Money Laundering Law Gets Agent Focus

By Steven Brostoff, Washington Editor

NU Online News Service, Feb. 21, 10:18 a.m. EST?Insurance agent groups will be meeting with Treasury Department officials to determine the extent to which agents and brokers may have to comply with new anti-money laundering rules established in the aftermath of the Sept. 11 terrorist attack.

The issue arises from the USA Patriot Act, which was enacted by Congress following Sept. 11 as a way of better tracking the assets of terrorist groups.

Section 352 of the USA Patriot Act requires all financial institutions to develop anti-money laundering procedures.

Patricia Borowski, senior vice president with the Alexandria, Va.-based National Association of Professional Insurance Agents, said that in earlier discussions, Treasury Department officials made clear that they intend to apply to USA Patriot Act to agents and brokers.

However, Ms. Borowski said, Treasury also appears to have authority to provide exceptions for certain lines of business. The entire agent community, she said, will be meeting with Treasury official to discuss the nature of the business, determine whether Treasury will consider exceptions, and try to identify areas where they will expect agents and brokers to respond.

Maria Berthoud, senior vice president of federal affairs with the Alexandria, Va.-based Independent Insurance Agents of America, said the entire agent community has become engaged in this issue.

The goal of the meetings, she said, is to make sure that the USA Patriot Act will not create any unnecessary burdens on agents.

According to a legal memo produced for agent groups, Treasury has broad discretion to implement regulations that could bring agents and brokers under the scope of federal anti-money laundering laws.

If Treasury exercises that discretion, the memo says, agents and brokers will have to establish anti-money laundering programs that include several elements.

Specifically, agents and brokers will have to develop internal policies, procedures and controls, designate a compliance officer, develop an ongoing training program, and establish an independent audit function to test the program.

The memo says that agents will discuss with Treasury the fact that many agencies are too small to be in a position to implement extensive anti-money laundering procedures, especially when there is a tangential relationship between insurance activities and anti-money laundering activities.

Agents will also note that insurance products do not lend themselves to money laundering because they require the demonstration of a loss to recover policy proceeds.

The only way to avoid this is to engage in fraud, agents say, and federal and state law enforcement mechanisms are already in place to deter fraud and detect money laundering.

Agents will also urge Treasury to examine what states are doing regarding money laundering and to consult with state regulators before imposing new requirements on the insurance industry.

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Money Laundering Law Gets Agent Focus

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