GAO Study Bolsters Case For FBI File Access Road Map bill would allow state insurance regulators to tap national crime database
Washington
A U.S. General Accounting Office study is providing support for a provision in the so-called "road map" regulatory reform legislation that would allow state insurance regulators access to the FBI's nationwide criminal history database.
In addition, a staff official at a key constituencythe Independent Insurance Agents and Brokers of Americasaid the Alexandria, Va.-based producer group is also supportive of the provision. IIABA sees the option as a means of weeding out the bad eggs who lose their license to sell insurance in one state, then move on to another state where they gain another license because there is no known clearinghouse that would provide notice of prior problems.
"We found that many state regulators, unlike their counterparts in the banking, securities and futures industries, continue to lack the legal authority to access the FBI's nationwide criminal history data," said GAO. "Consequently, regulators in other states cannot be sure that they are protecting insurance consumers from fraud by keeping individuals previously convicted of serious criminal behavior out of the business of insurance."
The report also found that financial regulators generally did not have ready access to all relevant data related to regulatory enforcement actions taken against individuals or firms.
The result of the study is a victory for Reps. Michael Oxley, R-Ohio, who chairs the House Financial Services Committee, and Richard Baker, R-La., who chairs a key subcommittee.
The pair shepherded legislation that passed the House in November 2001 that would have allowed state regulators across-the-board access to FBI files as part of the process of vetting applicants for state insurance licenses. The bill had another provision that would have allowed over 250 different regulators access to each other's files to ensure that "bad actors," who have committed fraud and other misdeeds, "cannot pull up stakes and move to another area or industry after being caught."
"We supported that bill thenespecially the provision allowing state regulators access to the FBI criminal files for licensing applications processing, and we continue to support the Oxley-Baker federal standards approach, and its inclusion of that provision," said Wes Bissett, senior vice president for government affairs and state relations at the IIABA.
The original legislation was drafted in the wake of the Martin Frankel scandal. Mr. Frankel, since convicted, was able to swindle millions of dollars from consumers in the insurance industry despite having already been banned from the securities industry by the Securities and Exchange Commission.
Reps. Oxley and Baker have copies of a staff draft of the bill in their possession, but have not indicated when they will release it.
Their plan is to expose the draft for public comment by early September, hold a hearing soon after Congress reconvenes on Sept. 7, and mark up the bill by the end of the month in preparation for floor action. While final action this year is unlikely, strong support in the committee and on the House floor could set the stage for passage early in the new Congress.
A key provision of the "road map" legislation they have drafted would require the U.S. Treasury Department and other agencies to provide state insurance regulators with access to the FBI's criminal data. The National Association of Insurance Commissioners has also been seeking such authority for several years.
The original bill in 2001 called for a panel of federal regulators to formulate a plan creating an information-sharing network within six months, and gave them an additional 18 monthstwo years from the enactment dateto establish the network.
Under that bill, a special subcommittee of the President's Working Group on Financial Markets would be given oversight of the network if the federal agencies couldn't set it up within the two-year time frame. It would have been headed by the secretary of the Treasury.
However, in talks after the bill passed the House, Treasury officials raised numerous objections, including concerns about its top official being forced to coordinate its implementation if federal regulators would be unable to agree on a common approach. Issues of privacy, who would be given access, and who would pay for it were also raised.
It is believed that the road map legislation will try to eliminate some of the issues by simplifying the requirement to allow state regulators access to the FBI crime files, perhaps through a secure system.
Reproduced from National Underwriter Edition, August 12, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.