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Insurance Companies
Required to Establish Anti-Money Laundering Programs and
File Suspicious
Activity Reports
Under two final rules announced today by the Financial Crimes
Enforcement Network (FinCEN), certain U.S. insurance companies are required
to both establish anti-money laundering programs and file Suspicious
Activity Reports. Insurance companies subject to these rules must establish
anti-money laundering program and start filing Suspicious Activity Reports
180 days after the date of the publication of the final rules in the
Federal Register.
The final rules apply to insurance companies that issue or
underwrite certain products that present a high degree of risk for money
laundering or the financing of terrorism or other illicit activity. The
insurance products subject to these rules include:
• permanent
life insurance policies, other than group life insurance policies;
• annuity
contracts, other than group annuity contracts;
• any other
insurance products with features of cash value or investment features.
At minimum, insurance companies subject to the rule requiring an
anti-money laundering program must establish a program that comprises four
basic elements:
• A compliance
officer who is responsible for ensuring that the program is implemented
effectively;
• 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;
• Ongoing
training of appropriate persons concerning their responsibilities under the
program; and
• Independent
testing to monitor and maintain an adequate program.
“These
rules represent key steps in ensuring that the Bank Secrecy Act is applied
appropriately to these businesses and in protecting the insurance industry
from potential abuse by those seeking to launder money or finance terrorism
or other illicit activity, said William J. Fox, Director of the Financial
Crimes Enforcement Network. “The rules enhance the protection of the
U.S. financial system generally, given that the characteristics of
financial products, including certain insurance products, can make those
products vulnerable to those seeking to launder money or finance terrorism
or other illicit activity.”
Anti-Money
Laundering Program Requirement for Certain U.S. Insurance Companies
Insurance
agents and brokers are not 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.
Importantly,
an insurance company that is subject to the requirement to have an
anti-money laundering program under another provision of the Bank Secrecy
Act is not required to establish a duplicate program under this rule. For
example, an insurance company may also be a registered broker-dealer in
securities. However, the company should evaluate the extent to which its
existing anti-money laundering program should be revised to appropriately
address the risks of doing business in insurance products covered by this
rule.
Under
the USA PATRIOT Act, financial institutions that have an obligation to
establish anti-money laundering programs are able to participate in the
sharing of information between financial institutions concerning terrorist
financing and/or money laundering. Once an insurance company subject to the
final insurance company anti-money laundering program rule has established
its anti-money laundering program, it may file a certification for purposes
of Section 314(b) of the USA PATRIOT Act.
Suspicious
Activity Reports Filing Requirement for Certain U.S. Insurance Companies
The
requirement to identify and report suspicious transactions applies only to
an insurance company, and not its agents or brokers. Insurance companies
are required to obtain customer information from all relevant sources,
including its agents and brokers, and to report suspicious activity based
on such information.
A new
Suspicious Activity Report form for insurance companies (FinCEN Form 108
– Suspicious Activity Report by Insurance Companies) will replace the
procedure of checking the suspicious transaction box on Form 8300 (Report
of Cash Payments Over $10,000 Received in a Trade or Business).
Consequently, it may be appropriate for an insurance company to file a Form
8300 as well as file FinCEN Form 108 when circumstances surrounding the
receipt of cash are suspicious.
Until
FinCEN Form 108 is published and effective, insurance companies may use FinCEN
Form 101 (Suspicious Activity Report by the Securities and Futures
Industries) to report any suspicious transactions. The words
“Insurance SAR” should be entered on the first line of the
narrative section.
The
threshold amount obligating an insurance company to report suspicious
transactions that are conducted or attempted by, at, or through the
institution is at least $5,000 (whether in an individual transaction or in
aggregate) in funds or other assets. 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. Nevertheless, insurance companies are encouraged to voluntarily
file Suspicious Activity Reports, if appropriate. An insurance company that
files a Suspicious Activity Report voluntarily is protected from civil
liability to the same extent as a company filing a Suspicious Activity
Report that is required under this final rule.
FinCEN
is also issuing a series of Frequently Asked Questions that are designed to assist insurance
companies in establishing their anti-money laundering and suspicious
activity reporting programs. FinCEN will continue to issue additional
guidance for this industry and will provide outreach and training about
these and related issues. Financial institutions may also call the FinCEN
Regulatory Helpline at 800-949-2732 for assistance.
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