IT Systems Play A Key Role In Responding To Terrorism
By Ara C. Trembly
In the post-9/11 era, financial services companies, including insurers, must utilize technology to meet federally mandated guidelines for guarding against money laundering and other “suspicious activities,” said Scott R. Harrison, a partner in PPMG, LLP, New York.
Speaking at the LOMA Systems Forum here, Harrison, formerly deputy superintendent with the New York Insurance Department, said the events of Sept. 11, 2001, showed us that “insuranceis an essential part of our national infrastructure.”
While property-casualty insurers bore the brunt of the financial damage from 9/11, Harrison said the life insurance industry also took a major hit, adding that future events could be equally serious for life companies. He emphasized that information technology professionals are a critical part of an infrastructure that must be protected.
According to Harrison, the USA Patriot Act, passed in October 2001, “imposes” enforcement duties on financial services companies with respect to anti-money-laundering activities. The Act was enacted by Congress as a way of better tracking the assets of terrorist groups.
Harrison said the Act calls for minimum standards for identifying customers who open accounts. Overall, financial services firms must develop an anti-money-laundering compliance program, verify customer information, report suspicious activity and perform “enhanced due diligence,” he explained.
“Every piece of information [regarding accounts and transactions] must be under control,” Harrison said. “Its a huge, huge problem. Banks are still struggling with this. Your systems have not been designed to do law enforcement detection.”
In order to create a compliance program, he noted, financial institutions need to develop internal policies and controls, designate a compliance officer, conduct ongoing employee training, and have an independent audit function to test the program.