Proposal To Require ID Photocopies Has Problems, Insurance Groups Say
Requiring financial institutions such as insurance company broker-dealers to obtain photocopies of customer identification documents may be self-defeating, says the American Council of Life Insurers.
“A photocopying requirement could unnecessarily facilitate identity theft,” writes the Washington-based ACLI in a letter to the Treasury Department.
“A photocopy database of sensitive customer identification information could unwittingly enable terrorists and international money launderers to threaten national security,” the letter says. “Ironically, this could thwart rather than bolster the worthwhile purposes of the Patriot Act.”
The letter is a response to a Treasury Department request for comments on whether financial institutions should obtain photocopies of identification documents as part of their customer identification responsibilities under the USA Patriot Act.
The Act was enacted in the wake of the Sept. 11, 2001, terrorist attack with the goal of preventing terrorists from engaging in money laundering.
Under current rules, financial institutions are required to examine customer identification documents and provide a description of the documents as part of the customers file.
However, Treasury is now considering requiring a photocopy of the documents.
The ACLI letter notes that pragmatically speaking, a photocopying requirement would be functionally impossible to perform for insurance distributors who see customers in their homes.
ACLI says insurance agents do not carry photocopying equipment with them. Moreover, ACLI says, many types of identification, such as drivers licenses, have security features that prevent copying.
The National Association of Insurance and Financial Advisors, Falls Church, Va., agrees. In a separate letter to Treasury, NAIFA says it is unreasonable to require agents to carry portable photocopying equipment into their clients homes.
“Imposing photocopying requirements would also amount to a de facto requirement that all business be conducted in person,” NAIFA says.
NAIFA also cites the increased risk of identify theft from a photocopying requirement. “By requiring the compilation of personal data in one location, Treasury would inadvertently create new opportunities for thieves to pirate personal information from one source.”
In addition to urging Treasury not to adopt a photocopying requirement, NAIFA is asking it not to impose a five-year recordkeeping requirement on small businesses.
Agencies that operate as small businesses, NAIFA says, incur large costs in relation to their size when recordkeeping requirements are imposed.