The Independent Insurance Agents of America is endorsing a House proposal that would empower state insurance commissioners and all financial regulators to better coordinate the fight against financial fraud, says IIAA Executive Vice President and Chief Operating Officer Robert A. Rusbuldt.
The Financial Services Antifraud Network Act (H.R. 1408) was offered last week by Rep. Mike Rogers (R-Mich.). Its primary objective is to eliminate fraud artists from the entire financial services industry. The lead cosponsor is House Financial Services Committee Chairman Mike Oxley (R-Ohio), whose panel the bill was referred to for consideration. Both Rogers and Oxley are former special agents of the Federal Bureau of Investigation.
“This legislation is the right tool to ensure that purveyors of fraud cannot prey on the insurance industry and the entire financial services marketplace,” Rusbuldt said. “It will prevent unreputable characters who have worn out their welcome in one sector of the financial services industry from moving on to another industry segment. If this legislation already had been in force Martin Frankel, who had been banned from the securities industry, would have been stopped in his tracks before he had the opportunity to wreak havoc on unsuspecting insurance companies.”
To stop financial fraud, the bill proposes the creation of a new computerized network that would link the antifraud databases of federal and state financial regulators and law enforcement agencies. Currently, there are over 200 agencies at the state and federal levels responsible for financial oversight. Many have antifraud databases, yet there is little or no communication between the different regulatory agencies.
Regulators would be able to network antifraud information on entities and key professionals in the financial services industry. Information would not be shared that is unrelated to financial or fraudulent activities, and shared information would only be available to financial regulators. Criminal background checks currently required for licensing would be coordinated for greater efficiency, consumer protection, and cost savings to agents.
The network would be established through a new antifraud subcommittee of the President’s Working Group on Financial Markets. The new legislation features no new federal regulations, and no new collection of information. Confidentiality and liability protection would be provided for all networked information to allow the regulators to share information without losing existing legal privileges.
IIAA endorsed the bill after gaining the inclusion of a couple important changes to safeguard agent privacy and to ensure that the cost to develop the network would not be passed onto independent insurance agents, says IIAA Vice President of Federal Government Affairs Maria L. Berthoud. “While IIAA supports the legislation’s underlying objective, we also had concerns with the initial draft,” says Berthoud. “We worked closely with Rep. Rogers, Chairman Oxley and Financial Services Committee staff to address our concerns. Through these efforts, we have minimized, and potentially eliminated, the financial impact on agents and won inclusion of a provision that stipulates that no information would be shared that is unrelated to financial or fraudulent activities and limits access to information to financial regulators.”
Under the legislation, the Treasury Department is authorized to commit $5 million to be used to establish the network. These startup costs will be recouped by charging access fees to regulators who will be accessing the network. “IIAA believes the Financial Services Antifraud Network Act is good for agents, the insurance industry, the financial services industry, and especially consumers,” says Rusbuldt. “It will help streamline the licensing process for the many independent agents who hold licenses in several states and who previously had to endure numerous background checks.”
Was this article valuable?
Here are more articles you may enjoy.