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FinCEN Wants You to Help Fight Foreign Kleptocrats

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What You Need to Know

  • FinCEN wants to hear about large cash payments.
  • The requirements affect issuers of permanent life policies and annuity contracts.
  • Insurers should offer agents and advisors suspicious activity reporting tools.

The Financial Crimes Enforcement Network says this is a great time for people involved with all kinds of financial services — including permanent life insurance and annuities — to help spot and report foreign public corruption.

FinCEN asked financial institutions to focus on identifying kleptocrats in an advisory released Thursday.

“Russia is of particular concern as a kleptocracy because of the nexus between corruption, money laundering, malign influence and armed interventions abroad, and sanctions evasion,” FinCEN officials said in the advisory.

Efforts to park foreign kleptocrat money in the United States distort U.S. markets, and fighting kleptocracy is a way to protect democratic institutions around the world, officials said.

Officials called for financial institutions to look out for transactions that involve “red flags” such as:

  • State-owned companies working with professional services providers in sketchy jurisdictions.
  • Foreign government officials using personal accounts to conduct official business.
  • Use of lawyers, accountants, financial advisors or other third parties to hide customers’ identities.
  • Efforts to use fake email addresses and false invoices to hide the origin or ownership of money.

Here are six more things to know about FinCEN’s efforts to see what corrupt foreign governments are doing with their money in the United States.

1. The U.S. government began implementing modern financial crime fighting rules and programs in the early 2000s.

Governments around the world began drafting the crime fighting proposals in the late 1990s. Privacy and red tape concerns slowed U.S. adoption at first, but the Sept. 11, 2001, terrorist attacks on New York and Boston changed federal views of the proposals overnight.

FinCEN posted a 2005 guide with suspicious activity reporting information for insurance companies and insurance producers here, and a 2006 guide that refers to requirements for mutual fund managers, including variable annuity and variable life insurance programs here.

The National Association of Insurance Commissioners’ Antifraud Task Force has posted an easier-to-use suspicious activity report guide for insurance companies and insurance producers under the documents tab on its section of the NAIC’s website.

2. The heart of the kleptocrat detection efforts is the Form 8300 — Report of Cash Payments Over $10,000 Received in a Trade or Business.

Insurance agents, financial planners and other personal advisors do not have a direct responsibility to file Form 8300 reports, but they are supposed to let insurers know when the insurers should file those reports with FinCEN.

An insurer must file a Form 8300 for a cash payment for $10,000, and it can file a Form 8300 for a smaller cash payment that seems questionable.

If an insurer thinks a cash payment it´s reporting might be related to foreign public corruption, it should use Box 1b to note that the payment is a “suspicious transaction” and put “CORRUPTION-FIN-2022-A001″ in the Comments section of the report.

3. Insurers have a separate obligation to send FinCEN suspicious activity reports.

The Form 8300 is meant for reporting cash payments that, in many cases, have nothing to do with crime.

Insurers that believe a large cash payment or any other transaction seems highly suspicious are supposed to file separate suspicious activity reports.

SAR requirements do not affect group insurance products, charitable annuities, health insurance, term life insurance or reinsurance contracts.

The requirements do affect issuers of individual permanent life insurance policies, such as whole life policies and universal life policies; individual annuity contracts; and any other individual insurance products with cash-value features.

4. Insurers are supposed to tell you what they want you to do about large cash payments and and other red flag behavior.

The insurers you work with are supposed to have anti-money laundering programs. Those programs should include procedures you can use to tell the insurers about potential problems.

5. FinCEN might take a long time to use any information you help file.

Frank Vogl, the co-founder of Transparency International, said Thursday, during an interview on the PBS show Amanpour & Company, that FinCEN has had to few analysts available to go through SARs thoroughly, and that it needs more money and more analysts.

Financial services groups could play a role in helping FinCEN get the resources it needs to make effective use of reports, and they may also be able to help by sharing some of the kinds of tools they use to detect credit card fraud and insurance claim fraud.

6. Stepped-up efforts to detect and stop kleptocrats may trip up law-abiding people.

Some existing financial services industry “know your customer” rules can lead to complicated bureaucratic mazes for young people who are just starting out or adults who move.

In some European countries, for example, simply getting a local bank account that suits local conditions is often difficult, because local banks may refuse to file the reports required by the U.S. Foreign Account Tax Compliance Act for for customers with relatively small checking or savings accounts.

Organizations such as the Financial Planning Association, Finseca, the National Association of Insurance Commissioners and the National Association of Insurance and Financial Advisors might have a role in getting FinCEN’s attention if new kleptocrat nets catch too many of the wrong fish.

(Image: Sergey Mironov/Shutterstock)