By

Washington

Life insurers are praising the final customer identification requirements applying to broker-dealers issued last week by the Treasury Department, saying they hope the philosophy underlying them will carry through to the pending rule covering insurance companies.

Carl Wilkerson, chief counsel for securities with the American Council of Life Insurers, Washington, says the final rule, which also applies to banks and mutual funds, takes a risk-based approach to establishing customer identification programs (CIP) that are based on circumstances.

He specifically praises several issues that are important to insurance companies.

First, Wilkerson notes, the final rule clarifies when a person becomes a customer. Under the rule, a person is a customer when there is an actual transaction.

Thus, a preliminary conversation with a person does not make that person a customer for purposes of the CIP program.

That, Wilkerson says, is very helpful for insurance distributors.

Second, he notes, if a financial institution is dealing with a group contract subject to Labor Department oversight, the group is not a customer for CIP purposes.

In addition, Wilkerson says, the final rule permits a financial institution to rely on another regulated U.S. financial institution to perform any part of the CIP.

Treasury provides the example of one broker who conducts securities trades on behalf of a customer through a clearing broker.

Under the regulation, the first broker is required to identify and verify the indentity of the customer, and the clearing broker can rely on that information without having to conduct a second verification.

In addition, Wilkerson notes the final rule provides some flexibility regarding procedures used to verify a customers identity.

He notes that the proposed rule would have required those covered by the legislation to make a copy of a customers identification, such as a drivers license.

In effect, he says, this could have required those who do business across a kitchen table to carry copying machines with them.

However, the final rule softens this requirement by instead requiring those covered by the act to record what they relied upon to verify identity.

The CIP rule is part of the USA Patriot Act, legislation that was approved following the Sept. 11, 2001, terrorist attack which requires financial institutions to establish anti-money-laundering programs that include customer identification.

In other news, the Association for Advanced Life Underwriting, Falls Church, Va., is planning to meet with 150 to 200 members of Congress this week during its annual meeting, says Association President Albert J. “Bud” Schiff, who is also president of Stamford, Conn.-based NYLEX Benefits.

The association is planning to visit a high percentage of Senators, Congressional leaders and members of the Congressional tax-writing committees, he says.

Schiff says they will specifically address key issues such as how businesses use life insurance to provide employee benefits and to protect against financial loss from the death of business owners or key employees.

In addition, he says, they will discuss the importance of nonqualified deferred compensation.

Both nonqualified deferred compensation and corporate-owned life insurance have come under Congressional scrutiny in recent months.

In addition to these issues, Schiff says that AALU members will discuss the need for consistent tax laws, which are necessary for effective long-term planning.

Finally, new legislation aimed at curbing unsolicited commercial e-mails known as spam is an improvement over previous versions of the bill but still raises concerns, industry representatives say.

The legislation, S. 877, is sponsored by Sens. Conrad Burns, R-Mont., and Ron Wyden, D-Ore., and seeks to make it easier for consumers to stop Internet marketers from sending them unwanted messages.

Under the legislation, all unsolicited commercial e-mail would have to contain a valid return e-mail address that would allow recipients to have their names removed from mass e-mail lists.

Once notified by a consumer, marketers would be prevented from sending any further messages to that person.

The Federal Trade Commission would have primary enforcement responsibilities under the legislation, although state insurance commissioners would have authority to enforce the law against insurance providers.

In addition, state attorneys general would be able to bring civil actions in federal court on behalf of residents of their states who receive unsolicited commercial e-mails and seek up to $1.5 million in damages.

Moreover, Internet Service Providers could file private lawsuits against spammers, also seeking up to $1.5 million in damages.

David Leifer, ACLI senior counsel, says that this is the third time that Sens. Burns and Wyden have co-sponsored an anti-spamming bill. Each version, he says, continues to get better.

The latest version, he says, is even closer to where ACLI thinks it should be. While ACLI at this time has no official position on S. 877, Leifer says, there are concerns.

In particular, he says, ACLI is concerned about the private right of action for ISPs and the ability of state attorneys general to file class-action type lawsuits.

These are not needed, Leifer says, since the legislation provides ample authority for regulatory agencies to enforce the provisions.


Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 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.