tentatively praising the Treasury Department for excluding agents from those who will have to directly comply with a proposed rule aimed at combatting money laundering by terrorists.
“We advocated a common sense approach to Treasury based on how life insurance agents do business,” says David Winston, vice president of government affairs for the National Association of Insurance and Financial Advisors, Falls Church, Va.
Nonetheless, Winston says, he is reviewing the proposal and may file comments.
He notes that while agents are excluded from direct responsibility under the proposed rule, it also says that life insurance companies will be required to integrate their agents and brokers into their own anti-money laundering programs.
Winston says he needs to review that language.
Carl Wilkerson, chief counsel with the American Council of Life Insurers, praises Treasury for issuing a sensible proposal that avoids a one-size-fits-all approach.
The framework, Wilkerson says, is conceptual rather than a list of dos and donts. He adds that it closely tracks previous proposals aimed at mutual funds and broker/dealers.
Regarding the role of agents, Victoria Fimea, senior counsel with ACLI, says that in its discussions with Treasury, ACLI discussed the differences between captive agents and independent agents and how each could be folded into the requirements.
In terms of independent agents, Fimea said, the proposal will require a substantial investment of time between companies and agents to determine the best approach. She adds that some contract provisions may have to be renegotiated.
The proposed rule was mandated by Congress under the USA Patriot Act, which was enacted in the wake of the Sept. 11 terrorist attacks as a means to upgrade the ability of law enforcement authorities to track the funds of terrorist organizations.
The proposed rule, issued last week, applies only to life insurance companies. The rule says that permanent life insurance policies that have a cash surrender value are particularly inviting money laundering vehicles.
The rule cites taking loans against the cash value as one means of money laundering.
Annuity contracts also pose a significant risk of money laundering because they allow the exchange of illicit funds for an immediate or deferred income stream, the rule says.