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Life Health > Life Insurance

Anti-Money Laundering Rules Finalized For Insurers

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Agents and brokers won’t be required to have their own programs


Life insurance companies–but not agents–will be required to comply by next June with anti-money laundering rules applicable now only to other financial services industries under regulations finalized last week by the Treasury Department.

The regulations require the filing of a form when cash of $5,000 or more is provided to pay for an insurance policy covered under the regulation, whether in an individual transaction or in aggregate. “This threshold amount is not limited to insurance policies whose premiums meet or exceed $5,000; rather, it includes a policy in which the premium or potential payout meets the threshold,” the regulation says.

The new regulations, in the works for three years, will go into effect six months after they appear in the Federal Register, said Treasury’s Financial Crimes Enforcement Network said. The agency also proposed a form companies can use to comply with the program; the companies will have 60 days to comment on the proposed form before it is approved for use.

Most life insurance products, with the exception of group insurance policies, will be covered under the program. These include life insurance contracts, annuities and any other insurance products that have cash value or investment features.

At the same time, the National Association for Variable Annuities said the rule recognizes that broker-dealers whose representatives sell variable annuities as securities will be able to comply with anti-money laundering rules under existing regulations.

“The new rule on anti-money laundering programs for insurance companies recognizes that VAs and variable life insurance contracts are securities under the federal securities laws and must be sold by registered broker-dealers who are themselves required by other Treasury rules to maintain anti-money laundering programs,” said NAVA general counsel Mike DeGeorge.

The final rule says that an insurance company should consider whether its agent or broker is required to establish its own AML program and “could generally rely on the agent’s own program requirements to address issues at the time of sale if reasonable (i.e., the insurer knows of no defect in the agent’s program), while the insurer’s program should focus on the ongoing administration of the covered product.”

NAVA had recommended that “such reliance be permitted in our comment letters to Treasury,” DeGeorge said.

The American Council of Life Insurers said it found the new rules “to be clear and instructive,” adding many life insurers have already implemented voluntary anti-money laundering procedures based on guidelines developed by ACLI in 2002, so transitioning to the final rule should occur in good order.

The agency said insurance agents and brokers will not be required to have separate anti-money laundering programs. “However, as an integral part of the insurance industry, given their direct contact with customers, insurance agents and brokers must be integrated into an insurance company’s anti-money laundering program and monitored for compliance.

“An insurance company’s anti-money laundering program also must include procedures for obtaining relevant customer-related information for an effective program, either from its agents and brokers, or otherwise,” the new rules say.

Basic Elements

At a minimum, insurers subject to the rule requiring an anti-money laundering program must establish a program that comprises four basic elements:

o A compliance officer who is responsible for ensuring that the program is implemented effectively.

o Written policies, procedures and internal controls reasonably designed to control the risks of money laundering, terrorist financing, and other financial crime associated with its business.

o Ongoing training of appropriate persons concerning their responsibilities under the program.

o Independent testing to monitor and maintain an adequate program.


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