Anti-Money Laundering

Customer identification program

Contains customer identify verification procedures, verification recordkeeping, government list comparison, and notification to customers

Securities and Exchange Commission

An insurer that sells variable annuities; satisfies the AML program requirement for an insurance company in correlation

Related transaction

Any transaction conducted between a payer or its agent and the recipient

IRS Form 8300

Captures the identity of the individual from whom the cash was received; the person on whose behalf the transaction was conducted; a description of the transaction and the method of payment; and the name of the business that received the cash; may be filed voluntarily

Placement

Putting dirty money into financial institutions or the retail economy

Money laundering

The process of making dirty money appear legitimate

Patriot Act of 2001

Expanded the scope of BSA by bringing all financial institutions under its regulations; require: the establishment of an anti-money laundering program, the creation of customer identification and verification programs, enhanced recordkeeping and reporting, and enhanced suspicious activity reporting

Suspicious Activity Report by Insurance Companies

Filed in a central location determined by FinCEN; shared with appropriate law enforcement; must be supported by documentation and kept on file for five years

Right to Financial Privacy Act

Generally prohibits financial institutions from disclosing a customer's financial record to a government agency without service of legal process, notice to the customer, and an opportunity to challenge the disclosure; does not apply when providing information to FinCEN or a supervisory agency

Currency transaction report

Generally required when an insurer receives more than $10,000 in cash in one transaction or in two or more related transactions; made on IRS form 8300

Bank Secrecy Act of 1970

Intended to prevent banks are other financial institutions from being used as intermediaries to transfer, disguise, or hide money derived from criminal activity; imposes strict reporting and recordkeeping requirements on financial institutions

Money Laundering Control Act of 1986

Made money laundering a criminal activity

Financial Institution

Must conduct its own assessment to evaluate the money laundering risks it faces on the bases of its products, customer base, and customer activity

Requirements for an AML

Must include training for all appropriate persons that provide an understanding of money laundering risks in general; provide for independent testing on an ongoing basis to ensure that it complies with the regulations and continues to function as it was designed

Financial Crimes Enforcement Network

Purposed to present signs of possible illicit activity that some insurance companies have identified, and thus raise awareness of possible risks and vulnerabilities

Suspicious activity report

Reporting requirement of suspicious transactions; authorizes a financial institution to report any suspicious transaction that is relevant to a possible violation of law or regulation

Financial Action Task Force

Represents over 20 countries and supports suspicious activity reporting

Money Laundering Suppression Act of 1994

Required regulators to enhance examination procedures an upgrade examiner training to improve the identification of money laundering schemes in financial institutions

Compliance officer

Responsible for the administration of the insurer's anti-money laundering program; may be a single individual or a committee; must be empowered to develop and enforce appropriate policies and procedures and ensure that company personnel are appropriately trained and educated

Government list comparison

The company must determine if the customer's name appears on any list of known or suspected terrorist organizations issued by the federal government within a reasonable time after the customer's account is opened or a product is purchased

Notification to customers

The company must provide customers with adequate notice that it is requesting information to verify their identities

Customer identity verification procedures

The customer must provide identifying information and the company must verify the accuracy of the information provided

Verification recordkeeping

The information provided by the customer must be recorded and maintained for five years after his account is closed

Layering

Using multiple and complex financial transactions to hide illicit funds and obscure the audit trail

Intergration

When the washed funds are put back into the legitimate economic and financial system

Suspicious transaction

Any activity in which it appears that a person is attempting to prevent the filing of Form 8300 or cause a false or incomplete filing, or any transaction in which there is an indication of possible legal activity; involves at least $5,000; activity that appears to violate the laws

Insurance company

Any person engaged in the United States as a business in the issuing, underwriting, or reinsuring of a life insurance policy; the issuing, granting, purchasing, or disposing of any annuity contract; or the issuing, underwriting, or reinsuring of any insurance product with investment features similar to those of a life insurance policy or an annuity contract, or which can be used to store value and transfer that value to another person

Structuring

Breaking large transactions are broken into smaller exchanges