New York May Check Insurance Firms’ Compliance with Global Money Rules

July 6, 2009

New York State Insurance Department licensees should protect their businesses by ensuring that they comply with federal requirements designed to prevent such practices as money laundering and other illegal international transactions, Insurance Superintendent Eric Dinallo has warned.

“Complying with federal rules aimed at fighting money laundering, bribery and other illegal international transactions is essential. Those who fail to comply with these complex and technical rules risk criminal penalties, stiff fines and damage to their reputations. I urge companies to pay the utmost attention to these rules at very senior levels,” Dinallo said.

Dinallo’s comments came as the Insurance Department released an advisory, known as a circular letter, to its licensees. The circular letter describes federal requirements under the Federal Bank Secrecy Act, the Foreign Corrupt Practices Act and the Office of Foreign Assets Control and states that licensees should assess their business models to make sure they comply with these laws.

Enforcement of these federal requirements rests with federal regulators. However, in future examinations of licensees, Dinallo said his department may inquire about the policies and processes they have in place to satisfy the federal requirements.

The Bank Secrecy Act requires insurance companies to develop a written program designed to prevent products with cash value or investment features, like life insurance policies and annuities, from being used to launder money or finance terrorism. Programs should be designed that enable insurers to detect suspicious activities, such as large cash withdrawals made soon after a policy or contract is issued, or surrenders of annuities with return-of-premium guarantees.

Under the Foreign Corrupt Practices Act, U.S. businesses and individuals are prohibited from making payments to foreign officials, as well as other individuals or entities, with the intent of influencing official actions, obtaining business, or seeking an improper business advantage.

Federal rules also specify requirements involving financial transactions with regimes listed as Specially Designated Nationals (SDN) against whom federal government sanctions have been imposed. Transactions with SDNs are banned unless licensed by the U.S. Treasury Department’s Office of Foreign Assets Control. The requirement applies to U.S.-based underwriters, brokers, agents, primary insurers, reinsurers and U.S. citizens employed by foreign insurance firms.

Source: NYSID

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