USA Patriot Act - Proposed Regulations Affecting Insurance Companies
By Alan B. Horn,
Carl A. Fornaris, and Ileana Gomez, Greenberg Traurig
View or download the PDF version of this Alert
On September 18, 2002, the United States Department of the Treasury proposed
new USA PATRIOT Act regulations that would require certain insurance companies
such as providers of life insurance and annuities products to establish
formal anti-money laundering ("AML") programs. Implementation of these programs
will require such companies to devote substantial resources to achieve compliance.
Comments on these important proposed regulations must be received by
the Treasury Department no later than 60 days after publication in the
Under the Bank Secrecy Act, as amended by the USA PATRIOT Act, every
"financial institution" is required to establish an AML program. The statutory
definition of "financial institution" includes an "insurance company." However,
in an interim rule issued by the Treasury Department earlier this year,
insurance companies were exempted from the AML program requirement contained
in the PATRIOT Act. The proposed regulations – when issued in final form
– would eliminate the AML program exemption.
Specifically, the proposed regulations would define the term "insurance
company" to include any person engaged within the United States as a business
- the issuing, underwriting, or reinsuring of a life insurance policy;
- the issuing, granting, purchasing, or disposing of any annuity contract;
- the issuing, underwriting, or reinsuring of any insurance product
with investment features similar to those of a life insurance policy or
annuity contract, or which can be used to store value and transfer that
value to another person.
The definition explicitly covers those sectors of the insurance industry
offering life insurance and annuity products. Additionally, the third category
covers any business offering currently, or in the future, any insurance
product with an investment feature, and any insurance product possessing
both stored value and transferability. The rationale for the third category
is that such products allow a customer to place large amounts of funds into
the financial system and seamlessly transfer such funds to disguise their
Any insurance company that falls within one of these three categories
would be required to establish an AML program that includes, at a minimum:
- the development of internal policies, procedures, and controls;
- the designation of a compliance officer;
- an ongoing employee training program; and
- an independent audit function to test the program.
An insurance company’s written program also must be made available to
the Treasury Department upon request.
Exceptions. The definition of "insurance company" does not include
insurance agents or brokers as the Treasury Department believes the insurance
company is in the best position to design an effective AML program for its
products. The Treasury Department has, however, specifically invited comments
on whether the final rule should also require insurance agents and brokers
to establish and maintain an AML program because the insurance agents, in
dealing directly with customers, are in a unique position to observe the
kind of activity that may be indicative of money laundering.
* * *
The Treasury Department press release and proposed regulations are available
on the Treasury Department website at
© 2002 Greenberg Traurig
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