Insurers Ask Patriot Act Reporting Waiver
NU Online News Service, April 12, 3:07 p.m. EST?A group of insurance trade groups met yesterday with the U.S. Treasury Department, seeking exemptions for property-casualty insurers from the U.S. Patriot Act reporting provisions.
The recently enacted Patriot Act is aimed at detecting the money laundering schemes of terrorists.
Spearheaded by the National Association of Independent Insurers, which is based in Des Plaines, Ill., the group includes the Alliance of American Insurers, of Downers Grove, Ill, and the National Association of Mutual Insurance Companies, of Indianapolis, Ind.
The group told Treasury officials that the reporting requirements of the Patriot Act do not apply to p-c insurers. The group pointed out that those insurers collect premium from policyholders but are not involved in setting up large accounts for investment purposes that could be used for money laundering by terrorists.
"Title III of the Patriot Act is clearly directed at financial institutions such as banks and security brokers, " said Kathleen Jensen, NAII insurance services counsel.
"Although sections of the Act could apply to life insurers, the nature and process of business for property-casualty insurers preclude us from inclusion," she added.
Specifically, the group is seeking exemptions from Sections 311, 312 and 326 of the statute.
NAII explained that Section 311 authorizes the Secretary of the Treasury to define by regulation the term "account," referring typically to accounts outside of the United States, the NAII explained.
Ms. Jensen pointed out that while p-c insurers refer to premiums as accounts, premium is actually payment for insurance coverage, and it does not earn interest. Nor is it kept for investment purposes for individuals, she noted.
Section 312 describes entities that establish, maintain, administer or manage a private banking account or "correspondent," the NAII said. The trade groups do not believe that this definition applies to the type of business p-c insurers handle.
Section 326 concerns the opening of a new account, which would require informational recordkeeping to verify a person's identity on an account.
According to the NAII, insurers agree that the Patriot Act's definition of "account" does not apply to premium-paid accounts held by p-c insurance companies.
Insurers should be exempted from all of these sections, Ms. Jensen stated, because the actual cost of reporting will provide no additional protection against money laundering or terrorism.
On the other hand, the three trade groups said that three other sections of the Patriot Act should apply to the p-c industry.
Sections 314 and 318 call for cooperation among financial institutions and require that companies not knowingly become involved in an unlawful financial transaction. Section 352 establishes guidelines for the creation of anti-money laundering programs within insurance companies, the NAII explained.
The Treasury Department did not tell the three trades when it would be issuing a ruling on their exemption request. However, the trades were invited to submit their concerns in writing and to work with the Treasury on language that clearly identifies how p-c insurers would need to comply with specific sections.
The group said it hopes to have a ruling by the first compliance deadline on April 24.
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