A computer network that would link together the existing databases of U.S. state and federal banking, securities and insurance regulators in an effort to combat financial fraud could soon be a reality, much to the pleasure of industry associations.
Legislation to create such a network was debated and approved by the Financial Services Committee’s Financial Institutions and Consumer Credit Subcommittee on June 13. The streamlined exchange of data would enable the more than 200 separate state and federal agencies that currently share responsibility for financial regulation in the U.S. to more effectively stomp out the fraud problem.
The Financial Services Antifraud Network Act (HR 1408) was offered earlier this year by Rep. Mike Rogers (R-Mich.) and was cosponsored by Financial Services Committee Chairman Mike Oxley (R-Ohio).
The Independent Insurance Agents of America (IIAA) believes the bill would eliminate fraud artists from the entire financial services industry by empowering state insurance commissioners and all financial regulators to better coordinate the fight against financial fraud.
IIAA lent its endorsement after securing key changes that minimized, and potentially eliminated, the financial impact on agents; stipulated information unrelated to financial or fraudulent activities could not be shared; and limited access to information to financial regulators.
Regulators would be able to network antifraud information on entities and key professionals in the financial services industry. Information unrelated to financial or fraudulent activities would not be shared, 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 regulators to share information without losing existing legal privileges.
The legislation authorizes the Treasury Department to commit $5 million to establish the network. Startup costs will be recouped by charging access fees to regulators who access the network.
The bill now heads for consideration by the Financial Services Committee, where it should easily gain approval.
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