Treasury Department Implements New Insurance Regulations

Christopher N. Slagle
Faith M. Williams
Bricker & Eckler LLP
November 2005

On November 3, 2005, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published two new rules in the Federal Register applying provisions of the USA PATRIOT Act of 2001 to certain insurance companies.

The effective date of the two rules listed below is December 5, 2005, with full compliance required by May 2, 2006.

Anti-Money Laundering Regulation

FinCEN’s anti-money laundering rule requires insurance companies to develop written programs designed to prevent their products from being used in money laundering activities or for the financing of terrorist activities. The anti-money launder rule applies the Bank Secrecy Act’s anti-money laundering requirements to insurance companies – a practice not formerly adopted by the Treasury Department.

The anti-money laundering rule requires each insurance company to (1) incorporate policies, procedures, and internal controls to prevent money laundering and terrorist financing risks to covered products; (2) designate a compliance officer responsible for ensuring implementation of such programs; (3) provide on-going training for insurance company employees; and (4) provide independent testing to ensure the anti-money launder and anti-terrorist financing programs are adequate and working properly.

Suspicious Activity Reporting (SAR) Regulation

FinCEN also published its final rule requiring insurance companies to implement new regulations for suspicious activity reporting (SAR). Under the rule, insurance companies – not their agents or brokers – would be required to report suspicious activities relating to the payment or exchange of large sums of cash in certain business transactions.