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ACLI Wants Certain Products Exempted From Money Laundering Rule

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Life reinsurance, group insurance, term life and credit life should be exempted from the Treasury Departments proposed regulation aimed at combatting money laundering, the American Council of Life Insurers says.

In formal comments filed with Treasury, the Washington-based ACLI says these products do not contain features that lend themselves to be used as money laundering vehicles.

In addition to the requested exemptions, ACLI is asking Treasury to revise its proposed rule to clarify its application to independent agents and to broker-dealers already subject to anti-money laundering requirements.

The National Association of Insurance and Financial Advisors, Falls Church, Va., is also asking Treasury to clarify training requirements that apply to agents and brokers.

The proposed rule requires insurers to provide for on-going training. But NAIFA notes that some independent agents and brokers sell policies for many companies.

Treasury, NAIFA says, should encourage the insurance industry to work together to design acceptable training programs and indicate that outside vendors, including trade associations, can offer training.

This would free individual companies from sustaining duplicative and unnecessary costs to develop and implement virtually identical programs, and producers would not be required to attend duplicative training sessions, NAIFA says.

For its part, ACLI is asking Treasury to resolve issues involving life insurers and independent agents.

The proposed rule suggests that independent agents be “integrated” into a life insurers anti-money laundering program.

But ACLI notes that life insurers would be confronted with a variety of tasks under this standard.

These include renegotiating hundreds, if not thousands, of contracts to obligate agents to provide information to the insurer, ensuring that agents are properly trained, avoiding conflicting programs and auditing agent programs.

ACLI says it recognizes the difficulties for Treasury in developing regulations for a group that is as diverse and decentralized as agents.

“Nevertheless, we believe that it is both unworkable and unduly burdensome to impose the mandate on life insurers to integrate agents into the life insurers anti-money laundering programs,” ACLI says.

ACLI asks Treasury to issue guidance accompanying the regulation to clarify that life insurers are not required to integrate independent agents into their anti-money laundering programs or are required to undertake massive recontracting efforts.

ACLI says independent agents should be required under the regulation to provide certain information to insurers.

Moreover, the regulation should allow independent agents to meet the training requirements through certification, ACLI says.

Instead of having to train with each life insurer the independent agent represents, the agent should be able to certify that he or she has completed a program that covers the core elements of an acceptable program, according to ACLI.

In addition, ACLI says, Treasury should establish a central registry of agents who are certified. This is important, ACLI says, since agents often represent different companies at different times.

Turning to broker-dealers, ACLI says a registered representative already subject to anti-money laundering requirements applied to a broker-dealer should not be subject to duplicative compliance regarding the life insurer.

As for the request that certain life insurance lines be exempted from the regulation, ACLI says these lines are not useful for money laundering.

For example, ACLI says, the reinsurance business does not allow for a seamless transfer of funds to disguise their true origin.

“On the contrary, the transactions of reinsurance typically involve two corporate entities heavily regulated by the states,” ACLI says.

Moreover, ACLI says reinsurance does not possess the elements of “stored value” and “transferability” described in the proposed rule as features of money laundering vehicles.

Similarly, ACLI says, group life and group annuity insurance do not allow individuals to manipulate contributions.

Contributions, ACLI notes, are made by the employer, not the employee. As with reinsurance, ACLI says, features such as “stored value” and “transferability” do not apply to group products.

The same holds for term life and credit life, ACLI says. Term life policies, ACLI notes, have no cash value and do not offer dividends.

As for credit life, ACLI says, the product is offered through lending institutions as protection agains the risks of an unpaid debt. There is no opportunity for funds to be laundered through this type of policy, ACLI says.

Finally, ACLI takes issue with certain comments in a discussion preceding the text of the proposed rule which describes life insurance products as “posing a significant risk of money laundering.”

ACLI says that statement has no supporting facts or statistics, and is an “affront” to the valuable benefits offered by life insurance products and to the services offered by life insurers.

If Treasury has any information on cases concerning the use of life insurance for money laundering, that information should be released, ACLI says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 2, 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.


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